The NCLAT, New Delhi Bench has opined that a conjoint reading of Section 96(1)(b) with Section3(11) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) provides that an interim moratorium shall be for proceedings which relate to a liability or obligation due on date when the interim moratorium has been declared. The Tribunal opined that Section 96 does not put a stay on any future liability or obligation. Therefore, a stay on proceedings under Sections 19(2), 66, and 67 is not provided for under Section 96.
Brief Facts:
Section 9 of the IBC proceedings was initiated against the Corporate Debtor and during the proceedings, the Insolvency Resolution Professional (hereinafter referred to as “IRP”) an application under Section 19(2) of IBC was filed against the Appellants who were suspended Directors of the Corporate Debtor. Another application under Sections 66 and 67 was filed.
Thereafter, proceedings against the Appellants as the personal guarantors were initiated under Section 95 of IBC. Subsequently, an interim moratorium came into play as soon as proceedings were initiated.
The Appellants, thus, filed an application under Section 9 of IBC for a stay of proceedings under Sections 19(2), 66, and 67 which was rejected by NCLT. It is against this order of NCLT that the present appeal has been preferred.
Contentions of the Appellants:
It was submitted that under the proceedings of Sections 19(2), 66, and 67, there is a possibility that an order can be passed against Appellants in terms of monetary considerations to be paid by the Appellants and therefore, in lieu of interim moratorium these proceedings must be stayed. It was argued that the NCLT passed an order of dismissal without giving any cogent reason.
Contentions of the Respondent:
It was contended that Section 96 of IBC contemplates the stay of proceedings relating to the debt due. This Section does not contemplate staying of proceedings under Sections 19(2), 66, and 67 of IBC.
Observations of the Appellate Tribunal:
It was opined that a conjoint reading of Section 96(1)(b) with Section 3 (11) of IBC provides that an interim moratorium shall be for proceedings that relate to a liability or obligation due on the date when the interim moratorium has been declared. The Tribunal opined that Section 96 does not put a stay on any future liability or obligation. Therefore, stay on proceedings under Sections 19(2), 66, and 67 is not provided for under Section 96.
The decision of the Appellate Tribunal:
Therefore, the Tribunal held that by virtue of the interim moratorium under Section 96, proceedings under Sections 19(2), 66, and 67 of the IBC cannot be stayed. Accordingly, the order of the NCLT was upheld and the present Appeal was dismissed.
Case Title: Ashok Mahindru & Anr. V. Vivek Parti
Coram: Justice Ashok Bhushan (Judicial Member), Mr. Barun Mitra (Technical Member)
Case No.: Company Appeal (AT) (Insolvency) No. 1324 of 2022
Advocates for Appellants: Advs. Mr. Pallav Saxena, Mr. Sorabh Dahiya, Mr. Mohd. Nauseen S., Mr. Diwakar Goel, Mr. Mohd. Abdul Wasshi
Advocates for Respondent: Advs. Mr. Lakshay Sawhney, Ms. Karishma Rajput, Mr. Kartik Mittal
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