High Court Bombay (09.11.2020) in State of Maharashtra Vs. Anil Kohil, RP for Dunar Foods Ltd. [Writ Petition No. 3396 of 2019 with Civil Application No.29 of 2020] held that;
# 23. . . .Thus it is clear that Section 18 of the I.B. Code specifying duties of interim resolution professional, although provides in sub-Section 18(f) that he shall take control and custody of any asset over which the corporate debtor has ownership rights, however the same is subject to the determination to the ownership by a Court or Authority. In this particular case, such Court will be the Designated Court as per the provisions of the MPID Act.
# 30. Thus, in view of the above discussion, we hold that the NCLT has no jurisdiction to examine legality or validity of action taken under MPID Act and it is only the Designated Court constituted under Section 6 of the MPID Act that will have exclusive jurisdiction to deal with the same. Therefore, the impugned order passed by the NCLT is without jurisdiction and therefore, amenable to a challenge in our writ jurisdiction.
Excerpts of the order;
# 1. In the present case a very interesting question arises as to whether action taken under the provisions of the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 (hereinafter referred to as “MPID Act”) against a “Financial Establishment”, as contemplated under the MPID Act, can be challenged not before the Designated Court under the MPID Act but before the National Company Law Tribunal (hereinafter referred to as “NCLT”) by resorting to the remedy provided under the Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as “I.B. Code”). On the application of a “Financial Creditor” as contemplated under I.B. Code, an Interim Resolution Professional (hereinafter referred as “IRP”) is appointed by NCLT by exercising power under section 7 of the I.B. Code against the Corporate Debtor as contemplated under I.B. Code, which is also the Financial Establishment under the MPID Act and de-freezing of the corporate Debtor’s account attached in MPID proceedings is ordered. This order is the subject matter of challenge in this petition.
# 4. The State of Maharashtra through the Deputy Collector and Competent Authority (NSEL), by the present Writ Petition filed under Article 226 and 227 of the Constitution of India , has approached this Court challenging the legality and validity of the order dated 28/01/2019 passed by the Member (Judicial), National Company Law Tribunal, Mumbai Bench in M.A.No.1372/2018 in CP(IB)- 1138(MB)/2017. By the said order, National Company Law Tribunal (NCLT) directed de-freezing of bank account No.1952320006245 in HDFC Bank, Karnal, Haryana, (hereinafter referred to as “said account”) in the name of Dunar Foods Ltd.
# 6. ………. It appears that during investigation, as and when the Investigating Agency got knowledge about properties of various companies/persons to which the provisions of MPID Act in relation to said FIR could be applied, necessary notifications under section 4 were issued by Government of Maharashtra attaching immovable and movable properties. By the notification dated 19/10/2018 various properties belonging to various parties were attached including of M/s.E.D. Agro Procedures Pvt. Ltd. and Dunar Foods Pvt. Ltd. including the said account. In this petition, we are concerned with defreezing of the said account which is subject matter of the impugned order dated 28/01/2019.
# 8. It is significant to note that on 20/02/2018, M.A.No.237/2018 was filed by Dunar Foods Ltd. through IRP under section 9 of MPID Act before the Designated Court under MPID Act, seeking direction to defreeze the bank accounts of Dunar Foods Ltd. attached pursuant to the notifications issued by the Home Department of Government of Maharashtra under the MPID Act from time to time and seeking further direction to the Competent Authority designated under MPID Act to forthwith handover all assets of Dunar Foods Ltd. to the Applicant. By the order dated 28th December, 2018, passed by the learned Special Judge (MPID Act) City Civil and Sessions Court for Greater Bombay passed below Exhibit-1 in Miscellaneous Application No.237 of 2018, the said application was rejected, however, it was clarified that IRP was at liberty to raise objections before the Court under section 7 of the MPID Act.
