SANDEEP KHAITAN, RESOLUTION PROFESSIONAL FOR NATIONAL PLYWOOD INDUSTRIES LTD.  versus JSVM PLYWOOD INDUSTRIES LTD. & ANR.
[2021] 4 S.C.R. 122, Supreme Court of India, 2021
Outcome: Appeal(s) allowed (Granted)
Segment: Facts
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   [2021] 4 S.C.R. 122
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SANDEEP KHAITAN, RESOLUTION PROFESSIONAL FOR
NATIONAL PLYWOOD INDUSTRIES LTD.
VERSUS
JSVM PLYWOOD INDUSTRIES LTD. & Anr.
(Criminal Appeal No.447 of 2021)
APRIL 22, 2021
[UDAY UMESH LALIT AND K. M. JOSEPH, JJ]
Insolvency and Bankruptcy Code, 2016: ss. 14, 17 and 7 –
Code of Criminal Procedure, 1973 – s. 482 – Power of High Court
u/s. 482, if can override statutory provisions of IBC – On facts,
NCLT admitted application u/s. 7 IBC against one NPIL and
subsequently appellant was appointed as Resolution Professional
– Appellant alleging that the respondent-operational creditor,
transferred Rs 32.50 lakhs from the Corporate Debtor’s bank
account without the appellant’s sanction in violation of s. 14 –
Appellant then filed an FIR against the respondent – Respondent
filing petition u/s.482 before the High Court – Respondent also
filed an application for allowing it to use its bank account over
which lien had been created and the frozen accounts of its creditors
– High Court lifted the lien created on the respondent’s bank account,
and allowed the respondent to operate the bank account over which
lien had been created and the accounts of its creditors frozen in
connection with the FIR – On appeal, held: Power u/s. 482 may not
be available to the court to countenance the breach of a statuary
provision – Words ‘to secure the ends of justice’ in s. 482 cannot
mean to overlook the undermining of a
statutory dictate, provisions
of ss. 14 and 17 of the IBC – High Court overlooked the salutary
limits on its power u/s. 482 – Order of the High Court resulting in
the respondent No. 1 being allowed to operate the account without
making good the amount of Rs 32.50 lakhs to be placed in the
account of the Corporate Debtor, cannot be sustained – Respondent
No.1 is allowed to operate its account subject to first remitting Rs
32.50 lakhs into the account of the Corporate Debtor.
Allowing the appeal, the Court
HELD: 1.1 In this case an application filed under section 7
of the Insolvency and Bankruptcy Code, 2016 was admitted, the
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appellant was appointed as the interim resolution professional
and a moratorium was declared. With the declaration of the
moratorium the prohibitions as enacted in section 14 came into
force. It is clear that the assets of the company would include the
amounts lying to the credit in the bank accounts. There cannot
be any dispute that well after the order under section 14 was
passed, a sum of Rs. 32.50 lakhs has been remitted into the
account of Respondent No.1 company. No doubt it is the definite
case of the Respondent No.1 that it has had business relations
with the Corporate Debtor since more than 15 years and that the
amount remitted in its account represented the price of the
materials supplied to the Corporate Debtor. Apart from this
amount a sum of rupees more than Rs.39 lakhs is still due. It is
to be noticed that though an appeal was filed against the order
admitting the petition under Section 7 the same was dismissed
by the NCLAT. The appellate order was undoubtedly set aside
by this court and the appeal remanded to the NCLT for its
consideration. Setting aside the appellate order of the NCLAT
by this Court and remanding the appeal would not have the effect
of setting aside the order admitting the application. Initially, an
order was passed on 28.02.2020. The ambiguity created by the
said order was removed by the subsequent order of the Tribunal
dated 20.03.2020. In other words, by the order dated 20.03.2020
the NCLT ordered that the appellant
was at liberty to act as per
law and the words used in the earlier order dated 28.02.2020
relied upon by the Respondent No.1 were found to be a mere
casual observation which did not culminate into any direction.
