Whether eviction suit filed by landlord should be stayed if moratorium has been declared in Insolvency proceeding?

This G.A. No.2791 of 2017 has been filed by the defendant

in a suit for recovery of khas possession and for mesne profit, praying for

stay of all further proceedings in C.S. No.247 of 2010 on the ground that an

insolvency proceeding has started under Section 10 of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as the ‘said Code’). Although,

no affidavit-in-opposition has been filed to the application filed by the

defendant/petitioner. Mr. Deb Nath Ghosh, Learned Counsel appearing for

the plaintiff/respondent submits that the order passed at the instance of the

defendant/petitioner by the authority under the Insolvency Code (hereinafter

referred to as the ‘said Code’) has no manner of application in the present

case. He submits that according to the provisions of Section 14 of the said

Code where moratorium has been declared, at the highest, the execution of

the proceeding can be stayed. He submits that Section 14(1) (d) of the said

Code is relevant for the present purpose which says that only recovery of any

property by an owner or lessor where the property is occupied by or in the

possession of the corporate debtor, is prohibited. Therefore, according to

him, there can be no order staying further proceeding of the present suit. He

further submits that Section 18 (1) (f) of the said Code which relates to the

duties of interim resolution professional, specifies that the interim resolution

professional shall perform duties amongst other to take control and custody

of any asset over which the corporate debtor has ownership rights as

recorded in the balance-sheet of the corporate debtor. Section 18(1) (f) is set

out below :

“18. Duties of interim resolution professional. – (1) The interim

resolution professional shall perform the following duties, namely:—

…

3

(f) take control and custody of any asset over which the corporate

debtor has ownership rights as recorded in the balance sheet of the

corporate debtor, or with information utility or the depository of

securities or any other registry that records the ownership of assets

including—

(i) assets over which the corporate debtor has ownership

rights which may be located in a foreign country;

(ii) assets that may or may not be in possession of the

corporate debtor;

(iii) tangible assets, whether movable or immovable;

(iv) intangible assets including intellectual property;

(v) securities including shares held in any subsidiary of the

corporate debtor, financial instruments, insurance

policies;

(vi) assets subject to the determination of ownership by a

court or authority;”

Mr. Ghosh, learned Counsel for the plaintiff/respondent submits that

admittedly, the defendant is a corporate debtor, who has got no ownership

right in respect of the suit property for which recovery has been sought for

by the plaintiff/respondent. According to him, if the interim resolution

professional cannot take control and custody of any asset over which the

corporate debtor has no ownership rights, mere appointment of interim

resolution professional cannot stand in the way of proceeding with the suit

where admittedly, the defendant, although, is a corporate debtor but not the

owner of the suit property. According to him, the suit should proceed and

there cannot be any stay. Mr. Ghosh, learned Counsel has also drawn

attention of this Court to the preamble to the Act and submits that the Act is

of very recent origin and there cannot be any provision in the law to interfere

with his independent right for eviction of a tenant guaranteed under some

other law and if that is allowed the same will tantamount to interference with

his Constitutional Right to Property Protected under Article 300A of the

Constitution of India. Therefore, there can be no proposition of law to hold

that an owner or a landlord is debarred from proceeding with a suit against

his tenant in respect of whom an insolvency proceeding is pending.

A question often arises whether the right guaranteed under the rent

legislation by which a landlord is empowered to evict a tenant on certain

given circumstances whether by virtue of the provisions of the Insolvency

Code such rights of the landlord or landlady be allowed to be suspended.

However, in view of the provisions made under Section 238 of the Insolvency

Code such right can obviously be suspended inasmuch as provisions of the

Code shall have effect notwithstanding anything consistent therewith

contained in any other law for the time being in force or any instrument

having effect by virtue of any such law. In that view of the matter it will not

be unreasonable to hold that provisions of the Code will have overriding

effect on the provisions of rent legislation.

 Sub-Section (1) (a) of Section 14 clearly

prohibits institution of suits or continuation of pending suits or proceeding

against the corporate debtor including execution of any judgment, decree or

order in any Court of law, Tribunal, arbitration panel or other authority.

