Interim Order 2

Order Details: Order below exhibit
Pdf Text: 1 OBE 17 in Comm. Suit 400/2020
ORDER BELOW EXHIBIT 17
IN
COMMERCIAL SUIT NO. 400 of 2020
Housing Development Finance Corporation Limited ...Plaintiff
Versus
Mr. Kalpesh Patel & Ors. ….Defendants
Appearance:
Adv. Ms. Kriti Kalyani for Defendant No. 3.
Adv. Ms. Saurabhi Waknis I/b. Lodha & Lodha Associates
for Defendant Nos. 1 and 2.
Adv. Mr. Yogesh Bhoge along with Adv. Saylee Dolas for Plaintiff.
CORAM : SHRI. A.S.SALGAR
ADHOC JUDGE,
(C.R.NO.31)
DATED : 10th DECEMBER 2022
ORDER
This is an application filed on behalf of Resolution
Professional of defendant no. 3 seeking a stay of the present
proceedings on account of the moratorium which is in force. It is
submitted by the applicant that vide order dated 30.08.2018 passed by
Hon'ble National Company Law Tribunal, Mumbai Bench, the Hon'ble
NCLT was pleased to initiate the CIRP of the defendant no. 3 under the
provisions of the Insolvency and Bankruptcy Code, 2016. The NCLT
Mumbai was pleased to approve the appointment of the Resolution
Professional (RP) of the defendant no. 3 vide order dated 15.10.2018. It
is further submitted by the applicant that the NCLT allowed the
consolidation application filed by members of COC. Vide order dated
29.11.2021, the Hon'ble NCLT was pleased to grant an extension of 30
days to enable the COC to conclude the negotiations. It is also
submitted that upon the admission to insolvency, the Hon'ble NCLT was
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pleased to declare a moratorium in respect of the defendant no. 3 in
terms of Section 14 of the Code and said moratorium is presently in
force. It is submitted that upon declaration of moratorium, no pending
legal proceeding against the defendant no. 3 can be continued. Hence,
it is submitted by the applicant that the suit ought to be stayed and
adjourned sine die until the moratorium subsisting in respect of the
defendant no. 3 comes to an end.
2. The defendant nos. 1 and 2 submitted their written
submission at Exh.17A and submitted that the insolvency proceeding of
the defendant no. 3 in the Hon'ble National Company Law Tribunal is
sub judice and defendant nos. 1 and 2 are not party to the said
proceedings. The defendant no. 3 cannot escape from its liability owing
to the commencement of the corporate insolvency resolution process. It
is submitted that if the suit is stayed in respect of defendant no. 3, the
Hon'ble Court will not be in a position to effectually and completely
adjudicate upon and settle all the questions involved in the said suit.
The presence of defendant no. 3 is imperative for the said suit. Lastly, it
is submitted that the entire suit is liable to be stayed.
3. Learned Advocate for the plaintiff submitted that they do
not want to file reply on Exh.17. They orally advanced argument on
Exh.17.
4. Heard Learned Advocate Ms. Saurabhi WaknisiI/b. Lodha
and Lodha Associates for Defendant Nos. 1 and 2, Learned Advocate
Ms. Kriti Kalyani for Defendant No. 3 and Learned Advocate Mr. Yogesh
Bhoge for Plaintiff.
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5. By filing the present application, the present
applicant/defendant no. 3 prayed that suit may be stayed in respect of
defendant no. 3. Perused the contents of the application and say filed by
the plaintiff as well as defendant nos. 1 and 2. It is not in dispute that as
per the order passed by Hon'ble NCLT, Mumbai dated 30.08.2018, the
Hon'ble NCLT was pleased to initiate the CIRP under the provisions of
the Insolvency and Bankruptcy Code, 2016 against the defendant no. 3.
Admittedly, the Hon'ble NCLT, Mumbai was pleased to approve the
appointment of the Resolution Professional (RP) of the defendant no. 3.
Admittedly, as per the provisions of Section 12(2) of the Code, an
extension of 90 days was sought by the RP, which was duly granted by
the Hon'ble NCLT, Mumbai. The applicant has placed on record the
copy of order of the Hon'ble NCLT, Mumbai at Exh.'A'. The copy of
status of the case C.P. (IB) 1765 of 2018 on the NCLT website shows
that the CIRP Proceeding is pending against defendant no. 3. Thus, the
documents produced on record shows that the CIRP proceedings were
initiated against the defendant no. 3 under the provisions of Insolvency
and Bankruptcy Code and said matter was pending before Hon'ble
NCLT. After the admission to insolvency, the Hon'ble NCLT declared the
moratorium in respect of defendant no. 3 in terms of Section 14 of the
Code.
