Remedy to file a suit or an application against the corporate debtor after completion of the period of moratorium in accordance with Section 60(6) of the Code

“Decoding the Code”

Notwithstanding the order passed under Section 31 of the Insolvency and Bankruptcy Code, 2016(IBC), it is open to a person to file a suit or an application against the corporate debtor after completion of the period of moratorium in accordance with Section 60(6) of the IBC.

 

The moratorium comes into effects on the insolvency commencement date. The insolvency commencement date defines under section 5 (12) means the date of admission of an application for initiating CIRP by the Adjudicating Authority under sections 7,  Section 9 or section 10, as the case may be and where the interim resolution professional is not appointed in the order admitting application under section 7, 9 or section 10, the insolvency commencement date shall be the date on which such interim resolution professional is appointed by the Adjudicating Authority.

Section 14(4) sets out the time limit for which the moratorium can be in effect, i.e until the completion of the CIRP or on the approval of a resolution plan by the adjudicating authority or on a resolution of the committee of creditors to liquidate the corporate debtor, whichever is earlier.

Sub-section (6) of Section 60 of the Code provides that where the claim of  a creditor involves a disputed question or any other reason of fact as it cannot be decided by the Resolution Professional or the Adjudicating Authority, such creditor can raise such issue and claim at an before the Court of Competent Jurisdiction or an application before the appropriate forum after completion of the period of moratorium in accordance with Section 60(6) of the IBC.

 

Legal content of Section 60(6)

Section 60: Adjudicating Authority for corporate persons:

60. (1) The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate persons located.

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(5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of—

(a) any application or proceeding by or against the corporate debtor or corporate person;
(b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and
(c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code.

(6) Notwithstanding anything contained in the Limitation Act, 1963 or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against a corporate debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded.

 

Sub-section (5) of Section 60 empowers the National Company Law Tribunal (Adjudicating Authority) to entertain or dispose of any application or proceeding by or against the Corporate Debtor or Corporate Person; any claim made by or against the Corporate Debtor or Corporate Person including claims by or against any of its subsidiaries situated in India; apart from any question of priority or any question of law and facts arising out of or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor or corporate person under the code.

From sub-section (6) of Section 60 it is clear that after period of moratorium, a suit or application can be filed against the Corporate Debtor for which an order of moratorium has been made under the Part II and in such case, the period during which such moratorium is in place shall be excluded for the purpose of counting the limitation.

 

If resolution plan has already been approved by the Committee of Creditors but yet to approve by Adjudicating Authority

In M/s. Prasad Gempex v. Staer Agro Marine Exports Pvt. Ltd. & Ors.− Company Appeal (AT) (Ins.) No. 291 of 2018 etc., where the appellant M/s. Prasad Gempex filed a claim as Financial Creditor. The Resolution Professional rejected the claim. M/s. Prasad Gempex thereafter claimed to be an Operational Creditor on suggestion of the Resolution Professional but the same has also been rejected. The resolution plan has already been approved by the Committee of Creditors and the Resolution Professional had placed the same before the Adjudicating Authority in M/s. Prasad Gempex with regard to the CIRP initiated against M/s. Star Agro Marine Exports Pvt. Ltd. However, till date no order under Section 31 has been passed. NCLAT has directed the Adjudicating Authority to pass appropriate order under Section 31 of the Code on the resolution plan as approved by the Committee of creditors. and NCLAT has allowed the appellant – M/s. Prasad Gempex to file claim in terms of sub-section (6) of Section 60 before the appropriate court of law or may file appropriate application against the corporate debtor namely M/s. Star Agro Marine Exports Pvt. Ltd., if the resolution plan is approved and do not take proper care of the applicant.

 

Judicial Outcomes

NCLAT in M/s. Dynepro Private Limited vs. Mr. V. Nagarajan – Company Appeal (AT) (Insolvency) No. 229 of 2018 etc. held that from sub-section (6) of Section 60, it is clear that after period of moratorium, a suit or application can be filed against the Corporate Debtor for which an order of moratorium has been made under the Part II and in such case, the period during which such moratorium is in place shall be excluded for the purpose of counting the limitation.

In “M/s. Roma Enterprises v. Mr. Martin S.K. Golla, Resolution Professional− Company Appeal (AT) (Ins.) No. 232 of 2018”, NCLAT held that where the claim of an Operational Creditor involves a disputed question of fact as it cannot be decided by the Resolution Professional or the Adjudicating Authority, such Operational Creditor can raise such issue and claim at an appropriate stage i.e. after Moratorium is over, which reads as follows:

“4. In “Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors.─ 2019 SCC OnLine SC 73”, the Honble Supreme Court has already held that the Resolution Professional has no jurisdiction to decide the claim of one or other party. This Appellate Tribunal has also held earlier that the Resolution Professional can only collate the claim. Apart from the fact that earlier the same issue was raised and we did not entertain the appeal in view of the fact that nobody appeared on behalf of the Appellant and observed that the Appellant can raise such issue and claim at an appropriate stage i.e. after Moratorium is over, we are not inclined to give any finding for the same prayer in this appeal. The appeal is dismissed. No costs.”

In M/s. Prasad Gempex v. Star Agro Marine Exports Pvt. Ltd & Anr.− Company Appeal (AT) (Ins.) No. 469 of 2019, NCLAT held that the parties having given opportunity to move against the Corporate Debtor under sub-section (6) of Section 60 of the Code, the Adjudicating Authority cannot prohibit the aggrieved person from filing claim before the Court of Competent Jurisdiction or an application before the appropriate forum, which reads as follows:

“3. After hearing the learned counsel for the Appellant, learned counsel for the Successful Resolution Applicant who is now Corporate Debtor and the learned counsel for the Resolution Professional, we are of the view that the Adjudicating Authority has no jurisdiction to pass any order with regard to any matter pending before the Court of criminal jurisdiction. Further, the parties having given opportunity to move against the Corporate Debtor under subsection (6) of Section 60 of the I&B Code, the Adjudicating Authority cannot prohibit the aggrieved person to file a claim before the Court of competent jurisdiction or an application before the appropriate Forum.”

 

If the resolution plan is not approved and order of liquidation is passed

NCLAT in the matter of M/s. Prasad Gempex Vs. Star Agro Marine Exports Pvt. Ltd. & Ors. held that in case the resolution plan is not approved and order of liquidation is passed, in such case, it will be open to file claim before the Liquidator in accordance with the provisions of the Code and the Liquidator will decide the claim under Section 40 of the Code.

 

Conclusion

The cases in which the Adjudicating Authority or Appellate Tribunal could not decide the claim on merit, such claims or issues can be raised before an appropriate forum in terms of Section 60(6) of the Code. The Financial Creditors and the Operational Creditors whose claims have been decided by the Adjudicating Authority or this Appellate Tribunal, such decision being final and is binding on all such Financial Creditors and the Operational Creditors in terms of Section 31 of the Code. Their total claims stand satisfied and, therefore, they cannot avail any remedy under Section 60(6) of the Code. The Financial Creditors in whose favour guarantee were executed as their total claim stands satisfied to the extent of the guarantee, they cannot reagitate such claim from the Principal Borrower.

 

Disclaimer: The views expressed in this article are the personal views and are purely informative in nature. The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Reader should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein. For full disclaimer, kindly go to disclaimer page.

 

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