Praveen Gupta, Member (Judicial)
1. This order of ours will dispose off IA No.452/2022.
2. The present application has been filed under Section 60(5) of the Insolvency & Bankruptcy Code, 2016 on behalf of Vistra ITCL (India) Limited as being the Debenture Trustee seeking injunction against the Wiztown Planners Private Limited (Corporate Debtor) restraining it from alienating or creating any third-party interests/ rights over the assets of the Corporate Debtor, and/ or taking any other actions to devalue the assets of the Corporate Debtor.
3. As stated in the present IA, the Vistra ITCL (India) Limited is the Debenture Trustee appointed to safeguard the rights of the debenture holders. The Petitioner/ Financial Creditor has filed the petition U/s 7 of the Code vide CP (IB) No.90/ALD/2022, in which the notice was issued on 10.10.2022 and the counsel representing the Respondent/ Corporate Debtor has requested that the Ld. Counsel for the petitioner may be directed to supply the hard copy of the petition, which was so directed. It was further observed by this Tribunal vide order dated 10.10.2022 that the reply of the said petition be filed within next four weeks by serving an advance copy to the other side. The matter came up for further hearing on 21.12.2022, on which date the present IA No.452/2022 was also listed. The Ld. Counsel representing the Respondent/ Corporate Debtor has sought time to file reply in the main petition and the same was granted. Thereafter, on 30.01.2023 it was observed by this Tribunal that in terms of the present IA an interim prayer has been sought restraining the Corporate Debtor from alienating or creating any third-party interests/ rights on the assets of the Corporate Debtor, and a short date was sought by the Respondent/ Corporate Debtor to file reply to the present IA.
4. The reply was filed by the Respondent/ Corporate Debtor in IA No.452/2022 with an advance copy supplied to the Ld. Counsel representing the petitioner/ applicant and the matter came up for further hearing on 01.02.2023. While arguing the contention in support of the IA, Ld. Counsel representing the applicant stated that in exercise of the contractual rights under the Debenture Trust Deed and other documents it has issued letters to the Corporate Debtor to seek information pertaining to the assets of the Corporate Debtor, which are secured in favour of the Vistra, however, the Corporate Debtor/ its directors/ promoters have remained wholly unresponsive relaying no information, whatsoever, and therefore, the Corporate Debtor is functioning in an opaque manner.
5. The Ld. Counsel representing the applicant relied upon the communication dated 16.11.2022 given at page no.11 of the present IA that as recorded in clause 21.2 of the Amended Debenture Trust Deed the Corporate Debtor had agreed to provide the Debenture Trustee with such information regarding the financial condition, business and operations of the Corporate Debtor as may be requested by the Debenture Trustee and also furnish any other information in relation to the Corporate Debtor or the Projects for the purpose of monitoring or auditing their performance. Further, the Ld. Counsel relied upon another communication dated 29.11.2022 calling upon the Corporate Debtor to furnish the relevant information, to which also there has been no response. It has further been averred that the Corporate Debtor in addition to the corporate guarantee also executed a share pledge agreement whereby 100% of equity share capital of the Corporate Debtor were pledged, a deed of hypothecation creating a first ranking exclusive charges on the assets of the Corporate Debtor, a memorandum of entry recording the depositing of title deeds for creation of the mortgage over the property and declaration of mortgage by the Corporate Debtor for deposit of title deeds of the mortgage properties of the Corporate Debtor with Vistra.
6. Ld. Counsel representing the applicant thus, relied upon the judgment dated 17.07.2019 titled as NUI Pulp and Paper Industries Pvt. Ltd. v/s Roxcel Trading GMBH cited as 2019 SCC OnLine NCLAT 941, wherein the Hon’ble National Company Law Appellate Tribunal interalia held as under :-
3. However, while adjourning the case for 15 July, 2019, the following interim order was passed:
“However, the apprehension of the Applicant can be taken note of till the time either the Application is admitted or rejected, the assets and the accounts of the Company need to be maintained on date except withdrawal of the legitimate expenses required for carrying on the day-to-day expenses. Therefore, this Authority in exercise of the powers conferred under Rule 11 of the NCLT Rules, 2016, restrains the Corporate Debtor and its Directors from alienating, encumbering or creating any third party interest on the assets of the 1 Respondent Company till further orders.”