Therefore, when the said Code prohibits institution and/or continuation of a

suit or proceeding, I find no reason to allow the plaintiff to proceed with the

suit. The submission on behalf of the plaintiff that only restriction for stay of

execution has been created under Section 14(1) (d) of the said Code, does not

appear to be logical at all. It depends upon the circumstances where the

parties stand, if it is before the institution of the suit then the suit cannot be

instituted, if it is in the midst of the suit then the suit cannot be continued

and if the suit has been decreed then the execution should not be allowed to

continue. However, it has been clearly submitted by the learned counsel

appearing for the plaintiff/respondent that this Court can proceed with the

trial of the suit but at best the plaintiff can be restrained from proceeding

with the execution. Such submission may be considered to be fair but

cannot be accepted, inasmuch as, before a suit is tried it cannot be

presumed whether the suit will be decreed or dismissed. Such a question

can arise only after the suit is decreed but this Court has not yet reached

such stage and if admittedly a decree cannot be executed there is no reason

to allow the suit to proceed which may lead to multiplicity of proceedings.

IN THE HIGH COURT AT CALCUTTA

ORDINARY ORIGINAL CIVIL JURISDICTION

ORIGINAL SIDE

GA 2791 of 2017

WITH

CS 247 of 2010

KANAK PROJECTS LIMITED VS STEWARTS & LLOYDS OF INDIA LIMITED

BEFORE :

THE HON’BLE JUSTICE SAHIDULLAH MUNSHI

Dated: SEPTEMBER 11,2017

The Court :- This G.A. No.2791 of 2017 has been filed by the defendant

in a suit for recovery of khas possession and for mesne profit, praying for

stay of all further proceedings in C.S. No.247 of 2010 on the ground that an

insolvency proceeding has started under Section 10 of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as the ‘said Code’). Although,

no affidavit-in-opposition has been filed to the application filed by the

defendant/petitioner. Mr. Deb Nath Ghosh, Learned Counsel appearing for

the plaintiff/respondent submits that the order passed at the instance of the

defendant/petitioner by the authority under the Insolvency Code (hereinafter

referred to as the ‘said Code’) has no manner of application in the present

case. He submits that according to the provisions of Section 14 of the said

Code where moratorium has been declared, at the highest, the execution of

the proceeding can be stayed. He submits that Section 14(1) (d) of the said

Code is relevant for the present purpose which says that only recovery of any

property by an owner or lessor where the property is occupied by or in the

possession of the corporate debtor, is prohibited. Therefore, according to

him, there can be no order staying further proceeding of the present suit. He

further submits that Section 18 (1) (f) of the said Code which relates to the

duties of interim resolution professional, specifies that the interim resolution

professional shall perform duties amongst other to take control and custody

of any asset over which the corporate debtor has ownership rights as

recorded in the balance-sheet of the corporate debtor. Section 18(1) (f) is set

out below :

“18. Duties of interim resolution professional. – (1) The interim

resolution professional shall perform the following duties, namely:—

…

3

(f) take control and custody of any asset over which the corporate

debtor has ownership rights as recorded in the balance sheet of the

corporate debtor, or with information utility or the depository of

securities or any other registry that records the ownership of assets

including—

(i) assets over which the corporate debtor has ownership

rights which may be located in a foreign country;

(ii) assets that may or may not be in possession of the

corporate debtor;

(iii) tangible assets, whether movable or immovable;

(iv) intangible assets including intellectual property;

(v) securities including shares held in any subsidiary of the

corporate debtor, financial instruments, insurance

policies;

(vi) assets subject to the determination of ownership by a

court or authority;”

Mr. Ghosh, learned Counsel for the plaintiff/respondent submits that

admittedly, the defendant is a corporate debtor, who has got no ownership

right in respect of the suit property for which recovery has been sought for

by the plaintiff/respondent. According to him, if the interim resolution

professional cannot take control and custody of any asset over which the

corporate debtor has no ownership rights, mere appointment of interim

resolution professional cannot stand in the way of proceeding with the suit

where admittedly, the defendant, although, is a corporate debtor but not the

owner of the suit property. According to him, the suit should proceed and

4

there cannot be any stay. Mr. Ghosh, learned Counsel has also drawn

attention of this Court to the preamble to the Act and submits that the Act is

of very recent origin and there cannot be any provision in the law to interfere

with his independent right for eviction of a tenant guaranteed under some

other law and if that is allowed the same will tantamount to interference with

his Constitutional Right to Property Protected under Article 300A of the

Constitution of India. Therefore, there can be no proposition of law to hold

that an owner or a landlord is debarred from proceeding with a suit against

his tenant in respect of whom an insolvency proceeding is pending.