6. The applicant placed on record the copy of order of the Hon'ble
NCLT, Mumbai branch. On perusal of the same, it appears that Raj
Infrastructure Development (India) Pvt. Ltd. has filed an application for
initiation of Corporate Insolvency Resolution Process (CIRP) against
defendant no. 3. On perusal of the same, it appears that the Hon'ble
members of the NCLT passed an order and held that there shall be
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moratorium in terms of Section 14 of the Code in respect of Financial
Service Provider. The moratorium shall have effect from the date of the
order till the completion of the CIRP or until this Adjudicating Authority
approves the resolution plan under Section 31(1) of the Code. The said
continuation of moratorium is recorded in para no. 23 of admission
order of Hon'ble NCLT. In terms of NCLT orders and FSP Insolvency
Rules, the moratorium has commenced in terms of Section 14 of the
Code in respect of company. Section 14 of the Code does not prefer
either initiation or continuation of proceeding against Corporate
Debtor/Financial Service provider. At this stage, it is necessary to
mention the extract of Section 14 of the Insolvency & Bankruptcy for
ready reference which are as follows :
“(1) Subject to provisions of subsections (2) and (3), on the insolvency
commencement date, the Adjudicating Authority shall by order declare
moratorium for prohibiting all of the following, namely:
(a) the institution of suits or continuation of pending suits or
proceedings against the corporate debtor including execution of
any judgment, decree or order in any court of law, tribunal,
arbitration panel or other authority;
(b) transferring, encumbering, alienating or disposing off by the
corporate debtor any of its assets or any legal right or beneficial
interest therein;
(c)any action foreclose, recover or enforce any security interest
created by the corporate debtor in respect of its property including
any action under the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(54 of 2002);
(d) the recovery of any property by an owner or lessor where such
property is occupied by or in the possession of the corporate
debtor.
Explanation : For the purposes of this subsection, it is hereby
clarified that notwithstanding anything contained in any other law
for the time being in force, a license, permit, registration, quota,
concession, clearance or a similar grant or right given by the
Central Government, State Government, local authority, sectoral
regulator or any other authority constituted under any other law
for the time being inforce, shall not be suspended or terminated
on the grounds of insolvency, subject to the condition that there is
no default in payment of current dues arising for the use or
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continuation of the license or a similar grant or right during
moratorium period.....”
7. In view of Section 14(1)(a) of Code, upon declaration of
moratorium on 30.08.2018, no pending legal proceeding against
defendant no. 3 including present suit can be continued. The insolvency
proceeding against the defendant no. 3 were initiated before NCLT and
in view thereof moratorium would be operable in so far as defendant
no. 3 is concerned. The mandate of Section 14 of Code is clear. The
effect of moratorium is that all pending legal proceedings are deemed to
have been stayed. In view of Section 14 of the Insolvency & Bankruptcy
Act, the suit cannot be proceeded until the decision in CIRP proceeding.
8. In view of aforesaid discussion, I am of the view that
Section 14 of the Code does not permit continuation of the proceeding
against the defendants. The suit can be stayed till the completion of
CIRP proceeding. No prejudice would be caused to the plaintiff, if the
stay is granted. Under these circumstances, the suit can be stayed and
the application needs to be allowed. Hence, I pass the following order :
ORDER
1. The application at Exh. 17 is allowed.
2. Commercial Suit No. 400 of 2020 is stayed against all the
defendants till completion of CIRP proceeding.
3. Accordingly, application is disposed off.
Dated : 10.12.2022 (A.S. Salgar)
Adhoc Judge,
City Civil Court
Gr. Mumbai.
Dictated on : 10.12.2022
Typed on : 12.12.2022 & 17.12.2022
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CERTIFIED TO BE TRUE AND CORRECT COPY OF THE ORIGINAL
SIGNED JUDGMENT/ORDER”
UPLOAD DATE TIME NAME OF STENOGRAPHER
19.12.2022 4.20 p.m. Prachi Y. Potdar
Stenographer Grade I
Name of the Judge HHJ Shri. A.S. Salgar
(C.R.NO. 31)
Date of Pronouncement of
Judgment/Order.
10.12.2022
Judgment/order signed by P.O on 19.12.2022
Judgment/order uploaded on 19.12.2022
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