NCLT Mumbai (27.01.2020) in Jitender Kumar Jain & Anr. Vs. Loyal Auto Globe Pvt. Ltd. [M. A. No. 3189/MB/2019 in CP (IB) -4216/I&BP/MB/2018] held that;
# 9. Further Section 14 of the Code would continue to apply and moratorium period would govern the affairs of Corporate Debtor and the repugnancy between the provisions of Section 14 of the IBC and those of MPID will prevail and the MPID Act has to give away to the parliamentary statute and hence the judgement of the Principal Bench set aside the attachment order passed under the MPID Act and allowed the Application.
Excerpts of the Order;
# 1. This is an Application filed by the Resolution Professional under Sections 14, 18 and 23 of the IB Code seeking order as follows:
a. That this Hon’ble tribunal may be pleased to set aside MPID notification No. MPI.0112/CR-14/POL-12 dated 1st February, 2012 issued by State of Maharashtra under the provisions of Maharashtra Protection of Interest of Depositors Act, 1999 through the Respondents with respect to Shop No. 21, Ground Floor, Bonanza Arcade, Amboli, S. V. Road, Andheri admeasuring approximately 150 sq. ft. build-up area and to allow the Application to take possession thereof;
b. That this Hon’ble Tribunal may be pleased to direct the Respondents to release and remove its seal and lock from immovable assets owned by the Corporate debtor, namely,
(i) shop No. 22, Ground Floor, Bonanza Arcade, Amboli, S. V. Road, Andheri admeasuring approximately 150 sq. ft. build-up area,
(ii) shop No. 10-A, Ground Floor, Bonanza Arcade, Amboli, S. V. Road, Andheri admeasuring approximately 227 sq. ft. build-up area and
(iii) Plot No. 53, Sector-1, near Jui Nagar Railway Station, Navi Mumbai-400706, Maharashtra, Mumbai and to allow the Applicant to take possession thereof.
# 2. The Applicant submits that presently assets of the Corporate Debtor are attached under the provisions of Maharashtra Protection of Interest of Depositors Act, 1999 (MPID Act) by the Government of Maharashtra (Second Respondent herein). The First respondent being the Competent authority under the provision of MPID Act, notification No. MPI.0112/CR-14/POL-12 dated 1st February, 2012, the properties of the Corporate Debtor have been wrongly and illegally sealed under the provisions of MPID Act but in fact the notification dated 01.02.2012 has sought to attach the properties of financial establishment (Dhanlaxmi Co-op. Credit So.) and its directors/officers named in the MPID notification. The MPID notification does not include the name of the Corporate Debtor and the properties are said to have been attached wrongly.
# 8. The Counsel for the Applicant relied on a Judgement of the Principal Bench, New Delhi in C.A. No. 1312/2018 in the matter of Bank of India v. Tiruputi Infra Projects Pvt. Ltd. wherein it was held that the MPID Act, 1999 is a state enactment to heading one of Public order state list of the 7th Schedule whereas the IBC is a parliamentary statute under item 9 (Bankruptcy and Insolvency) of the concurrent list and further in view of the judgement of Supreme Court in the case of Innovative Industries Ltd. V. ICICI Bank Ltd and Anr. (2018) 1 SCC 407, it was held that pursuant to the moratorium the liabilities of the appellant were temporarily suspended for a period of 1 year and held that the insolvency Code is a parliamentary law that is an exhaustive Code in the matter of Insolvency of Corporate Entities and therefore the earlier state law is repugnant to the later parliamentary enactment.
a) It was observed that the Maharashtra Act cannot stand in the way of Corporate Insolvency Resolution Process under 2016 Insolvency Code, in view of Article 254 of the constitution of India which states that the law made by the parliament and legislature of state and when are repugnant - doctrine of pith and substance – Applicability of ; for such determination – laws made by parliament – when prevail over the state Laws – Parliamentary law which is a complete Code – Principles for such a situation. Clarifies – repugnancy must exist in fact and not depend upon a mere possibility and inconsistency between the competing acts must be clear and direct and of such a nature as to bring the two Acts or parts thereof into direct collision with each other, reaching a situation where it is impossible to obey one. Without disobeying the other – Further, even in absence of a direct conflict, where the Parliamentary law is intended to be a complete, exhaustive or exclusive code, a state law so long as it is referable to the same subject- matter as the Parliamentary legislation does not purport to be exhaustive or unqualified but itself permits or recognises other laws restricting or qualifying the general provisions made in it, there can be said to be no repugnance.