A question often arises whether the right guaranteed under the rent

legislation by which a landlord is empowered to evict a tenant on certain

given circumstances whether by virtue of the provisions of the Insolvency

Code such rights of the landlord or landlady be allowed to be suspended.

However, in view of the provisions made under Section 238 of the Insolvency

Code such right can obviously be suspended inasmuch as provisions of the

Code shall have effect notwithstanding anything consistent therewith

contained in any other law for the time being in force or any instrument

having effect by virtue of any such law. In that view of the matter it will not

be unreasonable to hold that provisions of the Code will have overriding

effect on the provisions of rent legislation.

In paragraph 66 of the said judgment it has been further held – “it is

clear that the later non-obstante clause of the Parliamentary enactment will

5

also prevail over the limited non-obstante clause contained in Section 4 of

the Maharashtra Act. For these reasons, we are of the view that the

Maharashtra Act cannot stand in the way of the corporate insolvency

resolution process under the Code.”

Mr. Ritabrata Mitra, learned Advocate appearing for the

defendant/petitioner, submits that the object of the Code is to promote

investments as well as resolution of insolvency of corporate persons, firms

and individuals in a time-bound manner. He submits that the Code provides

for designating the National Company Law Tribunal (NCLT) and Debt

Recovery Tribunal (DRT) as the Adjudicating Authorities. He also submits

that the Court separates commercial aspects of insolvency and bankruptcy

proceedings from judicial aspects and this is the reason the Act has been

enacted. He further pointed out that there is no single law in India that deals

with insolvency and bankruptcy provisions related to insolvency and

bankruptcy for companies can be found in Sick Industrial Companies

(Special Provisions) Act, 1985, the Recovery of Debt Due to Banks and

Financial Institutions Act, 1993, the Securitization and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002 and the

Companies Act, 2013. These Statutes provide for creation of multiple fora

such as Board of Industrial and Financial Reconstruction (BIFR), Debt

Recovery Tribunal (DRT) and National Company Law Tribunal (NCLT) and

their respective Appellate Tribunals. Liquidation of companies is handled by

the High Courts. Individual bankruptcy and insolvency is dealt with under

6

the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency

Act, 1920 and is dealt with by the Courts. The existing framework for

insolvency and bankruptcy is inadequate, ineffective and results in undue

delay in resolution, therefore, the present legislation has been enacted by the

Legislature. It also appears that the Insolvency and Bankruptcy Code, 2015

has been brought to consolidate and amend the laws relating to reorganization

and insolvency resolution of corporate persons, the partnership

firms and individuals in a time-bound manner for maximization of value of

assets of such persons, to promote entrepreneurship, availability of credit

and balance the interest of all the stakeholders including alteration in the

priority of payment of Government dues and to establish an Insolvency and

Bankruptcy Fund, and matters connected therewith or incidental thereto.

Therefore, according to him, the statement of object and reasons behind the

enactment of the Code are categorical. He submits that the Code itself

prohibits continuation of any suit where bankruptcy proceeding is pending

and there is no reason to proceed with the suit during the pendency of the

proceeding under Section 10 of the said Code.

Mr. Ritabrata Mitra, in support of his submission says that once

moratorium has been declared under Section 14 of the aforesaid Code it is

the duty of the Court to restrain the party from proceeding with the suit or

proceeding, as the case may be, and he relies upon a decision in the case of

M/s. Innoventive Industries Ltd. – Vs. – ICICI Bank & Anr., reported in

7

AIR 2017 SC 1025. He draws the attention of this Court to paragraph 63 to

66 which are set out below :

“63. There can be no doubt, therefore, that the Code is a

Parliamentary law that is an exhaustive code on the subject matter of

insolvency in relation to corporate entities, and is made under Entry 9,

List III in the 7th Schedule which reads as under :

“9. Bankruptcy and insolvency”

64. On reading its provisions, the moment initiation of the

corporate insolvency resolution process takes place, a moratorium is

announced by the adjudicating authority vide Sections 13 and 14 of the

Code, by which institution of suits and pending proceedings etc. cannot

be proceeded with. This continues until the approval of a resolution plan

under Section 31 of the said Code. In the interim, an interim resolution

professional is appointed under Section 16 to manage the affairs of

corporate debtors under Section 17.

