JENY THANKACHAN vs UOI & ORS
WP(C) NO. 31502 OF 2023
Facts:
1.Petitioner who is a sleeping partner in the 3rd respondent-Limited Liability Partnership Firm, seeks to declare that the provisions of the Insolvency and Bankruptcy Code, 2016 shall have overriding effect over the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, since insolvency resolution and bankruptcy for individuals and Partnership Firms have come into force with effect from 15.11.2019.
Issue: Whether the petition can be allowed and whether the IBC overrides SARFAESI in totality?
Arguments:
Petitioner:
1.Petitioner submitted that he holds 20% share in the 3rd respondent-Limited Liability Partnership and by virtue of Ext.P3 Government Order dated 15.11.2019, the provisions under Sections 78, 79 and 94 to 187 of Insolvency and Bankruptcy Code, 2016 (IBC 2016) came into force with effect from 15.11.2019. In order to redress his grievances relating to the partnership, the petitioner initiated insolvency resolution process under Section 94 of the IBC 2016 before the adjudicating authority / National Company Law Tribunal, Kochi Bench.
2.he submitted that the Bank filed Miscellaneous Case No.372/2023 on the files of the Chief Judicial Magistrate, invoking Section 14 of the Act, 2002. The petitioner would submit that along with Ext.P5 MC, the 6th respondent has not filed an affidavit in accordance with proviso to the Section 14(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
3.He further submitted that any action to foreclose, recover or enforce any security interest under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 shall be deemed to have been stayed and any legal action or proceedings in respect of any debt shall be deemed to have been stayed as per Section 96(b) of the IBC 2016, on the petitioner filing an application under Section 94 of the IBC 2016 before the NCLT.
4.He submitted that he has not executed any loan agreement with the 4th respondent-Bank. The property proceeded against by the Bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is joint family property of the petitioner, of which half share is not liable to be proceeded against pursuant to Ext.P6 order.
Respondents:
1.Counsel submitted that the question of law raised by the petitioner has already been considered by the Hon’ble Apex Court in State Bank of India v. B. Ramakrishnan [2018 17 SCC 394].
2.Counsel further pointed out that the application stated to have been filed by the petitioner under Section 94 of the IBC 2016 has not been admitted by the NCLT. The application has not been assigned a regular case number by the Tribunal. Therefore, the petitioner cannot contend that there is a deemed moratorium even for the corporate debtor. The writ petition is therefore liable to be dismissed.
Decision: Hon’ble HC dismissed the petition.
Rationale:
1.Hon’ble court noted that for an interim or final moratorium under Section 96 to come into force, the application filed by the debtor should be complete in all respects and without any procedural defects. In the case of the petitioner herein, the petitioner has only uploaded Ext.P4 application, which by itself cannot be treated as filing of an application as contemplated by Section 96.
2.It held that Mere uploading of an application under Section 96 of the IBC 2016 cannot be taken as filing of an application. The filing of an application as contemplated under Section 96 should be defectless and devoid of any procedural lapses. Only when an application is filed without any defects and satisfying the statutory procedural requirements of filing and only when the adjudicating authority numbers the application, there can ba legal and acceptable filing of application.
3.As long as the petitioner’s application is not duly numbered by the NCLT, the interim moratorium contemplated under Section 96(1)(b)(i) cannot come into operation. Therefore, the petitioner is not entitled to contend that the respondents cannot go ahead with the securitisation proceedings.
4.The securitisation proceedings against personal guarantors of corporate debtors can continue under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Therefore, initiation of a Section 94 (IBC 2016) proceedings by a Partner of an LLP in his capacity as a guarantor, cannot be averted to the proceedings initiated by the Bank against the petitioner, but in his capacity as a guarantor, under the Act, 2002.
Order Copy: