Alpha & Omega Diagnostics (India) Ltd vs Asset Reconstruction Company Of India ...

Alpha & Omega Diagnostics (India) Ltd. ...Appellant

Vs.

Asset Reconstruction Company of India Ltd. & Ors. . . .Respondents

Present: For Appellant:- Mr. Amit Vyas, Advocate

For Respondents:- Sh. Arun Kathpalia, Senior Advocate with Mr. Rohit Gupta, Mr. P.S. Sudheer and Subhoshree, Advocates.

ORDER

31.07.2017- The Appellant-Corporate Applicant filed an application

under Section 10 of the Insolvency and Bankruptcy Code, 2016

(hereinafter referred to as "I & B Code") for initiation of corporate

insolvency resolution process in so far it relates to Corporate Debtor

with the Adjudicating Authority.

2. Ld. Adjudicating Authority (National Company Law Tribunal)

Mumbai Bench, Mumbai, after notice to the 'Financial Creditor' and

others passed impugned order dated 10th July, 2017 in T.C.P. No.

11 17/I&BP/NCLT/MB/MAH/2017, admitting the application subject

to qualification, as quoted below:

"4.8. Nevertheless, the decision on "Admission" as

pronounced hereinabove is subject to a qualification.

The I&BP Code, 2016 has prescribed certain -2-

limitations which are inbuilt and must not be

overlooked. The 'Moratorium' indeed is an effective

tool, sometimes being used by the corporate Debtor

to thwart or frustrate the Recovery Proceedings, as

happened in this Case. The Learned Chief

Metropolitan Magistrate vide Order (supra) dated

11. 04.2017 has appointed a Court Commissioner to

takeover the possession of the flats. The admitted

position is that the Flats in question are not

under the Ownership of the corporate Debtor.

A question in this regard was raised during the

hearing however not disputed by the either side.

Even in the balance sheet of the Corporate Debtor

these flats are not reflected. It is further evidenced

that the documents annexed have clearly

demonstrated that the personal properties of the

Promoters have been given as a "Security" to

the banks. Now the question is that whether a

property(ies) which is/are not 'owned' by a

Corporate Debtor shall come within the ambits of the

Moratorium? To examine this aspect, it is useful to

reproduce verbatim the provisions of Section 14 of

the Code as under: -

5. Section 14. Moratorium -3-

(1) Subject to provisions of sub-sections (2)(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 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.

2 3 -4- 4

6. On careful reading I have noticed that the term "its"

is significant. The plain language of the Section is

that on the commencement of the Insolvency process

the 'Moratorium' shall be declared for prohibiting

any action to recover or enforce any security

interest created by the Corporate Debtor in

respect of "its" property. Relevant section which

needs in-depth examination is Section 14(1)(c) of the

Code.

7. There are recognised canons of interpretation.

Language of the Statute should be read as it existed.

This is a trite law that no word can be added or

substituted or deleted from the enacted Code duly

legislated. Every word is to be read and interpreted

as it exists in the statute with the natural meaning

attached to the word. Rather in this Section the

language is so simple that there is no scope

even to supply 'casus omissus'. I hasten to add

that the doctrine of 'Noscitur a Sociis' is

somewhat applicable that the associated

words take their meaning from one another so

that common sense meaning coupled together

in their cognate sense be interpreted. As a -5-

result, "its" denotes the property owned by the

Corporate Debtor. The property not owned by the

Corporate Debtor do not fall within the ambits

of the Moratorium. Even Section 10 is confined to

the Book of the Accounts of the Corporate Debtor,

due to the reason that Section 10(3) has specified

that the Corporate Applicant shall furnish "its"

Books of Accounts. This Bench has no legislative

authority to expand the meaning of the term, "its"

even under the umbrella of 'Ejusdem generis'.

8. The outcome of this discussion is that the Moratorium

shall prohibit the action• against the properties

reflected in the Balance Sheet of the Corporate

Debtor. The Moratorium has no application on the

properties beyond the ownership of the Corporate

Debtor. For the sake of completeness, it is worth to

refer that the provisions of The Securitisation and

Reconstruction of Financial Assets and Enforcement

of Securities Interest Act, 2002 (the SARFAESI Act)

may be having different criteria for enforcement of

recovery of outstanding debt, which is not the

subject matter of this Bench. Before I past with it

is necessary to clarify my humble view that the

SARFAESI Act may come within the ambits of -6-

Moratorium if an action is to foreclose or to

recover or to create any interest in respect of

the property belonged to •or owned by a

Corporate Debtor, otherwise not.

9. To conclude the Application under Section 10 of the

Code is hereby "Admitted" subject to the exception

as carved out supra. The consequential directions

shall be that the provisions of Section 14 of The Code

i.e. "Moratorium" shall come into operation: Next,

the proposed name of Interim Resolution

professional i.e. Mr. Rajendra Karanmal Bhuta, C/o

RK Bhutta & Co. Chartered Accountants, Insolvency

Professionals, 1207, Yogi paradise, Yodi Nagar,

Borivali (West), Mumbai-400 092, email -

rkbhuta, co. gmail. corn, IP Registration No.

INNI/IBA-IP/00078/201 6-2017/1074 is hereby

approved. The IRP shall take appropriate action

such as Public Announcement etc. so that the

Insolvency Resolution Process shall be initiated

expeditiously. He is directed to submit a Progress

Report within one month's time from the

commencement of Insolvency Resolution Process."

3. The impugned order dated 10th July, 2017 is under challenge in

this appeal.

I

4. Ld. Counsel appearing on behalf of the Appellant submitted that

the appellant has grievance only relating to qualifying part of the

impugned order as quoted above. According to the appellant, the

Moratorium should take into its recourse on the subject matters and

assets relating to its matters pending before the Debt Recovery Tribunal

(DRT) and under Securitisation and Reconstruction of Financial Assets

and Enforcement of Security Interest Act, 2002 (SARFAESI).

5. However, we are not inclined to accept such submissions as

Appellant-Corporate Applicant has sought for "its" own insolvency

resolution process that will include only the assets of the Corporate

Debtor and not any assets, movable or immovable of a third party, like

any director or other. In so far as 'guarantor' is concerned, we are not

expressing any opinion, as they come within the meaning of 'Corporate

Debtor individually', as distinct from principal debtor who has taken a

loan.

6. In the aforesaid background, if Ld. Adjudicating Authority, on

careful reading of the provisions has come to the definite conclusion

that on commencement of the insolvency process the "Moratorium" shall

be declared for prohibiting any action to recover or enforce any security

interest created by the 'Corporate Debtor' in respect of "its" property,

no ground is made out to interfere with the said order.

7. We find no merit in this appeal. It is accordingly dismissed.

However, in the facts and circumstances, there shall be no order as to

cost.

(Justice S.J. Mukhopadhaya) Chairperson

(Mr. Balvinder Singh) Member(Technical) ar