# 9. In the meanwhile, on 12/11/2018, M.A.No.1372 of 2018 in C.P.No.1138/I & BC/NCLT /MB/MAH/2017 was filed by IRP for Dunar Foods Ltd. under section 60(5), 14(1a) and 74(2) of I.B. Code before the NCLT, seeking direction to de-freeze the said account of the corporate debtor attached pursuant to the notifications issued by the Home Department, Government of Maharashtra under MPID Act from time to time and consequential directions to the Respondent, being the Competent Authority designated under MPID Act, to forthwith handover all assets of Dunar Foods Ltd. to the Applicant. It is further prayed that action be directed to be initiated under section 74(2) of the Code against the concerned officers of the corporate debtor for deliberate and willful violation of section 14 of the Code. A detailed reply dated 15/01/2019 was filed by the Deputy Collector and Competent Authority (NSEL) to M.A.No.1372/2018. By the impugned order dated 28/01/2019, passed by the learned Member (Judicial) NCLT, Mumbai Bench, M.A.No.1372/2018 was partly allowed by directing defreezing of the said account. The said order is challenged by the State of Maharashtra through Deputy Collector and Competent Authority, (NSEL) in the present writ petition.
# 10. Mr.Patil, learned AGP, submitted that the NCLT has no jurisdiction and no authority under law to pass the impugned order. He submitted that MPID Act is a special statute, which has as its object the protection of interest of depositors of Financial Establishments and matters relating thereto…….. He submitted that the issue of jurisdiction was specifically raised before the NCLT, however, the NCLT completely ignored the same while passing the impugned order. The learned AGP, while dealing with the contention raised regarding maintainability of the Writ Petition in view of availability of the alternate remedy of an appeal under section 61 of the I.B. Code, submitted that as the impugned order is passed without jurisdiction the Writ Petition is maintainable.
# 11. Learned AGP relied on the following judgments of the Supreme Court in support of his submissions :
(i) (1998) 8 SCC 1 Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai & Ors.;
(ii) (2003) 2 SCC 107 Harbanslal Sahnia & Anr. vs. Indian Oil Corporation & Ors.;
(iii) (2009) 2 SCC 630 Committee of Management & Anr. vs. Vice Chancellor & Ors.
(iv) (2009) 14 SCC 338 Godrej Sara Lee Ltd. vs. Assistant Commissioner (AA) & Ors.;
(v) 2019 SCC Online SC 1542 Embassy Property Developments Pvt. Ltd. vs. State of Karnataka
# 12. Mr.Abhishek Anand, learned Counsel for the Respondent, on the other hand, pointed out various provisions of I. B. Code including section 5(12) , section 7, section 14(a), section 14(c), section 15, section 17(i)(d), section 20, section 32A and section 60(5)(a)(b) thereof. …….. Therefore, it is his submission that the impugned order passed by NCLT is within the jurisdiction of NCLT and only NCLT will have exclusive jurisdiction. He submitted that the impugned order can be challenged by filing an appeal under section 61 of the I.B. Code, and therefore, the present Writ Petition is not maintainable.
# 13. Alternatively, he submitted that in any case, the IRP was appointed by NCLT on 22/12/2017 and, thereafter the said account was attached by notification dated 19/10/2018 issued under section 4 of the MPID Act which is totally impermissible. Therefore, he submitted that atleast as far as the said account is concerned, it is impermissible for the Deputy Collector and Competent Authority (NCLT) to act under the provisions of MPID Act and for State of Maharashtra, to take steps to issue notification under section 4, after appointment of IRP. In support of his submission he has relied on the following judgments :
(i) Judgment of NCLAT in JSW Steel Ltd. vs. Mahendra Kumar Khandelwal & Ors. in Company Appeal (AT) (INS) No.957 of 2019;
(ii) Judgment of Hon’ble Supreme Court in Anand Rao Korada vs. Varsha Fabrics (P) Ltd. and Ors., Civil Appeal No.8800- 8801 of 2019;
(iii) Judgment of Hon’ble Supreme Court in West U.P. Sugar Mills Association and Ors. vs. The State of Uttar Pradesh & Ors. Civil Appeal No.7508of 2005;
(iv) Judgment of Hon’ble Supreme Court in M.Karunanidhi vs. Union of India (UOI) & Ors. Criminal Appeal Nos.270-271 of 1979.