Furthermore, there is an FIR and which is pending consideration
in the High Court also. The appellant is essentially aggrieved by
the transactions representing a sum of Rs. 32.50 lakhs all of which
took place after order dated 20.03.2020. [Para 16][133-A-G]
1.2 In the interim order passed by the NCLT Guwahati,
the Tribunal had directed the Directors to refund the amount of
the Corporate Debtor less any amount paid for supplies. It is
also true that the review petition filed by the Appellant is
dismissed, essentially based on the limitations on the power of
review. [Para 17][133-G-H]
SANDEEP KHAITAN, RESOLUTION PROFESSIONAL FOR NATIONAL PLYWOOD
INDUSTRIES LTD. v. JSVM PLYWOOD INDUSTRIES LTD.
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1.3 The provisions of the IBC contemplate resolution of
the insolvency if possible, in the first instance and should it not
be possible, the winding up of the Corporate Debtor. The role of
the insolvency professional is neatly carved out. From the date
of admission of application and the appointment of Interim
Resolution Professional, the management of the affairs of the
Corporate Debtor is to vest in the Interim Resolution
Professional. With such appointment, the powers of the Board of
Directors or the partners of the Corporate Debtor as the case
may be are to stand suspended. Section 17 further declares that
the powers of the Board of Directors or partners are to be
exercised by the Interim Resolution Professional. The financial
institutions are to act on the instructions of the Interim Resolution
Professional. Section 14 is emphatic, subject to the provisions of
sub section (2) and (3). The impact of the moratorium includes
prohibition of transferring, encumbering, alienating or disposing
of by the Corporate Debtor of any of its assets. Furthermore,
Section 14 (2A) was inserted with effect from 28.12.2019. No
doubt under this provision goods or services not covered by
Section 14(2) are also covered. The call however is to be taken
by the IRP/RP. Raw material supply could fall within the provision.
The IRP/RP must take a decision guided purely by the object of
the IBC and the provisions and the factual matrix. [Para
18,
22][134-A-D; 135-C-D]
1.4 With the appointment of Committee of Creditors, a
Resolution Professional is to be appointed. The Resolution
Professional is thereafter to conduct the resolution process and
manage the operations. Section 23 (2) makes it clear that his
power is the same as the powers of the Interim Resolution
Professional. Undoubtedly, the Resolution Professional is bound
to seek prior approval of the Committee of Creditors in matters
covered by Section 28. [Para 23][135-D-F]
1.5 The High Court appears to have, in passing the
impugned order, which is an interim order for that matter,
overlooked the salutary limits on its power under Section 482.
The power under Section 482 may not be available to the Court
to countenance the breach of a statuary provision. The words ‘to
secure the ends of justice’ in Section 482 cannot mean to overlook
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the undermining of a statutory dictate, which in this case is the
provisions of Section 14, and Section 17 of the IBC. [Para 24]
[135-F-G]
1.6 Having regard to the orders passed by the NCLT
admitting the application, under Section 7, and also the ordering
of moratorium under Section 14 of the IBC and the orders which
have been passed by the tribunal otherwise, the order of the High
Court resulting in the Respondent No. 1 being allowed to operate
the account without making good the amount of Rs 32.50 lakhs
to be placed in the account of the Corporate Debtor cannot be
sustained. The appellant has also no objection in the Respondent
No. 1 being allowed to operate its account subject to it remitting
an amount of Rs. 32.50 lakhs into the account of the Corporate
Debtor. The Respondent No.1 is allowed to operate its account
subject to it to first remitting into the account of the Corporate
Debtor, the amount of Rs 32.50 lakhs which stood paid to it by
the management of the Corporate Debtor. The assets of the
Corporate Debtor shall be managed strictly in terms of the
provisions of the IBC. [Para 25][135-G-H; 136-A-C]
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
No. 447 of 2021.
From the Judgment and Order dated 04.02.2021 of the High Court
of Gauhati at Gauhati in I.A.(Crl.)/453 of 2020 in Crl. Pet./454 of 2020.
