The Bombay High Court quashed the orders of the District Consumer Dispute Redressal Commission, Akola, and bailable warrants issued against the owner and CEO of a company, holding that recovery proceedings initiated against a corporate debtor during the moratorium under the Insolvency and Bankruptcy Code (IBC) are unenforceable. The Court emphasized that such proceedings violate statutory protections and cannot bind the company or its new management.
The petitioner, a company registered under the Companies Act, came under a moratorium following insolvency proceedings initiated by the Reserve Bank of India and admitted by the National Company Law Tribunal (NCLT), Kolkata. During the Corporate Insolvency Resolution Process (CIRP), a consumer complaint was filed against the company alleging wrongful repossession of a JCB machine. The District Consumer Commission allowed the complaint, directed the machine’s return, and later issued bailable warrants against the company’s owner and CEO. The petitioner contended it was not made a party to the complaint and the orders violated the moratorium and resolution plan under the IBC.
Senior counsel for the petitioner argued that the complaint was filed after the moratorium was imposed and during CIRP, making the proceedings unenforceable. The company, now under new management approved by NCLT, could not be bound by actions initiated against the previous management. The issuance of bailable warrants was unlawful and contrary to the moratorium provisions of Section 14 of the IBC.
The respondent contended that non-joinder of the company did not invalidate the complaint. The grievance concerned deficiency in service rather than monetary recovery. The consumer complaint was maintainable during CIRP, and the respondent had lost possession of a JCB machine after paying substantial installments.
The High Court observed that Section 14 of the IBC prohibits initiation or continuation of suits or execution of orders against the corporate debtor during the moratorium. Section 31 provides that an approved resolution plan binds the corporate debtor, employees, creditors, and stakeholders.
The Court held, “Once the moratorium is declared or the resolution plan is approved, proceedings in the nature of recovery cannot be maintained in any Court of law, Tribunal, or Arbitration panel. The order directing return of the JCB machine upon payment of dues is a monetary decree and falls within the definition of 'property' under Section 3(27) of the IBC. Such proceedings are therefore barred by law.”
The Bombay High Court allowed the petition, quashing and setting aside the order dated 20.07.2022 of the District Consumer Dispute Redressal Commission, Akola, in Consumer Complaint, along with the proceedings and the order dated 19.06.2024 issuing bailable warrants against the owner and CEO of the petitioner company. The Court made the rule absolute, emphasizing that the protections under the IBC, including the moratorium and binding resolution plans, override any external recovery proceedings against a corporate debtor during insolvency resolution.
Case Title: SREI Equipment Finance Limited Vs. Rajesh Bajirao Khandewar & Ors.
Case No.: Criminal Writ Petition No. 41/2025
Coram: Justice M.M. Nerlikar
Advocate for Petitioner: Adv. A.S. Naik (Senior Advocate), A.S. Manohar
Advocate for Respondent: Adv. A.B. Mirza
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