The single judge bench of Justice Krishna Rao of the Calcutta High Court in the case of Alliance Broadband services Private Limited Vs Manthan Broadband services Private Limited held that the object of section 60 (2) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) is to group, the CIRP or liquidation proceedings of a Corporate Debtor, and the Insolvency Resolution or Liquidation or bankruptcy of a corporate guarantor or personal guarantor of a very same Corporate Debtor so that a single forum may deal with both.
Brief Facts:
The factual matrix of the case is that the Petitioner disbursed Rs. 6.30 crores to the Respondent as an accommodation loan with an interest rate of 9.75% per annum, which was secured by the pledge of original share certificates for 77,500 equity shares in the petitioner's company held in the respondent's name. The Respondent repaid the principal amount of Rs. 6.30 crores and subsequently obtained a loan of Rs. 10.20 crores with an agreement that the loan amount shall be repaid within 3 months with an interest rate of 9.75% and the pledged shares shall continue with the petitioner as security and further security in the form of a mortgage by deposit of title deeds of certain immovable properties by the respondent. The Respondent had paid Rs 25 Lacs as a part payment towards the earlier loan of Rs 6.30 Crore. Thereafter, the Respondent handed over the original title deeds of three land parcels to the Petitioner as additional security against the loan of Rs. 10.20 crore along with the accrued interest.
Moreover, the application was filed by the petitioner under section 7 of the IBC before the Learned National Company Law Tribunal Kolkata for initiation of the Corporate Insolvency Resolution Process against the respondent. The appeal was filed before the Learned National Company Law Appellate Tribunal, New Delhi against the order of the NCLT dated 18.09.2019 wherein the NCLAT has disposed of the appeal directing the IRP to constitute a committee of creditors and to consider any applications made by the promoters of the respondent under Section 12A of the IBC Code, 2016. The NCLT had initiated a liquidation proceeding against the respondent and appointed one Insolvency Professional as Liquidator by lifting the moratorium under Section 14 of the IPC. The petitioner has filed its claim of Rs. 14,47,32,521/- against the respondent before the liquidator.
The Liquidator has refused to recognise the petitioner as a secured creditor or to allow the petitioner to sell the pledged shares to satisfy a portion of the petitioner's claim against the respondent.
Contentions:
The learned counsel appearing on behalf of the Petitioner has contended that the pledged shares and Tajpur land cannot be included in the respondent's liquidation estate, and the Liquidator has wrongly attempted to remove the items from the petitioner.
The learned counsel appearing on behalf of the Respondent has contended that the communication relied on by the petitioner is made by the suspended Director, not the Liquidator, and thus cannot be interpreted as an admission by the respondent. It was further contended that in terms of Clause 52 (5) of the IBC, 2016, the petitioner has to make an application to the adjudicating authority to facilitate the secured creditor to realize such security interest in accordance with the law, and thus the petitioner cannot claim any injunction before this Court during the pendency of the Liquidation proceeding.
Courts Observation:
The Hon’ble court held that NCLT and NCLAT are constituted under Sections 408 and 410 of the Companies Act, 2013 but without specifically defining the power and functions of NCLT. Section 408 of the Companies Act states that the Central Government shall constitute a National Company Law Tribunal to exercise and discharge such powers and functions as are or may be conferred on it by or under the Companies Act or any other law for the time being in force. The matters fall within the jurisdiction of the NCLT, under the Companies Act, 2013 lie scattered all over the Companies Act, therefore, Section 420 and 424 of the Companies Act, 2013 indicates in brought terms, merely the procedure to be followed by the NCLT before passing any order. There is no separate provision in the Companies Act exclusively dealing with the jurisdiction and powers of NCLT.
In Sub-Sections (4) and (5) of Section 60 of the IBC, 2016 give an indication respectively about the powers and jurisdiction of the NCLT. Subsection 4 of Section 60 of IBC, 2016 states that the NCLT will have the powers of DRT as contemplated under part III of the Code for the purpose of sub-Section (2). Sub Section (2) deals with the situation where the Insolvency Resolution or Liquidation of Bankruptcy of the corporate guarantor or personal guarantor of a Corporate Debtor is already pending before the NCLT.
The object of subsection (2) is to group (A), the CIRP or liquidation proceedings of a Corporate Debtor, and (B) the Insolvency Resolution or Liquidation or bankruptcy of a corporate guarantor or personal guarantor of a very same Corporate Debtor so that a single forum may deal with both. This is to ensure that the CRIP of the Corporate Debtor and the Insolvency Resolution of the individual guarantors of the very same Corporate Debtor does not proceed on different tracks, before different forums, leading to conflict of interest, situations, or decisions.
The hon’ble court held that as per Section 238 of the IBC, 2016 is having an overriding effect in any other law for the time being in force. Because of the prima facie findings that this Court cannot pass any interim order at this stage. This Court is of the view that the matter in issue in the suit can be more appropriately and effectively decided and adjudicated by the NCLT. In the present case, Section 430 of the Companies Act, 2013 itself provides an additional bar by stating that no injunction shall be granted by any civil court in respect of any action taken or to be taken in pursuance of any power conferred on the NCLT by the Companies Act, 2013.
Case Title: Alliance Broadband Services Private Limited Vs Manthan Broadband Services Private Limited
Coram: Hon’ble Mr. Justice Krishna Rao
Case No: In CS/54/2019
Advocate for Petitioner: Mr. Ratnanko Banerjee, Sr. Adv. Ms. Swapna Choubey, Adv. Mr. K. Kejriwal, Adv. Ms. Ashika Daya, Adv. Ms. Deepti Priya, Adv.
Advocate for Respondent: Mr. Jayanta Sengupta, Adv. Mr. Rahul Auddy, Adv. Mr. Aditya Gupta, Adv.
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