65. It is clear, therefore, that the earlier State law is repugnant to

the later Parliamentary enactment as under the said State law, the State

Government may take over the management of the relief undertaking,

after which a temporary moratorium in much the same manner as that

contained in Section 13 and 14 of the Code takes place under Section 4

of the Maharashtra Act. There is no doubt that by giving effect to the

State law, the aforesaid plan or scheme which may be adopted under

the Parliamentary statute will directly be hindered and/or obstructed to

that extent in that the management of the relief undertaking, which, if

taken over by the State Government, would directly impede or come in

the way of the taking over of the management of the corporate body by

the interim resolution professional. Also, the moratorium imposed under

Section 4 of the Maharashtra Act would directly clash with the

8

moratorium to be issued under Sections 13 and 14 of the Code. It will be

noticed that whereas the moratorium imposed under the Maharashtra

Act is discretionary and may relate to one or more of the matters

contained in Section 4(1), the moratorium imposed under the Code

relates to all matters listed in Section 14 and follows as a matter of

course. In the present case it is clear, therefore, that unless the

Maharashtra Act is out of the way, the Parliamentary enactment will be

hindered and obstructed in such a matter that will not be possible to go

ahead with the insolvency resolution process outlined in the Code.

Further, the non-obstante clause contained in Section 4 of the

Maharashtra Act cannot possibly be held to apply to the Central

enactment, inasmuch as a matter of constitutional law, the later Central

enactment being repugnant to the earlier State enactment by virtue of

Article 254(1), would operate to render the Maharashtra Act void vis-àvis

action taken under the later Central enactment. Also, Section 238 of

the Code reads as under :

“Sec. 238. Provisions of this Code to override other laws.-

The provisions of this Code shall have effect, notwithstanding

anything inconsistent therewith contained in any other law for the time

being in force or any instrument having effect by virtue of any such law.”

66. It is clear that the later non-obstante clause of the

Parliamentary enactment will also prevail over the limited non-obstante

clause contained in Section 4 of the Maharashtra Act. For these reasons,

we are of the view that the Maharashtra Act cannot stand in the way of

the corporate insolvency resolution process under the Code.”

I have heard the parties at length. The moot question whether the

present suit should be allowed to continue or not. Before discussing further,

9

provisions of Section 14 are required to be taken into consideration first and

those are set out below :

“14. Moratorium. – (1) Subject to provisions of sub-sections (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 of by the

corporate debtor any of its assets or any legal right or

beneficial interest therein;

c) any action to foreclose, recover or enforce any security interest

created by the corporate debtor in respect of its property

including any action under the Securitization and

Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 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.

(2) The supply of essential goods or services to the corporate debtor

as may be specified shall not be terminated or suspended or interrupted

during moratorium period.

(3) The provisions of sub-section (1) shall not apply to such

transactions as may be notified by the Central Government in

consultation with any financial sector regulator.

10

(4) The order of moratorium shall have effect from the date of such

order till the completion of the corporate insolvency resolution process:

Provided that where at any time during the corporate insolvency

resolution process period, if the Adjudicating Authority approves the

resolution plan under sub-section (1) of section 31 or passes an order for

liquidation of corporate debtor under section 33, the moratorium shall

cease to have effect from the date of such approval or liquidation order,

as the case may be.”

