Schweitzer Systemtek India Pvt. Ltd vs Phoenix Arc Pvt. Ltd. & Ors

Schweitzer Systemtek India Pvt. Ltd. .Appellant

Vs.

Phoenix ARC Pvt. Ltd. & Ors. .Respondents

Present: For Appellant: Mr. Davesh Bhatia, Advocate

For Respondent No. 1:- Mr. Rishad A. Chowdhary and Mr. Manaswi, Advocates

ORDER

09.08.2017: The Appellant-Corporate Applicant has challenged the

order dated 3rd July, 2017 passed by Ld. Adjudicating Authority (National

Company Law Tribunal) Mumbai Bench, Mumbai in T.C.P. No.

1059/I&BP/NCLT/MB/MAH/2017, whereby and whereunder the

application preferred by appellant under Section 10 of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as "I & B Code") has been

admitted, an order of Moratorium has been passed and Insolvency

Resolution Professional has been ordered to be appointed.

2. The grievance of the appellant is that the movable and immovable

property of Guarantor (promoter) has been attached pursuant to

Corporate Resolution Process initiated under section 10 against the

Appellant-Corporate Applicant. However, such statement has been

disputed by the Ld. Counsel appearing on behalf of 1St Respondent/

'Financial Creditor'.

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3. From the impugned order, we find that the Ld. Adjudicating

Authority noticed the provision relating to Moratorium (Sec. 14) and

clarified as to which property is to be attached, as apparent from the

observations and finding as quoted below:

8.1. 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.

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 -3-

common sense meaning coupled together in their

cognate sense be interpreted. As a 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'.

8.2 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 beyon4

the ownership of the Corporate Debtor. As a result, the

Order of the Hon'ble Court directing the Court

Commissioner to take over the possession shall not fall

within the clutches of Moratorium. Even otherwise, 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

part with it is necessary to clarify my humble view -4-

that The SARFAESIAct may come within the ambits

of 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.

(Page 4 name) 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."

4. Similar question fell for consideration before this Appellate

Tribunal in "Alpha & Omega Diagnostics (India) Ltd. V. Asset

Reconstruction Company of India Ltd. & Ors." in Company Appeal

(AT) (Insol.) No. 116 of 2017 by judgment dated 31st July, 2017, this

Appellate Tribunal while upheld such findings, made following

observations: -

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"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 -6-

interest created by the 'Corporate Debtor' in respect of

"its" property, no ground is made out to interfere with the

said order."

5. At this stage, it will be desirable to refer to the relevant portion of

Section 60 of the I&B Code, as quoted below: -

"60. Adjudicating Authority for corporate persons- (1)

The. Adjudicating Authority, in relation to insolvency

resolution and liquidation for corporate persons including

corporate debtors and personal guarantors thereof shall be

the National Company Law Tribunal having territorial

jurisdiction over the place where the registered office of the

corporate person is located.

(2) Without prejudice to sub-section (1) and notwithstanding

anything to the contrary contained in this Code, where a

corporate insolvency resolution process or liquidation

proceeding of a corporate debtor is pending before a

National Company Law Tribunal, an application relating to

the insolvency resolution or bankruptcy of a personal

guarantor of such corporate debtor shall be filed before such

National Company Law Tribunal.

(3) An insolvency resolution process or bankruptcy

proceeding of a personal guarantor of the corporate debtor

pending in any court or tribunal shall stand transferred to the Adjudicating Authority dealing with insolvency

resolution process or liquidation proceeding of such

corporate debtor.

(4) The National Company Law Tribunal shall be vested

with all the powers of the Debt Recovery Tribunal as

contemplated under Part HI of this Code for the purpose of

sub-section (2).

(5) Notwithstanding anything to the contrary contained in

any other law for the time being in force, the National

Company Law Tribunal shall have jurisdiction to entertain

or dispose of--

(a) any application or proceeding by or against the

corporate debtor or corporate person;

(b) any claim made by or against the corporate debtor

or corporate person, including claims by oragainst any

Of its subsidiaries situated in India; and

(c) any question of priorities or any question of law or

facts, arising out of or in relation to the insolvency

resolution or liquidation proceedings of the corporate

debtor or corporate person under this Code. -

(6) Notwithstanding anything contained in the Limitation

Act, 1963 or in any other law for the time being in force, in -8-

computing the period of limitation specified for any suit or

application by or against a corporate debtor for which an

order of moratorium has been made under this Part, the

period during which such moratorium is in place shall be

excluded".

6. In this respect one may also refer to Section 60 of the I & B Code,

as per which under sub-section (2) if Corporate Insolvency Resolution

Process, or liquidation proceeding of a corporate debtor is pending before

the 'Adjudicating Authority', an application relating to the 'insolvency

resolution' or 'bankruptcy' of a personal guarantor required to be filed

before the same Bench of Adjudicating. Authority, meaning thereby,

separate application for initiation of resolution process require to be filed

against the guarantor before the same very Bench of the Adjudicating

Authority who is hearing the corporate resolution process or liquidation

proceeding against principal corporate debtor.

7. Sub-section (3) of Section 60 further makes it clear that if an

insolvency resolution process or bankruptcy proceeding of a personal

guarantor of the corporate debtor is pending before any other court of law

or Tribunal, such as "Debt Recovery Tribunal", who is the Adjudicating

Authority for the purpose of Fart-HI- Insolvency Resolution and

Bankruptcy for Individuals and Partnership Firms all those proceeding

shall also stand transferred to the Adjudicating Authority, dealing with

insolvency resolution process or liquidation proceeding of the Corporate

Debtor.

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8. Sub-section (5) of Section 60 further makes it clear that the

Adjudicating Authority has jurisdiction to entertain and dispose of an

application or proceeding by or against the Corporate Debtor or corporate

person including any claim made by or against the Corporate Debtor or

Corporate person, including claims by or against any of its subsidiaries

situated in India.

9. In view of the observations made above, the impugned order having

passed by Ld. Adjudicating Authority in accordance with law, we reject

the prayer. The appeal is dismissed. However, in facts and circumstances

of the case, the parties shall bear the respective costs.

(Justice S.J. Mukhopadhaya) Chairperson

(Balvinder Singh) Member(Technical) ar