Thursday, 16 January 2020

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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