Sub-Section (1) of Section 14 says that the adjudicating authority

shall, by order, declare moratorium for prohibiting all the following those are

mentioned under (a) to (d). In the present case, National Company Law

Tribunal, Kolkata Bench, in a company petition being No.213/KB/2017, in

exercise of its power under Section 10 of the Insolvency and Bankruptcy

Code, 2016 read with Rule 7 of the Insolvency and Bankruptcy (Application

to Adjudicating Authority) Rules, 2016 has pronounced an order on 1st May,

2017. Such exercise has been made on the basis of the application by the

defendant/petitioner, Stewarts and Lloyds of India Limited of 41,

Chowringhee Road, Kolkata – 700071, being the corporate debtor/corporate

applicant. In such proceeding an interim resolution professional has been

appointed whereby he has been directed to commence the proceedings of

corporate insolvency resolution process as per the procedure prescribed

under the Insolvency and Bankruptcy Code, 2016. Moratorium, within the

meaning of Section 14 of the said Code, has also been declared. The interim

resolution professional has been directed for making public an

11

announcement for initiation of corporate insolvency resolution process and

to call for submission of claims in terms of Section 15 of Insolvency and

Bankruptcy Code, 2016 and also progress report has been directed to be

submitted within 15 days from the date of the said order. Section 13 of the

said Code deals with declaration of moratorium and public announcement

which is set out below :

“13. Declaration of moratorium and public announcement.

– (1) The Adjudicating Authority, after admission of the application under

section 7 or section 9 or section 10, shall, by an order—

(a) declare a moratorium for the purposes referred to in

section 14;

(b) cause a public announcement of the initiation of

corporate insolvency resolution process and call for the

submission of claims under section 15; and

(c) appoint an interim resolution professional in the manner

as laid down in section 16.

(2) The public announcement referred to in clause (b) of subsection

(1) shall be made immediately after the appointment of the

interim resolution professional.”

The said provision shows that adjudicating authority, after admission

of application under Section 7 or Section 9 or Section 10, shall, by order,

declare moratorium for the purposes referred to in Section 14. Section 7

deals with initiation of corporate insolvency resolution process by financial

creditor. Section 7 is set out below :

12

“7. Initiation of corporate insolvency resolution process by

financial creditor. – (1) A financial creditor either by itself or jointly

with other financial creditors may file an application for initiating

corporate insolvency resolution process against a corporate debtor before

the adjudicating authority when a default has occurred.

Explanation.—For the purposes of this sub-section, a default

includes a default in respect of a financial debt owed not only to the

applicant financial creditor but to any other financial creditor of the

corporate debtor.

(2) The financial creditor shall make an application under subsection

(1) in such form and manner and accompanied with such fee as

may be prescribed.

(3) The financial creditor shall, along with the application furnish—

(a) record of the default recorded with the information utility

or such other record or evidence of default as may be

specified;

(b) the name of the resolution professional proposed to act

as an interim resolution professional; and

(c) any other information as may be specified by the Board.

(4) The Adjudicating Authority shall, within fourteen days of the

receipt of the application under sub-section (2), ascertain the existence of

a default from the records of an information utility or on the basis of

other evidence furnished by the financial creditor under sub-section (3).

(5) Where the Adjudicating Authority is satisfied that—

(a) a default has occurred and the application under subsection

(2) is complete, and there is no disciplinary

13

proceedings pending against the proposed resolution

professional, it may, by order, admit such application; or

(b) default has not occurred or the application under subsection

(2) is incomplete or any disciplinary proceeding is

pending against the proposed resolution professional, it

may, by order, reject such application:

Provided that the Adjudicating Authority shall, before rejecting the

application under clause (b) of sub-section (5), give a notice to the

applicant to rectify the defect in his application within seven days of

receipt of such notice from the Adjudicating Authority.

(6) The corporate insolvency resolution process shall commence

from the date of admission of the application under sub-section (5).

(7) The Adjudicating Authority shall communicate—

(a) the order under clause (a) of sub-section (5) to the

financial creditor and the corporate debtor;

(b) the order under clause (b) of sub-section (5) to the

financial creditor, within seven days of admission or

rejection of such application, as the case may be.”

Provisions of Section 7 appear to be not applicable in the present case

because the process is to be initiated by the financal creditor not by the

corporate debtor.

Section 9 deals with application for initiation of corporate insolvency

resolution process by operational creditor. The said provision is also not

applicable in the present case.

Section 10 deals with initiation of corporate insolvency resolution

process by corporate applicant. Section 10 is set out below :

“10. Initiation of corporate insolvency resolution process by

corporate applicant. – (1) Where a corporate debtor has committed a

default, a corporate applicant thereof may file an application for

initiating corporate insolvency resolution process with the Adjudicating

Authority.

(2) The application under sub-section (1) shall be filed in such

form, containing such particulars and in such manner and accompanied

with such fee as may be prescribed.

