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Pendency Of Proceedings Before DRT Other Forum Not A Bar For Initiating CIRP

Citation : Mr.AmarVora vs CityUnionBankLtd., Company Appeal (AT) (CH) (Ins) No. 130 of 2022

Date of Judgment/Order : 11/05/2022

Court/Tribunal : National Company Law Appellate Tribunal, Chennai Bench

Corum : Justice M. Venugopal] Member (Judicial), Kanthi Narahari, Member (Technical)

Background

Appeal was filed against the order of the NCLT, Chennai admitting a application under Section 7 of the Insolvency Code. Among the various objections raised by the Appellant was that earlier issued a demand notice to the Appellant under Section 13 (2) of SARFAESI ACT, 2002 followed by paper publication dated 27.09.2018. The authorised officer took symbolic possession of the property mortgaged as per Section 13(4) of the SARFAESI ACT, 2002. Thereafter, the subject property was attached with DRT Madurai Bench. Also the Appellants have asked the court to keep the attachment and operation of DRT in abeyance till decision is reached in a matter pending under Benami Property Transaction Act, 1988.


Judgment

The question before the NCLAT was whether the pendency of proceedings under SARFAESI ACT, DRT and before PBPT, prohibits the Respondent/financial Creditor for initiation of Proceedings under IBC, 2016?

The NCLAT observed that The IBC, 2016 is a special enactment and is an act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individual in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship. As held by the Hon’ble Supreme Court the aim and object of the Code is not for recovery of debts but for Resolution of Corporate Persons. In this regard Section 238 of I & B Code, 2016 deal with provisions of the Code to override other laws. In view of the above provision of law the financial Creditor/ Operational Creditor/Corporate Persons can file an application under Section 7 ,9 & 10 of the I & B Code, 2016 before the respective Adjudicating Authorities even though in respect of same any proceeding pending before other forums on the ground that the provisions of I & B Code, 2016 is overriding effect of other laws. In view of the aforesaid reasons the Appellant cannot take a stand that the proceedings are pending before DRT and PBPT and the application under Section 7 of the I & B Code, 2016 cannot be maintained does not merit. The application under Section 7 filed by the financial Creditor before the Adjudicating Authority is very well maintained.

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