Moratorium under IBC does not make DRAT powerless to recall appointment of Court Commissioner, Delhi HC

The Delhi High Court has held that imposition of moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 (IBC) does not take away the Debt Recovery Appellate Tribunal’s (DRAT) power to recall or modify its earlier order on appointment of Court Commissioners against a corporate debtor..The judgment was passed by a Division Judge Bench of Justices Vipin Sanghi and Rekha Palli in a petition by Amira Pure Foods Pvt Ltd. through its Resolution Professional (petitioner) assailing an order passed by the Debt Recovery Appellate Tribunal..Canara Bank had moved the Debt Recovery Tribunal against the petitioner company under the Recovery of Debts Due to Banks & Financial Institutions Act, 1993 for recovery of certain dues. The matter subsequently reached the DRAT which appointed two Court Commissioners to take over the assets including perishable assets, of the petitioner..Meanwhile, Canara Bank also approached the National Company Law Tribunal against the petitioner under the IBC. Subsequently, the NCLT appointed an Interim Resolution Professional (IRP) to fulfil the mandate of IBC in a time-bound manner..The IRP then approached the DRAT to take over the godowns/properties of the petitioner. The lead banker, Canara Bank also consented to the plea moved by IRP..The DRAT, however, rejected the IRP’s plea on the ground that in the light of the moratorium imposed by Section 14 of IBC, the continuation of any proceedings against the corporate debtor was prohibited. The DRAT opined that passing any order or direction in the recovery proceeding would violate the conditions of the moratorium..Aggrieved by the dismissal of its application, the petitioner moved the High Court..The petitioner argued that the view taken by the learned DRAT was not legally correct..It was submitted that Section 14 of IBC only imposed a moratorium and prohibited the institution of pending suits or proceedings against the corporate debtors. However, there was no prohibition against proceedings which could not be considered as being against the corporate debtor..It was further contended that the appointment and continuation of the Court Commissioners and the vesting of the assets of the corporate debtor in them, was preventing the IRP/RP from discharging his time-bound duties. As a result, the interest of the corporate debtor was suffering..Reliance was also placed on Section 18 of IBC which entitled the IRP/RP to monitor the assets and take control and custody of the assets of the corporate debtor..The Court recorded that Canara Bank also supported the petitioner’s case that the IRP/RP should take control of all the assets, including the perishable assets of the corporate debtor..After hearing the parties, the Court opined that there was “no real contest” in the present case..The Court held that after the imposition of the moratorium, the DRAT was not powerless to modify its own order which appointed the two court commissioners to take over control of the assets of the petitioner/corporate debtor..“In the facts of the case, the learned DRAT should have recalled its order so that the IRP/RP could take over the assets of the corporate debtor in the exercise of its mandate under the Insolvency & Bankruptcy Code, 2016.”, it said..Thus permitting the IRP to act in the exercise of the power vested in it by IBC, the Court set aside the order passed by the DRAT and recalled the appointment of the two Court Commissioners..The petitioner was represented by Advocate Ashish Makhija..Canara Bank was represented by Advocate Vijay Kumar..[Read Judgement].Bar & Bench is available on WhatsApp. For real-time updates on stories, Click here to subscribe to our WhatsApp.