Anand Varma, Abhishek Prasad, Ms. Astha Ahuja, Advs. for the
Appellant.
Harish Pandey, C.K. Rai, Anshuman Tiwari, Shuvodeep Roy, Advs.
for the
Respondents.
The Judgment of the Court was delivered by
K. M. JOSEPH, J.
Leave granted.
1. The appeal is directed against order dated 04.02.2021 passed
by the Hon’ble High Court of Guwahati. In the impugned order, the
High Court has allowed an interlocutory application filed by the
Respondent No. 1 to allow it to operate its bank account maintained
with the ICICI Bank Bhubaneswar and to unfreeze the bank account of
its creditors over which the lien has been created and the accounts frozen
SANDEEP KHAITAN, RESOLUTION PROFESSIONAL FOR NATIONAL PLYWOOD
INDUSTRIES LTD. v. JSVM PLYWOOD INDUSTRIES LTD.
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pursuant to the lodging of an FIR by the appellant before us. It was
made subject to conditions.
2. An application under Section 7 of the Insolvency and Bankruptcy
Code, 2016, hereinafter referred to as the IBC was admitted on
26.08.2019 against one National Plywood Industries Limited (NPIL).
The Appellant was appointed as the Interim Resolution Professional. A
moratorium also came to be passed by the very same order within the
meaning of Section 14 of the IBC. The Appellant came to be appointed
as the Resolution Professional by an order dated 08.11.2019. In the
meantime, the Respondent No.1 claiming to be an operational creditor
lay the claim for the amounts due to it from the Corporate Debtor before
the Appellant vide communication dated 22.11.2019. It would appear
that the former Managing Director of the Corporate Debtor challenged
the order of the NCLT, Guwahati, admitting the application under Section
7. The NCLAT by order dated 24.11.2019 dismissed the appeal interalia
holding that the application under Section 7 was not barred by limitation.
Civil Appeal No. 9142 of 2019 filed by the former Managing Director of
the Corporate Debtor came to be however allowed by this Court by an
order dated 20.01.2020. The NCLT was directed to consider the matter
in accordance with law. It would appear that on 28.01.2020 interlocutory
application 7 of 2020 filed by the former Managing Director of the
Corporate Debtor seeking an
injunction restraining the Respondents
therein from interfering in the operation of the Corporate Debtor and to
disperse the cost of the CIRP was disposed of interalia as follows: -
i.
“Today the Respondents submitted across the Bar that
except ratifying the expenses of the IRP, no major decisions
have been taken by the COC in the yesterday’s COC
meeting. Both the respondents informed that they are
conscious about the order passes by the Hon’ble Supreme
Court and the legal consequences thereof.
ii.
In view of the above submissions of the respondents, this
Tribunal expects that the respondents would maintain status-
quo in respect of the IRP proceedings. As the main company
petition was remanded back to the Hon’ble NCLAT for
fresh disposal in accordance with law, this Tribunal is of
the considered opinion that the petitioner has to approach
the Hon’ble NCLAT for any further directions in the above
matter and accordingly above application stands disposed
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of with the above observations. Even otherwise, the order
of admission of the company petition has not attained finality
and, therefore, no interim orders as prayed for needs to be
passed today.
iii.
In the result, IA No. 07 of 2020 is disposed of with the
above observations.”
Thereafter there is order dated 20.03.2020 passed which we will
advert to.
3. It is the case of the Appellant that the former Managing Director
of the Corporate Debtor in conspiracy with the Respondent No.1
engaged in an illegal transaction to the tune of Rs. 32.50 lakhs without
authority from the Appellant and in violation of Section 14 of the IBC. It
is his complaint that initially, the Managing Director made a transaction
of Rs. 500. Thereafter, he proceeded by virtue of 4 consecutive
transactions to transfer a sum of Rs. 32.50 lakhs to the Respondent No.
1. It is also complaint of the Appellant that the former Managing Director
proceeded to transfer another sum of Rs. 3.29 lakhs from another account
and the amount was transferred to his close associate.
