Case Note & Summary
The State of Maharashtra, through the Deputy Collector and Competent Authority (NSEL), filed a writ petition under Articles 226 and 227 of the Constitution of India challenging an order dated 28/01/2019 passed by the National Company Law Tribunal (NCLT), Mumbai Bench in M.A.No.1372/2018 in CP(IB)-1138(MB)/2017. The NCLT order had directed de-freezing of the bank accounts of Dunar Foods Ltd., which was both a corporate debtor under the Insolvency and Bankruptcy Code, 2016 (IBC) and a financial establishment under the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 (MPID Act). The State had attached these accounts under the MPID Act for the benefit of depositors. The key issue was whether the NCLT, exercising powers under the IBC, could override the attachment ordered under the MPID Act. The State argued that the MPID Act is a special statute with overriding effect, and the Designated Court under the MPID Act has exclusive jurisdiction over the attached properties. The respondent, the Resolution Professional, contended that the IBC is a complete code and the moratorium under Section 14 of the IBC should prevail. The court analyzed the provisions of both Acts, including Sections 3, 4, 5, 6, and 7 of the MPID Act and Sections 7, 14, and 32A of the IBC. It held that the MPID Act is a special statute enacted to protect the interests of depositors and has an overriding effect over the IBC. The NCLT acted without jurisdiction in ordering de-freezing of assets attached under the MPID Act. The court allowed the petition, set aside the NCLT order, and directed that the attached assets remain under the control of the Designated Court under the MPID Act.
Headnote
A) Insolvency and Bankruptcy Code - Conflict of Laws - MPID Act vs IBC - Sections 7, 14, 32A IBC; Sections 3, 4, 5, 6, 7 MPID Act - The court held that the MPID Act is a special statute enacted to protect depositors and has overriding effect over the IBC. The NCLT cannot order de-freezing of assets attached under the MPID Act as the Designated Court under the MPID Act has exclusive jurisdiction over such properties. The IBC provisions, including Section 32A, do not apply to proceedings under the MPID Act. (Paras 1-43) B) Constitutional Law - Jurisdiction of High Court - Article 226, 227 Constitution of India - The High Court can entertain a writ petition challenging an order of NCLT de-freezing assets attached under MPID Act, as the NCLT acted without jurisdiction. (Paras 4-43) C) Criminal Law - Attachment and Confiscation - MPID Act - Sections 3, 4, 5, 6, 7 MPID Act - The attachment and confiscation of properties under the MPID Act are independent of the IBC moratorium and cannot be interfered with by the NCLT. The Designated Court under MPID Act has the power to distribute assets to depositors. (Paras 20-43)
Issue of Consideration
Whether the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016 (IBC) can order de-freezing of assets attached under the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 (MPID Act) and whether the MPID Act overrides the IBC.
Final Decision
The court allowed the writ petition, set aside the NCLT order dated 28/01/2019, and held that the MPID Act overrides the IBC. The attached assets remain under the control of the Designated Court under the MPID Act.
Law Points
- MPID Act is a special statute
- IBC is a general statute
- MPID Act overrides IBC
- Designated Court under MPID Act has exclusive jurisdiction
- NCLT cannot de-freeze assets attached under MPID Act
- Section 32A of IBC does not apply to MPID Act proceedings