(3) The corporate applicant shall, along with the application

furnish the information relating to –

(a) its books of account and such other documents relating

to such period as may be specified; and

(b) the resolution professional proposed to be appointed as

an interim resolution professional.

(4) The Adjudicating Authority shall, within a period of fourteen

days of the receipt of the application, by an order –

(a) admit the application, if it is complete; or

(b) reject the application, if it is incomplete:

Provided that Adjudicating Authority shall, before rejecting an

application, give a notice to the applicant to rectify the defects in his

application within seven days from the date of receipt of such notice

from the Adjudicating Authority.

(5) The corporate insolvency resolution process shall commence

from the date of admission of the application under sub-section (4) of this

section.”

Sub-Section (1) of Section 10 says, where a corporate debtor has

committed a default, a corporate applicant thereof may file an application for

initiating corporate insolvency resolution process with the adjudicating

authority.

Sub-Section (5) of Section 5 defines “corporate applicant” which also

means a corporate debtor. Therefore, the application made within the scope

of Section 10 by a corporate applicant which includes corporate debtor is

very much maintainable and the proceeding being maintainable the other

consequential reliefs mentioned under Section 14 of the said Code is equally

applicable in the present case. Sub-Section (1) (a) of Section 14 clearly

prohibits institution of suits or continuation of pending suits or proceeding

against the corporate debtor including execution of any judgment, decree or

order in any Court of law, Tribunal, arbitration panel or other authority.

Therefore, when the said Code prohibits institution and/or continuation of a

suit or proceeding, I find no reason to allow the plaintiff to proceed with the

suit. The submission on behalf of the plaintiff that only restriction for stay of

execution has been created under Section 14(1) (d) of the said Code, does not

appear to be logical at all. It depends upon the circumstances where the

parties stand, if it is before the institution of the suit then the suit cannot be

instituted, if it is in the midst of the suit then the suit cannot be continued

and if the suit has been decreed then the execution should not be allowed to

continue. However, it has been clearly submitted by the learned counsel

appearing for the plaintiff/respondent that this Court can proceed with the

trial of the suit but at best the plaintiff can be restrained from proceeding

with the execution. Such submission may be considered to be fair but

cannot be accepted, inasmuch as, before a suit is tried it cannot be

presumed whether the suit will be decreed or dismissed. Such a question

can arise only after the suit is decreed but this Court has not yet reached

such stage and if admittedly a decree cannot be executed there is no reason

to allow the suit to proceed which may lead to multiplicity of proceedings.

Those apart, this Court is not oblivious of the provisions of Section 

of the said Code which fixes up time limit for completion of insolvency

resolution process. Section 12 is set out below :

“12. Time-limit for completion of insolvency resolution

process. – (1) Subject to sub-section (2), the corporate insolvency

resolution process shall be completed within a period of one hundred

and eighty days from the date of admission of the application to initiate

such process.

(2) The resolution professional shall file an application to the

Adjudicating Authority to extend the period of the corporate insolvency

resolution process beyond one hundred and eighty days, if instructed to

do so by a resolution passed at a meeting of the committee of creditors

by a vote of seventy-five per cent of the voting shares.

(3) On receipt of an application under sub-section (2), if the

Adjudicating Authority is satisfied that the subject matter of the case is

such that corporate insolvency resolution process cannot be completed

within one hundred and eighty days, it may be order extend the

duration of such process beyond one hundred and eighty days by such

further period as it thinks fit, but not exceeding ninety days:

Provided that any extension of the period of corporate insolvency

resolution process under this section shall not be granted more than

once.”

It says that subject to Sub-Section (1) of Section 12 and subject to

Sub-Section (2), the corporate insolvency resolution process shall be

completed within a period of 180 days from the date of admission of the

application to initiate such process. Sub-Section (2) says that the resolution

professional shall file an application to the adjudicating authority to extend

the period of the corporate insolvency resolution process beyond 180 days, if

instructed to do so by a resolution passed at a meeting of the committee of

creditors by a vote of 75% of the voting shares.

