New India Co-operative Bank Ltd. vs Mr. G. Rathinavelu & Ors.

The Appeal in hand puts a question to the propriety of the Impugned Order dated 15.07.2024, as passed in IA(IBC)/935/CHE/2024 in CP(IB) No.49/CHE/2019, which was rendered by the Learned Adjudicating Authority / National Company Law Tribunal, Chennai Bench, wherein the Learned Adjudicating Authority had passed the order to the following effect: -

The interpretation which has been given by the Learned Adjudicating Authority, to the orders which has been passed by the Hon’ble High Court of Judicature at Madras is an interpretation, given to the Interim Order, as if the Hon’ble High Court has granted the status quo order and as such the status quo order has to be read qua the proceedings of the CIRP also. The Appellant has placed on record the proceedings which were drawn by the Hon’ble High Court, by way of Writ Petition No.33866/2019 & 33396/2019, emanating from the proceedings which were held under Section 19 and consequentially under Section 20 of the Recovery of Debt and Bankruptcy Act of 1993. Initially, when the matter was taken up before the Divisional Bench of the Hon’ble High Court of Judicature at Madras. The Divisional Bench has passed the following order on 04.12.2019, which is extracted hereunder: -

On a simpliciter reading of the said order rendered in the proceeding, which was subject matter of consideration was emanating from Section 19 and Section 20 of the Recovery of Debt and Bankruptcy Act of 1993. The Hon’ble High Court had passed an order that, no third-party interest would be created with regards to the rights and in respect of the property in question, therein, when it refers to the non-creation of a right in relation to the third party, it would always be read to be in relation to the property in question, would exclusively confined to the properties which were the subject matter of proceedings under Section 19, ultimately in the appellate proceedings under Section 20 of the Recovery of Debts and Bankruptcy Act of 1993. The said order was subsequently extended and alleging that, there was non-compliance of the same. The Contempt Petition was filed being Contempt Petition No.1260/2022, when the Contempt Petition was taken up based on the statement made by the Counsel and the undertaking given before the Hon’ble High Court, the Hon’ble High Court has passed the following order.

At this stage, it would be pertinent to mention that both the orders that, is the orders passed under a writ jurisdiction or the orders which were passed in the Contempt Proceedings, there is no specific order passed by the Hon’ble High Court, staying the proceedings of the CIRP. The status quo order which has been subsequently passed was in the Contempt Petition, when the matter was taken up on 28.01.2022, the Hon’ble High Court, in the Contempt Proceedings, has passed an order to the following effect where the parties were directed to maintain the status quo, as on today with regards to the alienation of the property. The Hon’ble High Court of Madras, quite in its specific terms of the order, as passed on 04.12.2019 and if it is to be read in consonance to the order of 28.01.2022, where in the contempt jurisdiction the status quo order was passed that, was exclusively confined in relation to the aspect of alienation which was the subject matter of consideration in the Interim Order, passed by the writ jurisdiction on 04.12.2019. None of the orders passed either in the writ jurisdiction or in the contempt proceedings had there been any specific directions that, there would be a stay of the proceedings of the CIRP and quite logically too that, could not have been because the Hon’ble High Court of Madras was seized with the Judgment which was emanating from the proceeding under Section 19 and Section 20 of the Recovery of Debts and Bankruptcy Act of 1993, where it would be the exclusive aspect pertaining to the mortgage property, which could have been put to sale for the purposes of the recovery of the amount, which has been determined to be due to be paid by the Impugned Order, which is exclusively under challenge before the Hon’ble High Court. There has to be a logical inference drawn to proceedings under Section 19 and Section 20, which as now reached the stage of Article 226 of the Constitution of India, before the Hon’ble High Court of Madras, the same cannot be intermixed with the proceedings of CIRP which stood initiated under Section 7 of the I & B Code and was pending consideration before the NCLT, Chennai Bench.

The Learned Counsel for the Appellant has submitted that, emanating from the same set of proceedings of the Company Petition being CP(IB)49/CHE/2019. Initially, the Comp App (AT) (CH) (Ins) No.143/2022 came up for consideration where an order of admitting the CIRP Proceedings under Section 7 of the I & B Code, was subject matter of challenge. In the said Judgment which was rendered by this Tribunal on 27.06.2023. The Tribunal has passed the order to the following effect: -

This Tribunal while dealing with the impact of Section 7 proceedings has taken into consideration the effect of the Interim Order dated 04.12.2019, as it was passed in Writ Petition No.33866/2019 and in Writ Petition No.33396/2019 and while dealing with the effect of the injunction order, it has specifically observed that, may be because of the pendency of the Writ Petition and grant of the Interim Order, will not at all prejudice the proceedings before the NCLT for the purposes of considering the matter on merit emanating under Section 7 of the I & B Code.

Owing to what has been observed by this Tribunal, earlier in Comp App (AT) (CH) (Ins) No.143/2022 coupled with that, if the Interim Order as passed in the Writ Petition, as well as Contempt Petition are taken into consideration they are specifically related to that, there would not be any alienation of the property and a restraint would be treated as a restraint from the creation of the third party interest in relation to the property which was the subject matter of proceedings under Section 19 and 20 of the DRT Act.

The status quo order as passed in the contempt jurisdiction has had to be interpreted only for the purposes of the immovable property, which has been the subject matter of challenge before the Hon’ble High Court. Even otherwise logically also the status quo order would always relate to the status of the property to be maintained during the pendency of the proceedings, its interpretation cannot be enlarged to an extent that, it would amount to creating a restriction in carrying proceeding with the CIRP Proceedings under Section 7, as it has been dealt within Para 122 of the Judgment rendered by the Tribunal as observed above. Thus, the view taken by the Learned NCLT that, owing to the fact that there is a status quo order passed by the Hon’ble High Court, there would be status quo to the CIRP Proceedings is contrary to the records and respectfully the interpretation given to the Interim Order therein is belied from the observations made by the Hon’ble High Court and the status quo order as observed will not be qua the proceedings because none of the orders speaks so that, the proceeding would be kept in abeyance. Thus, the interpretation given is absolutely misnomer in that eventuality while disposing of this Company Appeal, request is made to the Learned Adjudicating Authority of the NCLT, Chennai Bench, to proceed to decide the IAs which are mentioned in the Impugned Order of 15.07.2024 in accordance with Law. Subject to the aforesaid the Impugned Order would stand modified to that extent.