8. Rule 11 of the National Company Law Tribunal Rules, 2016 deals with ‘inherent powers’ of the National Company Law Tribunal and reads as follows:
“11. Inherent Powers.- Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal.”
9. From the aforesaid Rule 11, it is clear that the Tribunal (Adjudicating Authority herein) can make any such order as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal.
10. From the aforesaid provisions, it is clear that once an application under Sections 7 or 9 is filed by the Adjudicating Authority, it is not necessary for the Adjudicating Authority to await hearing of the parties for passing order of ‘Moratorium’ under Section 14 of the ‘I&B Code’. To ensure that one or other party may not abuse the process of the Tribunal or for meeting the ends of justice, it is always open to the Tribunal to pass appropriate interim order.
7. It is further stated that the appeal against the said order dated 17.07.2019 before the Hon’ble Supreme Court in Civil Appeal No.6697/2019, has been dismissed.
8. Ld. Counsel for the applicant further relied upon the judgment dated 31.01.2022 titled as Yes Bank Ltd. v/s Dewan Housing Finance Corporate Limited and Another and cited as 2022 SCC OnLine NCLAT 1203, wherein Hon’ble National Company Law Appellate Tribunal interalia held as under :-
12. We have considered the submissions of Learned Counsel for the Parties and perused the record.
13. On the submissions raised by Learned Sr. Counsel for the Appellant that Adjudicating Authority has no jurisdiction to pass any Interim Order of the Status – Quo prior to admission of Section 7 Application, Learned Sr. Counsel for the Respondent has relied on Judgment of this Tribunal in Company Appeal (AT) Ins. No. 664 of 2019 in the matter of ‘NUI Pulp and Paper Industries Pvt. Ltd. v. Roxcel Trading GMBH’ in which case also the Adjudicating Authority before admission of the Application under Section 9 of the Code had passed an Interim Order on 15th July, 2019. In an Appeal filed against the said order, it was contended that Adjudicating Authority has no jurisdiction to pass any Interim Order prior to admission of the application. This Tribunal after noticing the Rule 11 of the National Company Law Tribunal, Rules, 2016 laid down following in Paragraphs 9 to 12:
“9. From the aforesaid Rule 11, it is clear that the Tribunal (Adjudicating Authority herein) can make any such order as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal.
10. From the aforesaid provisions, it is clear that once an application under Sections 7 or 9 is filed by the Adjudicating Authority, it is not necessary for the Adjudicating Authority to await hearing of the parties for passing order of ‘Moratorium’ under Section 14 of the ‘I&B Code’. To ensure that one or other party may not abuse the process of the Tribunal or for meeting the ends of justice, it is always open to the Tribunal to pass appropriate interim order.
11. The Respondent- ‘Operational Creditor’ had issued Demand Notice under Section 8(1) and after receipt of the reply under Section 8(2), informed that the ‘Corporate Debtor’ has not made payment, filed an application under Section 9. It was at this stage, the ‘Operational Creditor’ brought to the notice of the Adjudicating Authority (National Company Law Tribunal) that there is an apprehension that the ‘Corporate Debtor’ may abuse the process of the ‘I&B Code’ to deny the creditors from its legitimate rights if admission of the application under Section 9.
12. The Appellant having not given any undertaking or made any specific reply and refused to say that they have no such intention, we are of the view that it is always open to the Adjudicating Authority to pass ad-interim order before admitting any application under Sections 7 or 9 or 10 of the ‘I&B Code’. However, on reply, once the application is admitted, then the order of ‘Moratorium’ under Section 14 will follow, taking away the right of the Board of Directors of the ‘Corporate Debtor’ to take any decision on behalf of the ‘Corporate Debtor’ prohibiting others from taking any action against the ‘Corporate Debtor’ which is different from interim order. On the other hand, if application under Sections 7 or 9 or 10 is rejected, the interim order will automatically stands vacated.”