4. On 23.04.2020, the Appellant filed a cyber complaint. This was
followed on the same date by filing an application under Section 19 read
with Section 23 (2) of the IBC alleging non corporation by the previous
management of the Corporate Debtor. On 27.04.2020, the Appellant got
lodged an FIR. On 04.05.2020 the ICICI Bank created a lien upon the
bank account of the Respondent No. 1 based on the allegedly illegal
transaction. The
next development to be noticed is the order dated
20.05.2020 passed by the NCLT, Guwahati. The order is passed in I.A.
No. 37 of 2020. The relief sought therein was for direction to the Directors
of the Corporate Debtor to hand over the management of the company.
The order reflects the controversy relating to the payment of Rs. 32.50
lakhs violating the moratorium. Tribunal finds that the directors of the
Corporate Debtor were not giving maximum assistance. On the basis of
its findings the tribunal issued directions to the suspended Board of the
Corporate Debtor to cooperate with the Appellant. The Auditors were
to complete the audit expeditiously interalia. More importantly the
Directors were directed to refund the amount withdrawn less the amount
if any paid to the alleged supplier as the cost of raw materials. The
interlocutory application was posted before the regular bench for hearing
after lifting the lockdown.
SANDEEP KHAITAN, RESOLUTION PROFESSIONAL FOR NATIONAL PLYWOOD
INDUSTRIES LTD. v. JSVM PLYWOOD INDUSTRIES LTD. [K. M. JOSEPH, J.]
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5. A perusal of the order reveals that the Directors of the company
sought to defend the withdrawal of Rs.32.50 lakhs as one intended to
pay for the raw materials. It is further noticed that the Tribunal noticed
that there was no proof for the same. More importantly it was found
that even if done to discharge debt due to supplies during the CIRP,
without permission and knowledge of the Resolution Professional, it was
in violation of Section 14 of the Code.
6. The Appellant moved an application for review of the order
dated 20.05.2020. The Tribunal in its order dated 05.06.2020 noticed the
limitations flowing from Rules 154 and 155 of the NCLT, Rules, 2016 in
the matter of review. It is observed that for the reasons highlighted in
the 20.05.2020 the former Directors of the Corporate Debtor are found
prima facie liable to refund the amount unauthorisedly withdrawn from
the account of the Corporate Debtor. It is also noticed that the Directors
of the suspended board were not made respondents. The application for
review came to be dismissed.
7. The genesis of the impugned order is the FIR lodged against
the Appellant and arose from the payment effected into the account of
Respondent No.1 in a sum of Rs. 32.50 lakhs. The said FIR came to be
challenged in a petition under Section 482 of the Cr.P.C. by the
Respondent No.1 by filing Criminal Petition No. 454 of 2020. In the
same the Appellant also filed I.A. No. 453 of 2020.
8. On 19.01.2021 the NCLT, Guwahati passed an order in I.A
No. 37 of 2020. By the said order the Appellant was directed to discharge
his duties as per the provisions of the IBC. Thereafter, it also passed the
following directions: -
i.
“The Learned Counsel for the Respondents has confirmed
that the Suspended Management has been co-operating and
providing assistance to RP to complete the CIRP in time.
The Corporate Debtor is directed to submit its reply Affidavit
to the allegations made relating to the transactions of Rs.
35.795 lakhs serving a copy upon the RP.
ii.
Any amount of the Corporate Debtor lying in any Bank is
to be transferred to the account being operated by the RP.
Banks having account of the Corporate Debtor are directed
to lift the lien, if any, on any amount of the Corporate Debtor
and allow the operation of the account by the RP only.
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iii.
The RP is directed to utilize the funds of the Corporate
Debtor under CIRP judiciously keeping the Unit in its full
operation.”
9. Thereafter, in the petition filed by the Respondent No.1 under
Section 482, the High Court admitted the petition. The case was directed
to be listed for regular hearing in usual course. (According to the
Appellant the High Court had directed investigation to be continued.
