Point of Law: Section 14 of IBC 2016 relates to moratorium which will come into play in corporate Insolvency Resolution Processes initiated by Financial Creditors, Operational Creditors and by Corporate Applicants

JUDGMENT :

N. NAGARESH, J.

The 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 by virtue of Ext.P3 Notification.

2. The petitioner states that he holds 20% share in the 3rd respondent-Limited Liability Partnership as contemplated under Section 23(4) of the Limited Liability Partnership Act, 2008. The petitioner submits that 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. According to the petitioner, the NCLT has accepted Ext.P4 application submitted by the petitioner and has assigned Diary No.1386/2023 dated 23.08.2023 to the application.

3. The petitioner states that he initiated Ext.P4 insolvency proceedings as the 5th respondent-Bank resorted to coercive proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. 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. The Chief Judicial Magistrate, without ascertaining the maintainability of Ext.P5 MC, has passed Ext.P6 order dated 30.06.2022 allowing Ext.P5 MC.

4. Though the petitioner submitted Ext.P7 affidavit dated 15.07.2019 before the Chief Judicial Magistrate and intimated about the proceedings pending before the NCLT, the proceedings pursuant to Ext.P6 order has not been suspended.

5. The petitioner submits 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. The petitioner would further argue 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. However, the Advocate Commissioner filed an interim report before the Chief Judicial Magistrate intimating that she requires more police force since the petitioner has intimated that IBC proceedings are in force.

6. The counsel for the petitioner reiterated that the provisions of IBC 2016 shall have overriding effect over the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 by virtue of Section 238 of the Code. Since insolvency resolution and bankruptcy for individuals and Partnership Firms came into force with effect from 15.11.2019 as per Ext.P3 Notification, steps pursuant to securitisation proceedings under the Act, 2002 cannot legally go ahead.

7. The counsel for the petitioner further argued that the attitude of the Chief Judicial Magistrate