9. Per-contra, the Ld. Senior Counsel representing the Respondent/ Corporate Debtor argued that the present application has been filed U/s 60(5) of the Code, which empowers this Tribunal to entertain and dispose of matters concerning, arising out of or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor. It is further stated that in terms of Section 12 of the Code, the insolvency resolution begins only after the admission of the application filed either by an operational creditor or a financial creditor and not before that, and since the petition U/s 7 of the Code filed by the present applicant is still pending adjudication and has not been admitted yet, the present application thus is premature and is liable to be dismissed. The Ld. Senior Counsel has relied upon the judgment passed by Hon’ble Supreme Court titled as ‘Vidarbha Industries Power Limited v/s Axis Bank Limited’ Civil Appeal No. 4633 of 2021’, as reproduced in para no.9 of the reply, wherein as per para 76, the term ‘may’ had been used U/s 7(5)(a) of the IBC but a different word, that is, ‘shall’ in the otherwise almost identical provision of Section 9(5)(a) shows that ‘may’ and ‘shall’ in the two provisions are intended to convey a different meaning and therefore it is contended by the Ld. Senior Counsel that the present petition U/s 7 of the Code may or may not be accepted for admission and therefore the present IA for interim relief is not maintainable.
10. The Ld. Sr. Counsel also relied upon the judgment titled as E.S. Krishnamurthy and others v/s Bharath Hi-Tech Builders Private Limited and cited as (2022) 3 Supreme Court Cases 161, to contend that as per para 34 of the aforesaid judgment only two options are available before the Adjudicating Authority U/s 7(5) of the Code to verify whether a default has occurred or if a default has not occurred and based upon its decision, the Adjudicating Authority must then either admit or reject an application respectively.
11. We have heard the Learned Counsels representing the parties and perused the record.
12. The present IA has been filed during the pendency of Section 7 petition filed by the petitioner/ applicant wherein the respondent/ corporate debtor has already put in appearance and has sought time to file reply. Pending aforesaid petition U/s 7, the present IA No.452/2022 has been moved for interim relief restraining the Corporate Debtor from alienating or creating any third party interests/ rights on the assets of the Corporate Debtor secured in favour of the Debenture Trustee. The contention of the Ld. Counsel representing the applicant is that though the debt is already secured as stated in para 7(a) of the present IA, however, the Corporate Debtor is not furnishing the requisite information and details as sought by the Debenture Trustee vide different communications, which according to Ld. Counsel representing the applicant has given sufficient apprehension about the interests/ intentions about the secured assets. The Ld. Sr. Counsel representing the Respondent/ Corporate Debtor has opposed the interim relief sought in the present IA mainly on the ground that since the petition is pending U/s 7, therefore no interim relief is warranted in favour of the applicant/ financial creditor prior to the admission of the petition U/s 7 and commencement of the moratorium period.
13. We have examined the judgments relied upon by the Ld. Counsel representing the applicant i.e. NUI Pulp and Paper Industries Pvt. Ltd. (Supra) as well as Yes Bank Ltd. v/s Dewan Housing Finance Corporate Limited and Another (Supra), from the aforesaid judgments it is clear that this Adjudicating Authority would have inherent powers for granting relief in favour of the Financial Creditor and against the Corporate Debtor from alienating or creating any third party interests/ rights in the peculiar facts and circumstances of the case. In the present matter though the debts are stated to be secured, however non-communication by the Corporate Debtor to the applicant i.e. Debenture Trustee about the requisite information sought by the applicant with regard to the monthly cash flow statements, capital structure, bank statements and monthly sales particularly in compliance of clause 21.4 of the amended Debenture Trust Deed, the contention of the Ld. Counsel for the applicant of having apprehensions against the Corporate Debtor of their intentions, inspires confidence. The objection and opposition by the Corporate Debtor against the seemingly innocuous prayer of restraining the Corporate Debtor from alienating or creating any third party interests/ rights are therefore not tenable as the present IA is not deciding merit of the case of the main petition.
14. In view of the aforesaid discussions, we hereby restrain the Corporate Debtor from alienating or creating any third party interests/ rights on the assets of the Corporate Debtor secured in favour of the Debenture Trustee till further orders. It may however be observed that nothing said in this order would be construed as an expression/ opinion on merits of the main petition. Ordered accordingly.
15. IA stands disposed of with no order as to costs.
16. The main petition to come up for hearing on 01.03.2023 for filing reply therein and for completion of pleadings.