(v) Judgment of Hon’ble Supreme Court in Innoventive Industries Ltd. vs. ICICI Bank & Ors. Civil Appeal Nos.8337- 8338 of 2017.
(vi) Judgment of Designated Court under the MPID Act at Bombay City Civil and Sessions Court, Mumbai in Roofit Industries Limited Vs. The State of Maharashtra in MPID Special Case No. 34 of 2004.
# 14. In the light of above submissions, the following two questions arise for our determination:-
1. Whether the present Writ Petition, filed challenging order dated 28.01.2019 of NCLT, is maintainable in view of availability of alternate remedy of appeal provided under Section 61 of the I.B. Code to the National Company Law Appellate Tribunal (for short “NCLAT”) ?
2. Whether notification issued under Section 4 of the MPID Act and consequent attachment of the property including the bank account of the corporate debtor can be challenged by approaching NCLT under Section 60(5) of the I.B. Code ?
Before considering the above questions, we are making it very clear that we will not be dealing with the merits of the case, namely, whether in view of order dated 22.12.2017 of NCLT admitting the petition and appointing IRP and inter alia directing that moratorium as prescribed under Section 14 shall commence, no steps under MPID Act can be taken or continued and also whether the attachment of the properties of Dunar Foods Ltd. are required to be set aside. We make it very clear that we are only dealing with the forum which should be approached concerning the action taken under the MPID Act.
# 17. Thus, it is clear that MPID Act is a complete Code and enacted to protect the interest of depositors in Financial Establishments. The Respondent, i.e. IRP, was mainly aggrieved by the issuance of notification dated 19/10/2018 under Section 4 of the MPID Act. As set out hereinabove Section 7 of MPID Act provides a remedy to the aggrieved person including the present Respondent, i.e. IRP, to approach the Designated Court pointing out the objection to the attachment of any property of the Financial Establishment or any portion thereof. The Designated Court is empowered to either make the order of attachment passed under sub-Section 1 of Section 4 absolute or varying it by releasing a portion of the property from attachment or cancelling the order of attachment entirely. Thus, it is clear that the Respondent-IRP is having a remedy to approach the Designated Court under Section 7 of the MPID Act. A bare reading of the provisions of the MPID Act clearly demonstrates that action taken under the MPID Act is to be challenged before the Designated Court under the MPID Act and the order passed by the Designated Court can be challenged in appeal before the High Court under section 11 of the MPID Act. It is also important to note that under section 13 of the MPID Act, the Designated Court is even empowered to take cognizance of the offence and while trying the accused person, the Designated Court shall follow the procedure prescribed in the Code of Criminal Procedure, 1972, and for the purposes of the provisions of the Code of Criminal Procedure, 1972, the Designated Court shall be deemed to be a Magistrate.
# 18. We will hereafter examine the impact of the provisions of the I.B. Code, particularly when application for initiating corporate insolvency resolution process is admitted by the NCLT and moratorium is declared by the NCLT as contemplated under section 14 of the I.B. Code, on the jurisdiction of the Designated Court under the MPID Act.
# 20. After noticing the relevant provisions of the I.B. Code it will be very useful to note the judgments of the Hon’ble Supreme Court on the aspect regarding jurisdiction of NCLT under the provisions of I.B. Code.
# 23. …….. Thus it is clear that Section 18 of the I.B. Code specifying duties of interim resolution professional, although provides in sub-Section 18(f) that he shall take control and custody of any asset over which the corporate debtor has ownership rights, however the same is subject to the determination to the ownership by a Court or Authority. In this particular case, such Court will be the Designated Court as per the provisions of the MPID Act.
# 24. The learned counsel for the Petitioner has heavily relied on Section 32(A) of the I.B. Code. The same is already reproduced above. A bare perusal of Section 32(A) of I.B. Code clearly shows that liability of corporate debtor is not wiped out entirely. There are several criteria which are enumerated in section 32(A) before ceasing the liability for the offfences. Thus, it is clear that the Designated Court under the MPID Act after hearing all the parties concerned, would have to decide the issue as to criminal liability. Thus, in any case it is very clear that it is the Designated Court under the MPID Act that will alone have jurisdiction to decide the same. However, the Designated Court under MPID Act has to take into consideration the provisions of the I.B. Code and the orders passed by the Adjudicating Authority under section 7 of I.B. Code and other relevant orders and rule on their interplay.
