Supreme Court

Sandeep Khaitan, Resolution Professional for National Plywood Industries Ltd. vs. JSVM Plywood Industries Ltd. and Ors.

MANU/SC/0300/2021

22.04.2021

Insolvency

Power under Section 482 is not available to the Court to countenance the breach of a statuary provision

The appeal is directed against order passed by the Hon'ble High Court. In the impugned order, the High Court has allowed an interlocutory application filed by the Respondent No. 1 to allow it to operate its bank account maintained with the ICICI Bank, Bhubaneswar and to unfreeze the bank account of its creditors over which the lien has been created and the accounts frozen pursuant to the lodging of an FIR by the Appellant.

The contours of the jurisdiction under 482 of the Code of Criminal Procedure, 1973 (CrPC) are far too well settled to require articulation or reiteration. In present case, by 26th August, 2019, an application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) was admitted, the Appellant appointed as the interim resolution professional. Further, with the declaration of the moratorium, the prohibitions as enacted in Section 14 of IBC came into force. It is clear that, the assets of the company would include the amounts lying to the credit in the bank accounts. There cannot be any dispute that, well after the order under Section 14 was passed, a sum of Rs. 32.50 lakhs has been remitted into the account of Respondent No. 1 Company. No doubt, it is the definite case of the Respondent No. 1 that, it has had business relations with the Corporate Debtor since more than 15 years and that the amount remitted in its account represented the price of the materials supplied to the Corporate Debtor. Apart from this, amount a sum of rupees more than Rs. 39 lakhs is still due.

The role of the insolvency professional is neatly carved out. From the date of admission of application and the appointment of Interim Resolution Professional, the management of the affairs of the Corporate Debtor is to vest in the Interim Resolution Professional. With such appointment, the powers of the Board of Directors or the partners of the Corporate Debtor as the case may be are to stand suspended. Section 17 of IBC further declares that, the powers of the Board of Directors or partners are to be exercised by the Interim Resolution Professional. The financial institutions are to act on the instructions of the Interim Resolution Professional. Section 14 of IBC is emphatic, subject to the provisions of Sub-section (2) and (3). The impact of the moratorium includes prohibition of transferring, encumbering, alienating or disposing of by the Corporate Debtor of any of its assets.

With the appointment of Committee of Creditors, a Resolution Professional is to be appointed. The Resolution Professional is thereafter to conduct the resolution process and manage the operations. Section 23(2) makes it clear that, his power is the same as the powers of the Interim Resolution Professional. Undoubtedly, the Resolution Professional is bound to seek prior approval of the Committee of Creditors in maters covered by Section 28.

The High Court appears to have, in passing the impugned order, which is an interim order overlooked the salutary limits on its power under Section 482 of CrPC. The power under Section 482 of CrPC may not be available to the Court to countenance the breach of a statuary provision. The words 'to secure the ends of justice' in Section 482 of CrPC cannot mean to overlook the undermining of a statutory dictate, which in present case is the provisions of Section 14, and Section 17 of the IBC.

In view of orders passed by the NCLT admitting the application, under Section 7 of IBC, and also the ordering of moratorium under Section 14 of the IBC and the orders which have been passed by the tribunal otherwise, the impugned order of the High Court resulting in the Respondent No. 1 being allowed to operate the account without making good the amount of Rs. 32.50 lakhs to be placed in the account of the Corporate Debtor cannot be sustained.

The Respondent No. 1 is allowed to operate its account subject to it to first remitting into the account of the Corporate Debtor, the amount of Rs. 32.50 lakhs which stood paid to it by the management of the Corporate Debtor. The assets of the Corporate Debtor shall be managed strictly in terms of the provisions of the IBC. The Appellant as RP will bear in mind the provision of Section 14(2A) and the object of IBC. The judgment will not stand in the way of the Respondent No. 1 pursuing its claim with regard to its entitlement to a sum of Rs. 32.50 lakhs and any other sum from the Corporate Debtor or any other person in the appropriate forum and in accordance with law. Appeal allowed.

Tags : Interim order Powers High Court

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