Amit Gupta Vs. Anil Kohli - The Successful Resolution Applicant is eligible to have encumbrance free transfer of the assets of the Corporate Debtor after the approval of the Resolution Plan.

 NCLT Mumbai-II (11.11.2019) in Amit Gupta  Vs. Anil Kohli  (IA No. 2847, 2666 & 2685 of 2021 In CP/IB/MB/No. 1138 of 2017) held that;

• The Successful Resolution Applicant is eligible to have encumbrance free transfer of the assets of the Corporate Debtor after the approval of the Resolution Plan. 

Excerpts of the order;

# 1. The present Application is filed by the Applicant i.e. the successful Resolution Applicant seeking following prayers :- 

• a. To direct the Respondent/Monitoring Professional to handover the complete control over the Corporate Debtor to the Applicant being the Successful Resolution Applicant forthwith including the right to operate the Bank Accounts of the Corporate Debtor; 

• b. To reduce the Professional fee of the Respondent/Monitoring Professional to Rs. 25,000/- per month; 

• c. Or in alternative to prayer ©, Substitute the Monitoring Professional who can charge Rs. 25,000 per month; 

• d. Pass any other or such further order(s) as this Hon’ble Tribunal may deem fit and proper in the facts and circumstances of the case and in the interest of justice; 

 

Submissions of the Applicant are as follows:- 

# 2. The Resolution Plan of the Applicant was approved vide Order dated 26.11.2019. The Order wrongly mentioned the time for the payment under the Resolution Plan as 30 months instead of 3 months. Thereafter the Resolution Professional approached the Tribunal for rectification of the Order dated 26.11.2019 without making the Applicant herein as the party to the said Application. It was only on 11.02.2020, the Applicant came to know of the said rectification of the Order. 

 

# 3. Thereafter, the Applicant filed an Application being IA 661 of 2020 for extension of time for making the payment. There were attachments/liens/encumbrances on the assets of the Corporate Debtor. Further, the Applicant filed another Application being 1327 of 2020 requesting that the Applicant may be permitted to pay amount under the Plan within two months from lifting of attachments/encumbrances. The said two Applications were decided vide Order dated 30.04.2021. the Tribunal was pleased to direct the Applicant to pay interest @ 12% from the date of the amount becoming due. The Applicant filed an appeal being aggrieved by levy of interest and shifting obligations to remove the attachments on the Applicant. The said subject matter of appeal is sub judice before Hon’ble NCLAT. 

 

# 4. Further, the Respondent itself in its reply has accepted the fact that the entire payment has been made by the Applicant as per the Resolution Plan. Therefore, the Applicant was entitled to receive the handover of complete control of the Corporate Debtor. However, the Respondent failed to do so. 

 

# 5. Further the Applicant has also filed an Affidavit cum undertaking dated 14.01.2022 wherein the Applicant has undertaken to pay interest in accordance with the Order dated 30.04.2021 passed by this Tribunal subject to final outcome of Appeal pending before Hon’ble NCLAT. Hence, nothing remains on the part of the Respondent to object the prayer of the Applicant. 

 

# 6. Another issue raised by the Applicant is that the Applicant is entitled to get the assets of the Corporate Debtor free from encumbrances. The assets of the Corporate Debtor are under attachments of ED, MPID Court etc. The Resolution Professional has not taken any effective steps for lifting the attachments and also reflects that no work has been undertaken by the Resolution Professional as he was responsible to lift the attachments and has only conducted one meeting each year in 4 consecutive years and has been charging an exorbitant fee of Rs. 5.5 Lakhs per month exclusive of GST. 

 

# 7. The Applicant has paid the entire payment of Rs. 87.10 Crores in accordance with the terms of the Resolution Plan. The Applicant states that the Applicant is entitled for complete control of the management as well as the operations of the Corporate Debtor. Further on the payment of the entire amount under the Resolution Plan, the Applicant cannot be made to wait for an indefinite period for the sake of Monitoring Professionals undue gain of approximately Rs. 6.49 Lakh per month. 

 

# 8. The fees of the Resolution Professional is unreasonable and also does not reflect the work done in by four years also as enumerated above. This is leading to the fate of the already distressed Company into Liquidation at the fault of the Resolution Professional. The Resolution Professional has conducted only four meetings from 2019 till 2022 i.e. only one meeting in each year. The last meeting conducted on 21.01.2022 was convened only to seek time with an intention to prolong the matter as nothing conclusive resulted from the said meeting. 

 

# 9. The Respondent also does not provide the copy of minutes to the Applicant. The Respondent is charging an unreasonable amount parallel to the amount of work done. 