Mr. Ghosh has relied on a decision in the case of Sree Chamundi

Mopeds Ltd. – Vs. – Church of South India Trust Association CSI Cinod

Secretariat, Madras, reported in (1992) 3 SCC 10 and tried to argue that

taking into similar provisions contained in Sick Industrial Companies

(Special Provisions) Act, 1985, the Hon’ble Supreme Court has refused to

grant stay in an identical situation.

So far the decision cited by Mr. Ghosh in the case of Shree Chamundi

(supra), it relates to applicability of the provisions of Section 22(1) of the Sick

Industrial Companies (Special Provisions) Act, 1985, praying suspension of

proceedings for winding up of industrial company filed under Section 433(e)

of Companies Act, 1956 by the respondent before the Hon’ble Supreme Court

whose premises was taken on rent by the appellant company. It was held by

the Hon’ble Supreme Court that proceeding initiated by landlord against

tenant sick industrial company on ground of arrears of rent not covered by

such category of proceedings leasehold interest in the premises in occupation

of the company as the statutory tenant also not property and eviction

proceeding resulting in deprivation of such interest not covered by the

proceedings contemplated under Section 22(1) of the aforesaid Act of 1985. It

has been further held that such an interpretation is in consonance with the

object and purpose of the Act. However, the Hon’ble Supreme Court while

arriving at such a decision has held that it cannot agree with the contention

of the learned counsel for the appellant company that the leasehold interest

of the appellant company in premises leased out to it is property for the

purpose of Section 22(1) of the said Act and the appeal was dismissed. The

fact situation involved in the aforesaid decision is quite different from the

case which we are dealing now. In the case at hand the corporate debtor is

somehow in a different situation than the appellant company in the aforesaid

decision in Re: Chamundi (supra). Therefore, the said decision being

distinguishable on fact has no bearing on the fact situation of the present

19

case. That apart, Sick Industrial Companies (Special Provisions) Act, 1985

has been repealed by the Sick Industrial Companies (Special Provisions)

Repeal Act, 2003. The aforesaid decision of the Hon’ble Supreme Court on

29th April, 1992 and the Sick Industrial Companies (Special Provisions) Act,

1985 was repealed in 2003. Therefore, when the decision came into effect,

Sick Industrial Companies (Special Provisions) Act, 1985 was very much in

force. After repeal of the said Act no useful purpose will be served to compare

with the provisions of Section 14 of the aforesaid Code with those of the

provisions of Sick Industrial Companies (Special Provisions) Act, 1985.

Per contra the decision in M/s. Innoventive Industries (supra) it has

been held that “the moment initiation of the corporate insolvency resolution

process takes place a moratorium is announced by the adjudicating

authority vide Sections 13 and 14 of the Code, by which institution of suits

and pending proceedings etc. cannot be proceeded with. This continues until

the approval of a resolution plan under Section 31 of the said Code…”

If an adjudicating authority is satisfied that the subject matter of the

case is such that the Corporate Insolvency Resolution Process cannot be

completed within 180 days it may, by order, extend the duration of such

process beyond 180 days of such further period as it thinks fit, but not

exceeding 90 days. The proviso to sub-section (3) further says that any

extension of the period of Corporate Insolvency Resolution Process under the

said execution shall not be granted more than once. Therefore, on a conjoint

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reading of the sub Sections under Section 12 it appears that the resolution

process has to be completed within 180 days and further 90 days of

extension (once only). If the provisions of the Code are compared with its

object, it gives a logical conclusion that the Courts are prohibited from

proceeding with the suits and proceedings which has direct nexus with the

provisions of Section 14 of the said Code. Admittedly, the defendant is a

corporate debtor. Admittedly, in a proceeding under Section 10 a moratorium

has been declared, an Insolvency Resolution Professional has been appointed

on and from the date of the order under Section 10 of the said code, i.e.,

01.05.2017. We are now in September 2017. Therefore, it is expected that

within the timeframe mentioned in Section 12 the Insolvency Proceeding will

be completed and it is prudent to hold that the trial of the suit will be stayed

for the present for a period of four months from date with liberty to the

plaintiff to bring it to the notice of the Court with regard to further

development in the Insolvency Proceeding. Therefore, I am inclined to stay

the proceedings of the suit only for a period of four months for the present

with liberty to the parties to pray for extension if situation so demands.

The application stands disposed of.

(SAHIDULLAH MUNSHI, J)

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