This is not seen reflected in the order which is produced). In the I.A No.
453 of 2020 filed in the Section 482 resulting in the impugned order, the
prayers sought has already been noted. It is to allow the Respondent
No.1 and its creditors to operate their bank account over which lien has
been created and those accounts which have been frozen based on the
FIR dated 27.04.2020.
THE IMPUGNED ORDER
10. After noticing the contentions of the parties, the Learned Single
Judge in the impugned order proceeds to hold as follows:-
i.
“From the material on record, it is apparent that there was
business relation between the petitioner company and the
NPIL, which is evident from the various documents
annexed to the petition. Only question raised in this FIR is
that the money was transferred by the suspended CMD
without any authority, inasmuch as, the entire state of affairs
of NPIL was vested with the Respondent No. 2, who has
been appointed as resolution professional. Only incriminating
allegation against the petitioner is that the suspended CMD
has personal
interest in the petitioner company being an
associate company, which is however, a disputed fact
required to be investigated by police.
ii.
Be that as it may, having considered the entire gamut of the
matter and the nature of accusation brought against the
present petitioner, I am of the view that freezing of all the
bank account as indicated above would certainly cause
unnecessary hardship, which may not be necessary for the
investigation of the present FIR in view of the nature of the
accusation made therein as well as in view of the offer
made by the petitioner to furnish a bond. Therefore, in my
consider view, the petitioner is entitled to the interim relief
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as sought for. Accordingly, it is provided that the lien created
upon the bank account no. 149905001306 maintained with
the ICICI Bank Limited, Chandrasekarpur Branch,
Bhubaneswar be lifted, the petitioner and its creditors shall
be allowed to operate the bank account over which lien has
been created and the accounts have been frozen pursuant
to the instruction of the Respondent No. 2 in connection
with Margherita P.S. Case No. 0112/2020, until further order
of the Court.
iii.
It is however, made clear that the interim relief granted to
the petitioner as above with regard to unfreezing the bank
account and lifting of lien shall be subject to the condition
that the petitioner shall withdraw the WP (C) No. 118/2020
filed before the Itanagar Permanent Bench of this Court
and furnishing an indemnity bond undertaking to refund the
amount of Rs. 32.50 Lakhs if required, subject to final
outcome of the criminal case.”
11. We heard the Learned Counsel for the Appellant Shri Anand
Varma and the Learned Counsel for the Respondent No. 1, Shri Harish
Pandey. The State is represented by Shri Shuvodeep Roy.
SUBMISSIONS
12. The Learned Counsel for the Appellant contended that the
impugned order proceeds on an erroneous basis namely that the
allegations about the co-accused (former Managing Director of the
Corporate Debtor) having an interest in the Respondent No.1 Company
was a disputed fact which had to be investigated. It is the
case of the
Appellant that there is a report of the auditing firm. Also, the said finding
of the High Court is contrary to the documents of the Respondent No. 1
itself. It is also urged that the High Court itself has permitted the
investigation to go on in the petition under section 482. Secondly, he
pointed out that the impugned order was contrary to Section 14 of the
IBC. He drew support from the judgment of this Court in P Mohanraj
vs. M/S. Shah Brothers Ispat Pvt. Ltd. in Civil Appeal No. 10355 of
2018. According to him, the whole purpose of the moratorium would be
defeated if members of the previous management of the Corporate Debtor
are left free to transfer the funds of the Corporate Debtor. The
Respondent No. 1 was a related party of the Corporate Debtor. He
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reiterates that with the appointment of Appellant as the Resolution
Professional under Section 25 (2) a of the IBC he is to take custody and
control of all the assets of the Corporate Debtor. Finally, he also
emphasized the nature of the jurisdiction under Section 482 of the Cr.P.C.
The High Court has overlooked the limits of its power in passing the
impugned order, he complains. He points out that the order admitting the
application under section (7) has not been stricken by the remand by this
Court of the appeal against the order admitting the application.
