Case Note & Summary
The petitioner, M/s. Dreams Infra India Pvt. Ltd., represented by its Resolution Professional Sri Ashok Kriplani appointed by the National Company Law Tribunal (NCLT), Bengaluru, filed a writ petition under Articles 226 and 227 of the Constitution of India read with Section 482 of the Code of Criminal Procedure, 1973. The petition sought to quash the proceedings in Miscellaneous No.2/2020 dated 02.01.2020 pending before the Principal City Civil and Sessions Judge (Special Judge), Bengaluru, initiated by the respondent, the Competent Authority under the SARFAESI Act, 2002. The petitioner also sought a direction to the respondent to hand over the properties of the corporate debtor to the Resolution Professional. The background of the case is that the corporate debtor was admitted into Corporate Insolvency Resolution Process (CIRP) by the NCLT, Bengaluru, vide order dated 20.08.2019, and a moratorium was declared under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC). Despite the moratorium, the respondent initiated proceedings under the SARFAESI Act against the corporate debtor's assets. The legal issues considered were whether the SARFAESI proceedings could continue during the moratorium and whether the IBC overrides the SARFAESI Act. The petitioner argued that the moratorium under Section 14 IBC prohibits any proceedings against the corporate debtor's assets and that the IBC has overriding effect over other laws. The respondent contended that the SARFAESI Act is a special statute and the proceedings were valid. The court analyzed the provisions of Section 14 IBC and Section 35 of the IBC, which gives the Code overriding effect. The court held that the moratorium under Section 14 IBC bars any proceedings against the corporate debtor's assets, including those under the SARFAESI Act. The court further held that the IBC overrides the SARFAESI Act and other laws. Consequently, the court quashed the proceedings in Miscellaneous No.2/2020 and directed the respondent to hand over possession of the properties to the Resolution Professional. The decision was in favor of the petitioner.
Headnote
A) Insolvency and Bankruptcy Code - Moratorium - Section 14 IBC - Overriding Effect - The moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 prohibits any proceedings against the corporate debtor's assets, and the IBC has overriding effect over the SARFAESI Act, 2002 and other laws. Held that the proceedings under the SARFAESI Act cannot continue during the moratorium period (Paras 5-10). B) SARFAESI Act - Proceedings During CIRP - Section 13 SARFAESI Act - Jurisdiction - The proceedings initiated under the SARFAESI Act against a corporate debtor after the commencement of CIRP are barred by the moratorium under Section 14 IBC. Held that the competent authority under SARFAESI Act must hand over possession of the properties to the Resolution Professional (Paras 11-15).
Issue of Consideration
Whether the proceedings initiated under the SARFAESI Act against the corporate debtor, which is under Corporate Insolvency Resolution Process (CIRP), can be quashed and the properties be handed over to the Resolution Professional.
Final Decision
The court quashed the proceedings in Miscellaneous No.2/2020 dated 02.01.2020 pending before the Principal City Civil and Sessions Judge (Special Judge), Bengaluru, and directed the respondent to hand over possession of the properties to the Resolution Professional, Sri Ashok Kriplani.
Law Points
- Insolvency and Bankruptcy Code
- 2016 overrides SARFAESI Act
- 2002
- moratorium under Section 14 IBC bars proceedings against corporate debtor's assets
- Resolution Professional entitled to possession of assets
- writ petition maintainable under Articles 226 and 227 read with Section 482 Cr.P.C.