b) Constitution of India- Art. 254- Repugnant State law- when prevails over Parliamentary Law- Effect of subsequent Parliamentary Law- Repugnant legislation by the State is void only to the extent of the repugnancy- Further, when it is found that a state legislation is repugnant to Parliamentary Legislation or an existing law if the case falls within Art. 254 (2), and Presidential assent is received for State Legislation, the State legislation of an existing law within that state- however, here also the state law must give way to any subsequent Parliamentary law which adds to amends varies or repeals the law made by the legislature of the state, by virtue of the operation of Art. 254 (2) proviso.
c) Constitution of India – Art. 254- Laws made by Parliament and legislature of State- when; even in the absence of a direct conflict ,are repugnant- test of implied repeal- applicability if Held, the test applied in such cases is based on the principles on which the rule of implied repeal rests, namely, that if the subject-matter of the State legislation or part thereof is identical with that of the Parliamentary legislation, so that they cannot both stand together, then the State legislation will be said to be repugnant to the Parliamentary legislation.
d) Constitution of India- Art. 254- Onus to prove repugnancy-Held since there is a presumption in favour of the validity of statutes generally, the onus of showing that a statute is repugnant to another has to be on the party attacking its validity.
e) The Non- obstante clause under section 238 of the IB Code gives overriding affect and is extracted below:
“the provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.”
f) In view of the provision of Section 238 of Code and the Non-Obstante power as envisaged under the code, the parliamentary enactment will prevail over Sec 4 of Maharashtra Relief Undertaking Act.
# 9. Further Section 14 of the Code would continue to apply and moratorium period would govern the affairs of Corporate Debtor and the repugnancy between the provisions of Section 14 of the IBC and those of MPID will prevail and the MPID Act has to give away to the parliamentary statute and hence the judgement of the Principal Bench set aside the attachment order passed under the MPID Act and allowed the Application.
# 10. As a Sequel to the above discussions, this application is allowed. The notification dated 19.10.2018 is hereby set aside to the extent the bank accounts of the Corporate Debtor has been attached and 50% of the shares in the Radisson Blue Hotel have further been attached. The attachment from the bank account as well as from the Radisson Blue Hotel is deemed to have come to an end on 01.02.2019.
# 11. The assets of the Corporate Debtor have been wrongly attached vide MPID order dated 01.02.2012. The MPID order sought to attach the properties of Dhanlaxmi cooperative society and the name of the Corporate Debtor is not notified in the MPID notification, but the properties of the Corporate Debtor have been attached and sealed. Further due to illegal attachment of properties, the resolution professional could not take control of the said properties, appoint valuer etc. to perform his duties under the I&B code. In view of the above facts and the judgement of the co ordinate bench setting aside the attachment order passed by the MPID Court, this application is hereby allowed with further directions as follows.
# 12. The order of attachment under the notification dated 01.02.2012 under the MPID Act to the extent of property Shop No. 21, Ground Floor, Bonanza Arcade, Amboli, S. V. Road, Andheri West, Mumbai-400058 is set aside.
# 13. It is further ordered that the properties which were sealed by a report filed by the Juhu Police, Mumbai on 06.03.2012 namely
(i) shop No. 22, Ground Floor, Bonanza Arcade, Amboli, S. V. Road, Andheri West, Mumbai-400058
(ii) (ii) shop No. 10-A, Ground Floor, Bonanza Arcade, Amboli, S. V. Road, Andheri West, Mumbai-400058 and
(iii) Plot No. 53, Sector-1, near Jui Nagar Railway Station, Navi Mumbai-400706, Maharashtra, India.
be released immediately forthwith with the specific direction to open the seal/lock of the said properties.
# 14. Accordingly, this Application stands disposed off in terms of above order.
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