13. Per contra Shri Harish Pandey, Learned Counsel, contended
that the order may not be interfered by this Court. The Respondent
No.1 was a related party and it was always known to be such related
party. He referred to the fact that the Respondent No.1 was supplier of
raw material to the Corporate Debtor. He pointed out goods worth more
than Rs.2 crores have been supplied by it to the Corporate Debtor.
Payments were being made. In fact, a sum of more than Rs.39 lakhs is
further due from the Corporate Debtor to the Respondent No. 1. It is
emphasized as a MSME it would cause grave prejudice to it if the
impugned order is set aside.
14. It is the case of the Respondent No. 1 further that the business
relationship between the Respondent No. 1 and Corporate Debtor has
existed for more than 15 years. The Corporate Debtor has been declared
a sick industry on 18.04.2006. It was nursed back by the Respondent
No. 1. Our attention is drawn to the minutes of the first meeting of the
Committee of Creditors dated 23.09.2019. The minutes reveal that
committee of creditors observes that a substantial part of the raw
materials is purchased from Respondent No.1 and that the relatives of
the Corporate Debtor directors or shareholders hold more than 51 percent
shareholding of the first respondent. It is further noted that the processes
to assess the veracity and reasonableness of the transaction in such
situation were let known and the purchases/sales must be benchmarked
against arm’s length transactions and open market transactions. (We
may also notice that the meeting resolved that all the banks were to act
on the instructions of the appellant interalia.) It is the case of the
Respondent No. 1 that right from the beginning, it was known that the
Respondent No. 1 was a related party. It is the further case of the
Respondent No. 1 that its claim for over 6 crores of rupees was vetted,
verified and admitted by the Appellant. After the commencement of
CIRP Respondent No. 1 had made regular substantial supplies to the
SANDEEP KHAITAN, RESOLUTION PROFESSIONAL FOR NATIONAL PLYWOOD
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Corporate Debtor for which the payment were being made (they relate
to the period from 26.08.2019 to 31.03.2020). This is shown as amounting
to Rs. 2,70,84,982. The Respondent No. 1 lays store by the order of the
NCLT, Guwahati dated 28.01.2020 which we have already referred to.
E-mails addressed to the Appellant to clarify did not evoke any response.
In March 2020, orders were placed by the Corporate Debtor for
approximately Rs. 30 lakhs. The lockdown intervened. On 18.04.2020 it
is not disputed that the Corporate Debtor made a payment of Rs 32.50
lakhs through online net banking transfer against material supplied during
the period that the corporate debtor was under CIRP. The Learned
Counsel for the Respondent No.1 would point out that the order of the
NCLT dated 20.05.2020 passed by the NCLT directed the directors of
the Corporate Debtor to refund the amount withdrawn less any amount
supplied to the alleged supplier. It is therefore, pointed out creating a lien
on the accounts of the Respondent no. 1 was not justified. The Learned
Counsel also drew our attention to the order dated 24.03.2021 passed by
the NCLT Guwahati Bench. This is in an effort at showing the manner
in which the appellant has been functioning. The Tribunal in the said
order refers to the Impugned Order and the Interim order passed by this
Court in this matter. The Tribunal noted that the production has been
suspended and layoff notice is also
issued in regard to the Corporate
Debtor. The objectives of the IBC are being defeated on the basis of the
claims and the FIR interalia. The Appellant was directed to file the copy
of the FIR in this case among other documents. The Learned counsel
for the Respondent no. 1 would submit that the having regard to the
orders passed by the tribunal the Impugned Order passed by the High
Court may not be interfered with. Having regard to the dismissal of the
review petition filed against the 20.05.2020 there is no merit in the present
appeal.
15. The Learned Counsel for the Appellant would point out that
the Appellant is prevented from disbursing the salary of the workers.
Nearly four months’ salary would be disbursed with the amount which
was paid by the former management without any authority as noticed. It
is the case of Appellant that the transactions between the Respondent
No.1 and the Corporate Debtor was not authorised by the Appellant
during the period from 21.02.2020 to 27.04.2020.
