The moratorium provision under Section 14(1)(a) of the Insolvency and Bankruptcy Code 2016 is intended to prohibit debt recovery actions against the assets of the corporate debtor and does not apply to proceedings which do not result in endangering, diminishing, dissipating, or adversely impacting the assets of the corporate debtor.

YOGESH KHANNA, J.

1. This petition is under section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred as the Act) for setting aside the arbitral award dated 20.05.2016 passed by the arbitral tribunal in favour of the respondent herein. The award is in nature of a pure money decree in favour of the respondent.

2. During the pendency of these proceedings under section 34 of the Act, an application under Section 7 of the Insolvency and Bankruptcy Code 2016 (hereinafter referred as the Code) was filed by a financial creditor against the respondent company before the National Company Law Tribunal – Mumbai, (hereinafter referred as the NCLT) seeking initiation of the corporate insolvency resolution against the respondent and by an order dated 04.07.2017 the NCLT has admitted such application and has declared a moratorium in terms of Section 14 of the Code.

3. The question now has arisen is if the present proceedings under Section 34 of the Act, need to be stayed, per Section 14 (1)(a) of the Code?

4. The respondents case is if the proceedings are stayed, the respondent would be unable to execute the award given in its favour for an extended period till the moratorium exists and be unable to recover its dues thereby further impeding its financial condition. Hence, the issue is if the word proceedings used in Section 14(1)(a) of the Code be read to mean all legal proceedings or be read restrictively to mean a particular type of legal proceedings viz. debt recovery action which may have an effect of dissipating or diminishing the debtor's assets during the period of its insolvency resolution.

5. Section 14(1)(a) of the Code runs as under:-

“14.(1) Subject to provisions of sub-sections (2) and (3) on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:—

(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority.”

6. Admittedly the term proceedings as is mentioned in Section 14(1)(a) of the Code is not preceded by the word all to indicate the moratorium provisions would apply to all the proceedings against the corporate debtor.

7. In Canara Bank vs. Deccan Chronicle Holdings Limited Company Appeal No. 147/2017, the court has already recognized the moratorium provision does not apply to all proceedings viz. to proceedings under Article 32 or 226 of the Constitution of India.

8. The object of the Code is to provide relief to the corporate debtor through standstill period during which its assets are protected from dissipation or diminishment, and as a corollary, during which it can strengthen its financial position, extending of the unexecutability of the award would rather prevent the corporate debtor from recovering money due to it and adding to its financial corpus. Such a consequence would infact be directly contrary to the object of the Code. To determine the true meaning of the statute, the provision would have to be construed in the context of the statute as a whole, for which purpose interpretative criteria may have to be applied even when the statutory language is apparently free from any semantic ambiguity.

9. The meaning and purpose of Section 14(1)(a) of the Code may also be reliably ascertained from the context of its surrounding provisions. Sub-clauses (b), (c) and (d) of Section 14 (1) of the Code are reproduced below for ease of reference would further demonstrate the moratorium provision would apply only to protect the assets of the corporate debtor. The provisions read as under:-

“14.(1) xxxx

(b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein.

(c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of