# 25. The properties attached under various notifications issued from time to time by exercising power under section 4 of the MPID Act in the MPID proceedings include the properties of Dunar Foods Ltd. Any application for cancelling any such action of attachment is to be considered by the Designated Court under the MPID Act.
# 26. ………. However, in this particular case it is not even argued before us by the learned counsel for the Respondent that the provisions of MPID Act are repugnant with the provisions of I.B. Code. He only raised three contentions:
(i) in view of availability of alternate remedy under Section 61 of I.B. Code of Appeal to be preferred to the NCLAT, the Writ Petition is not maintainable,
(ii) in view of Section 32- A of the I.B. Code the proceedings under the MPID Act shall cease and cannot be proceeded with and
(iii) Alternatively to submissions at Sr. Nos.(i) and (ii), he submitted that, as IRP was appointed by NCLT on 22.12.2017 and the attachment of the said account took place subsequently by issuance of notification dated 19.10.2018 issued under Section 4 of the MPID Act, although the attachment of other properties which are subject matter of section 4 notification issued earlier may be permissible, at least, the attachment of the said account is totally impermissible.
# 27. We have already made it clear that in the present Writ Petition we are only examining the aspect regarding the forum in which the action taken under the MPID Act can be challenged and not the merits of the case. In fact, the Respondent can file objections to the attachment under Section 7 of the MPID Act before the Designated Court under the MPID Act and can point out the provisions of the I.B. Code to the Designated Court. The statement of law which is applicable to the present case as found in paragraphs 40 and 41 in the judgment of Embassy Property Developments Pvt. Ltd. (supra) is, at the cost of repetition, again quoted hereinbelow:
“40. If NCLT has been conferred with jurisdiction to decide all types of claims to property, of the corporate debtor, Section 18(f)(vi) would not have made the task of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights, subject to the determination of ownership by a court or other authority.
“41. This shows that wherever the corporate debtor has to exercise rights in judicial, quasi judicial proceedings, the resolution professional cannot short circuit the same and bring a claim before NCLT taking advantage of Section 60(5).”
Thus it is clear that the appropriate forum to challenge the attachment of the account of the Respondent is the Designated Court under MPID Act where the Respondent can raise all contentions on merits and also can point out the provisions of I.B. Code and the effect of the same on the steps taken under the MPID Act. It will be for the MPID Court to consider the interplay of the provisions of the MPID Act and the I.B. Code and rule on the matter. Such ruling would obviously include even the aspect of prior appointment of IRP by NCLT and subsequent attachment of the said account by notification dated 19.10.2018 issued under Section 4 of the MPID Act.
# 30. Thus, in view of the above discussion, we hold that the NCLT has no jurisdiction to examine legality or validity of action taken under MPID Act and it is only the Designated Court constituted under Section 6 of the MPID Act that will have exclusive jurisdiction to deal with the same. Therefore, the impugned order passed by the NCLT is without jurisdiction and therefore, amenable to a challenge in our writ jurisdiction.
# 31. Thus, it is clear that the only remedy for Respondent-IRP is to approach the Designated Court under Section 7 of the MPID Act. Therefore, the impugned order passed by NCLT by which the said account was directed to be de-freezed, is without jurisdiction. ………..
# 32. In view of above discussion, we quash and set aside the order dated 28/01/2019 passed by the NCLT in M.A.No.1372/2018 in C.P.No.1138/I & BC/NCLT/MB/MAH/2017 by which the said account was directed to be de-freezed. The Respondents can approach the Designated Court under section 7 of the M.P.I.D. Act seeking appropriate reliefs. We have not dealt with the merits of the case and the contentions in that behalf are expressly kept open. Rule is made absolute in above terms with no order as to costs.
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