 

# 10. Further in a recent judgement in “Devarajan Raman vs. Bank of India Limited” the Supreme Court has observed; - 

• “15. The Insolvency and Bankruptcy Board of India has issued a circular on 12 June 2018. The circular, inter alia, requires the insolvency professional to ensure that the fees payable to him during the CIRP are reasonable and the approval of the CoC for the fee or other expenses is obtained, wherever approval is required. “ 

• “16. The appellate authority has merely proceeded in an ad hoc manner on the ground that the amount of Rs. 5,00,000 as fee, in addition to the expenses, appears to be reasonable. Both the orders suffer from an abdication in the exercise of jurisdiction. In the absence of any reasons either in the order of the NCLT or the appellate authority, it is impossible for the Court to deduce the basis on which the payment of an amount of Rs. 5,00,000 together with expenses has been found to be reasonable.” 

 

Submissions of the Respondent are as follows :- 

# 11. The Respondent states that the Order for approval of Resolution Plan was passed on 26.11.2019 and the order inadvertently recorded 30 months instead of 3 months to make payment under the Resolution Plan. 

 

# 12. Further taking advantage of such inadvertent error, the Applicant filed an Application IA 661 of 2020 praying that the time to make payment under the Resolution Plan be reckoned from 27.01.2020 i.e. the date on which the Order was rectified. 

 

# 13. That due to covid-19 pandemic and implementation of lockdown by the Central Government, the functioning of the Tribunal was affected. Thereafter, the Order was pronounced on 30.04.2021. Vide the said Order the prayer sought by the Applicant was partly allowed and time period to make complete payment in terms of the approved Resolution Plan subject to payment of interest at a commercial rate of 12% from the reckoned date i.e. 27.01.2020 till the entire payment is made. 

 

# 14. Further it was made clear that the payment of interest is the condition precedent to the extension of time for making payment which was not honoured by the Applicant. The Order dated 30.04.2021 is not complied with by the Applicant but instead filed an Appeal No. 445 of 2021 in Hon’ble Appellate Tribunal praying for waiver of interest. 

 

# 15. Further the Applicant also in its IA No. 661 of 2020 had sought prayers for making fundamental changes in the Plan which had effect of modifying/altering the terms of the Resolution Plan and it was rightly rejected by this Tribunal vide Order dated 30.04.2021. 

 

# 16. The Respondent states that after the Resolution Plan was approved by the Adjudicating Authority and granted extension of time to the Applicant to make payment however, subject to pre-condition i.e. payment of interest. Further the Hon’ble NCLAT has not granted any stay on the aforesaid issue of interest and hence the Applicant until and unless makes payment in terms of the approved Resolution Plan, reliefs sought for handover by the Applicant is neither maintainable but the same is contrary to the approved Resolution Plan. Further the Adjudicating Authority has not been vested with power to review and modify its own Order. 

 

#17. Further, it is well settled law that once a Resolution Plan is approved by the Adjudicating Authority, it attains finality and cannot be altered or modified. 

 

# 18. Further, the Applicant is estopped in law as once the Resolution Plan is approved it includes the fee of the Monitoring Professional till complete payment is made. As per the approved Resolution Plan, the management and control of the business of the Corporate Debtor is as under :- 

• Management and control of the business of the Corporate Debtor. 

• “The Resolution Applicant note that post approval of the plan by Hon’ble NCLT, till the time the financial obligations proposed by him is not paid, the Resolution Applicant will be allowed to carry the operations and management of the Corporate Debtor under the supervision and control of a Monitoring Committee appointed by the CoC, which consists of existing RP, an independent person representing CoC and a representative of resolution application. Further though no cost will be leviable or borne by the Resolution Applicant in any manner for such supervision. The remuneration of the Resolution Professional in Monitoring Committee may continue at the current fee till the complete handover of CD to RA. Any act been performed by the Monitoring Committee will be done under the trust and for the benefit of the Resolution Applicant as well as Corporate Debtor.” 

 

# 19. The Applicant cannot seek modification of an approved Resolution Plan or can challenge the commercial wisdom of the CoC who have approved the Resolution Plan. The Applicant in its Plan has stated that the Monitoring Professional will be paid fee as of the Resolution Professional continuing in the Monitoring Committee till the complete handover of the Corporate Debtor to the Resolution Applicant which cannot be challenged by the Applicant who is not only estopped in law but also has no locus to challenge the commercial wisdom of the CoC who have approved the Resolution Plan. 

 

# 20. Also, the Respondent states that due to noncompliance of the Order dated 30.04.2021 by the Applicant, the Financial Creditors have decided not to handover of the possession until the Order dated 30.04.2021 is complied by the Applicant. 