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FINDINGS
16. The contours of the jurisdiction under 482 of the Cr.P.C. are
far too well settled to require articulation or reiteration. Undoubtedly, in
this case by 26.08.2019 an application filed under section 7 of the IBC
was admitted, the appellant appointed as the interim resolution
professional and what is more a moratorium declared. With the
declaration of the moratorium the prohibitions as enacted in section 14
came into force. It is clear that the assets of the company would include
the amounts lying to the credit in the bank accounts. There cannot be
any dispute that well after the order under section 14 was passed, a sum
of Rs. 32.50 lakhs has been remitted into the account of Respondent
No.1 company. No doubt it is the definite case of the Respondent No.1
that it has had business relations with the Corporate Debtor since more
than 15 years and that the amount remitted in its account represented
the price of the materials supplied to the Corporate Debtor. Apart from
this amount a sum of rupees more than Rs.39 lakhs is still due. It is to be
noticed that though an appeal was filed against the order admitting the
petition under Section 7 the same was dismissed by the NCLAT. The
appellate order was undoubtedly set aside by this court and the appeal
remanded to the NCLT for its consideration. We would think that setting
aside the appellate order of the NCLAT by this court and remanding the
appeal would not have the effect of setting aside the order
admitting the
application. Initially, as was noticed by us an order was passed on
28.02.2020. The ambiguity created by the said order was removed by
the subsequent order of the Tribunal dated 20.03.2020. In other words,
by the order dated 20.03.2020 the NCLT, Guwahati ordered that the
appellant was at liberty to act as per law and the words used in the
earlier order dated 28.02.2020 relied upon by the Respondent No.1 were
found to be a mere casual observation which did not culminate into any
direction. We need not say anything further particularly in view of the
fact that there is an FIR and which is pending consideration in the High
Court also. It is significant only for us to notice that the Appellant is
essentially aggrieved by the transactions representing a sum of Rs. 32.50
lakhs all of which took place after order dated 20.03.2020.
17. It may be true that in the interim order passed by the NCLT
Guwahati, the Tribunal had directed the Directors to refund the amount
of the Corporate Debtor less any amount paid for supplies. It is also true
that the review petition filed by the Appellant is dismissed, essentially
based on the limitations on the power of review.
SANDEEP KHAITAN, RESOLUTION PROFESSIONAL FOR NATIONAL PLYWOOD
INDUSTRIES LTD. v. JSVM PLYWOOD INDUSTRIES LTD. [K. M. JOSEPH, J.]
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18. The provisions of the IBC contemplate resolution of the
insolvency if possible, in the first instance and should it not be possible,
the winding up of the Corporate Debtor. The role of the insolvency
professional is neatly carved out. From the date of admission of application
and the appointment of Interim Resolution Professional, the management
of the affairs of the Corporate Debtor is to vest in the Interim Resolution
Professional. With such appointment, the powers of the Board of Directors
or the partners of the Corporate Debtor as the case may be are to stand
suspended. Section 17 further declares that the powers of the Board of
Directors or partners are to be exercised by the Interim Resolution
Professional. The financial institutions are to act on the instructions of
the Interim Resolution Professional. Section 14 is emphatic, subject to
the provisions of sub section (2) and (3). The impact of the moratorium
includes prohibition of transferring, encumbering, alienating or disposing
of by the Corporate Debtor of any of its assets.
19. Sub section 2 reads as follows:-
“The supply of essential goods or services to the corporate debtor
as may be specified shall not be terminated or suspended or interrupted
during moratorium period.”
20. Essential goods and services referred to in Section 14(2) has
been defined by Regulations. Regulation 32 of the INSOLVENCY AND
BANKRUPTCY 
BOARD 
OF 
INDIA 
(INSOLVENCY
RESOLUTION PROCESS FOR CORPORATE PERSONS)
REGULATIONS, 2016, reads as follows:-
“Essential Supplies.
The essential goods and services referred to in section 14(2) shall
mean-
i.
Electricity;
ii.
water;
iii.
telecommunication services; and
iv.
information technology services, to the extent these are not
a direct input to the output produced or supplied by the
corporate debtor.
Illustration- Water supplied to a corporate debtor will be essential
supplies for drinking and sanitation purposes, and not for generation
of hydro-electricity.”
A
B
C
D
E
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135
21. Also, undoubtedly Section (2A) of Section 14 of the THE
INSOLVENCY AND BANKRUPTCY CODE, 2016 provides as
follows:
“Where the interim resolution professional or resolution
professional, as the case may be, considers the supply of goods or
services critical to protect and preserve the value of the corporate
debtor and manage the operations of such corporate debtor as a
going concern, then the supply of such goods or services shall not
be terminated, suspended or interrupted during the period of
moratorium, except where such corporate debtor has not paid
dues arising from such supply during the moratorium period or in
such circumstances as may be specified.”
22. This provision was inserted with effect from 28.12.2019. No
doubt under this provision goods or services not covered by Section
14(2) are also covered. The call however is to be taken by the IRP/RP.
Raw material supply could fall within the provision. The IRP/RP must
take a decision guided purely by the object of the IBC and the provisions
and the factual matrix.
23. With the appointment of Committee of Creditors, a Resolution
Professional is to be appointed. The Resolution Professional is thereafter
to conduct the resolution process and manage the operations. Section 23
(2) makes it clear that his power is the same as the powers of the Interim
Resolution Professional. Undoubtedly, the Resolution Professional is
bound to seek prior approval of the Committee of Creditors in maters
covered by
Section 28.
24. We have to also in this context bear in mind that the High
Court appears to have, in passing the impugned order, which is an interim
order for that matter, overlooked the salutary limits on its power under
Section 482. The power under Section 482 may not be available to the
Court to countenance the breach of a statuary provision. The words ‘to
secure the ends of justice’ in Section 482 cannot mean to overlook the
undermining of a statutory dictate, which in this case is the provisions of
Section 14, and Section 17 of the IBC.
25. It would appear to us that having regard to the orders passed
by the NCLT admitting the application, under Section 7, and also the
ordering of moratorium under Section 14 of the IBC and the orders
which have been passed by the tribunal otherwise, the impugned order
SANDEEP KHAITAN, RESOLUTION PROFESSIONAL FOR NATIONAL PLYWOOD
INDUSTRIES LTD. v. JSVM PLYWOOD INDUSTRIES LTD. [K. M. JOSEPH, J.]
A
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136
SUPREME COURT REPORTS
[2021] 4 S.C.R.
of the High Court resulting in the Respondent No. 1 being allowed to
operate the account without making good the amount of Rs 32.50 lakhs
to be placed in the account of the Corporate Debtor cannot be sustained.
The Learned Counsel for the Appellant has also no objection in the
Respondent No. 1 being allowed to operate its account subject to it
remitting an amount of Rs. 32.50 lakhs into the account of the Corporate
Debtor. In such circumstances, Appeal is allowed. The Impugned order
is modified as follows:
i.
The Respondent No.1 is allowed to operate its account
subject to it to first remitting into the account of the
Corporate Debtor, the amount of Rs 32.50 lakhs which stood
paid to it by the management of the Corporate Debtor. The
assets of the Corporate Debtor shall be managed strictly in
terms of the provisions of the IBC. The Appellant as RP
will bear in mind the provision of Section 14 (2A) and the
object of IBC. We however make it clear that our order
shall not be taken as our pronouncement on the issues arising
from the FIR including the petition pending under Section
482 of the Cr.P.C.
ii.
We also make it clear that the judgment will not stand in the
way of the Respondent No.1 pursuing its claim with regard
to its entitlement to a sum of Rs.32.50 lakhs and any other
sum from the Corporate Debtor or any other person in the
appropriate forum and in accordance with law. There will
be no order as to costs.
Nidhi
Jain
Appeal allowed.