 

# 21. Since the Appeal preferred by the Applicant is pending for adjudication in the Hon’ble Appellate Tribunal, the Financial Creditor suggested to keep amount equivalent to the interest in interest free no lien account of the lead Bank to which the Applicant dissented. Hence, the undertaking given by the Applicant demonstrates that the Applicant does not wish to comply with the directions of this Tribunal.

 

FINDINGS 

# 22. We have heard the Counsels appearing for the Applicant and the Respondent. We have also considered the above narrated facts and examined the merits of the present IA. 

 

# 23. At this juncture it is important to refer certain facts which needs to be considered. The Resolution Plan was approved by this bench vide Order dated 26.11.2019. Thereafter, the RP moved an application for removal of typographical errors which had occurred in para 18(g) of the Order. It was mentioned therein that the total amount due under the Resolution Plan shall be payable within 30 months instead of 3 months. The said error was rectified to this extent that payment of total amount due under the Plan to be payable within 3 months from the date of approval of the Resolution Plan. In view of the same IA No. 661 of 2020 was filed by the Resolution Applicant seeking prayer to extend the time line for making total payment of amount due under the Resolution Plan to be reckoned from 27.01.2020 instead of 26.11.2019. This Bench vide its Order dated 30.04.2021 partly allowed the time for making outstanding amount from 27.01.2020 subject to payment of interest at the rate of 12% p.a. The payment of interest was to be payable from the due date of remaining amount till the entire payment under the Plan was made. To this the Applicant preferred an Appeal which is pending for its Adjudication. The Respondent herein are reluctant to handover the complete control of the Corporate Debtor due to non-compliance of the interest by the Applicant. 

 

# 24. In view of the above facts we hereby are of the considered view that as the Applicant has paid entire amount in accordance with the terms of the Resolution Plan, the Respondent is hereby directed to handover complete control, Management as well as the operations of the Corporate Debtor Company to the Applicant i.e. the Successful Resolution Applicant subject to the Applicant to pay Interest @ of 12% p.a. from due date of remaining amount of payment of Resolution Plan until the entire amount paid under the Plan by the Applicant. Further it is observed in a Judgement passed by Hon’ble Supreme Court in “Gajendra Sharma V/s UOI” wherein the plight of the borrower/entrepreneur was duly considered in making payment of EMI during Covid-19 period and also observed that date of making payment of such due instalment can be deferred but there can be no waiver of interest accrued even during the pandemic situation. Hence the Applicant herein is liable to pay interest on amount due for such delayed/deferred payment in the light of the above decision. The Applicant is directed to deposit the said Interest amount in an Escrow account to be opened with the lead Bank. 

 

# 25. Further in light of the decision of the Hon’ble Supreme Court in the matter of “Ghanshyam Mishra and Sons Private Limited V/s Edelweiss Asset Reconstruction Company Limited” and also in “Jaypee Kensington Boulevard Apartments Welfare Association and Others V/s NBCC (India) Limited” and other landmark decisions of the Hon’ble Supreme Court, it is a settled law that all the liability of the Corporate Debtor which are prior to CIRP and prior to approval of the Resolution Plan and before transfer of the assets of the Corporate Debtor to the Resolution Applicant shall stand extinguished. The Successful Resolution Applicant is eligible to have encumbrance free transfer of the assets of the Corporate Debtor after the approval of the Resolution Plan. Therefore, the Applicant can approach the statutory authorities on the strength of the Hon’ble Supreme Court ruling and can get lifted the attachment and the prohibitory orders passed creating encumbrances on the assets of the Corporate Debtor to be removed. 

 

# 26. The Monitoring Professional is directed to extend necessary cooperation to the Applicant to approach the Government Authorities of Central and State Government for lifting the attachment/removal of prohibitory Orders encumbrance over the assets of the Corporate Debtor prior to CIRP and before the transfer of assets of the Corporate Debtor to the Resolution Applicant on approval of the Resolution Plan. 

 

# 27. Further, this Bench also observes that as the Plan has been approved and the Resolution Professional being one of the Member of the Monitoring Professional and as the work has substantially been reduced, the fee charged by the Respondent is excessive and exorbitant Hence, the fee of the Respondent/Monitoring Professional is fixed at Rs. 2,00,000/- per month. 

 

# 28. Further, as the Applicant has paid the entire amount under the Resolution Plan, the prayers in the Applications being IA 2666 of 2021 and IA 2847 of 2021 have now become infructuous. Hence, these Applications are disposed of. 

 

29. With the aforesaid observation, the present IA No. 2847 /2021 is partly allowed. 

 

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Jitender Kumar Jain & Anr. Vs. Loyal Auto Globe Pvt. Ltd. - Attachment of property under MPID Act.

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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State of Maharashtra Vs. Anil Kohil, RP for Dunar Foods Ltd. - Attachment of bank accounts of CD under MPID Act.

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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