MR. ANAND RAO KORADA RESOLUTION PROFESSIONALversusM/S. VARSHA FABRICS (P) LTD. & ORS.

                          [2019] 14 S.C.R. 695                           695


 MR. ANAND RAO KORADA RESOLUTION PROFESSIONAL                            A
                                  v.
            M/S. VARSHA FABRICS (P) LTD. & ORS.
               (Civil Appeal Nos. 8800-8801 of 2019)
                       NOVEMBER 18, 2019                                 B
    [INDU MALHOTRA AND R. SUBHASH REDDY JJ.]
      Insolvency and Bankruptcy Code, 2016 – ss.7, 13, 14, 231
and 238 – Respondent No.5 divested its 100% shareholding in
respondent No.4 in favour of respondent Nos.1 to 3 – Respondent
                                                                         C
No.4 shut down its factory – Respondent No.13-Workers’ Union
filed writ petition and sought payment of arrears and current
salaries of the workmen – High Court directed Labour court to
quantify the amount payable to workmen – During the pendency
of the writ petition, a financial creditor filed petition u/s 7 of the
IBC, 2016 before NCLT for initiation of the Corporate Insolvency         D
Resolution Process (CRPF) against respondent No.4 – NCLT
declared moratorium u/s.14 of the IBC – During the pendency of
moratorium, in the pending writ petition High Court directed
valuation of a land owned by respondent No.4 and passed the
orders for carrying out auction of the assets of the respondent No.4
                                                                         E
– Propriety of – Held: Not proper – In view of the provisions of
the IBC, the High Court was not justified in passing the orders
for carrying out auction of the assets of the respondent No.4, once
the proceedings under the IBC had commenced and an order
declaring moratorium was passed by the NCLT – Alienation of the
assets of the respondent No.4 during the pendency of the                 F
proceedings under the IBC would jeopardise the interest of all the
stakeholders – However, it is open for the respondent No.13 to file
an application u/regulation 9 of the IBC for payment of arrears,
salaries before the competent authority – Therefore, orders passed
by the High Court set aside.
                                                                         G
      Allowing the appeals, the Court
      HELD: 1. The Insolvency and Bankruptcy Code, 2016 was
published in the Gazette of India on 28.05.2016. It was framed
as a complete code to consolidate and amend the laws relating
to insolvency resolution of corporate entities, partnership firms,       H
                                 695
696            SUPREME COURT REPORTS                     [2019] 14 S.C.R.


A     and individuals in a time-bound manner, for maximisation of the
      value of the assets of such persons, and balance the interest of
      all the stakeholders. The Corporate Insolvency Resolution
      Process (“CIRP”) could be initiated when a corporate debtor
      commits a default, either by a financial creditor, or an operational
      creditor, or the corporate debtor itself. Section 12 of the IBC
B
      provides a time-frame to complete the CIRP. As per Section
      13 of the IBC, the Adjudicating Authority i.e. the National
      Company Law Tribunal (“NCLT”) shall declare a moratorium for
      the purposes referred to in Section 14 of the IBC. [Para 6] [699-
      G-H; 700-A-B]
C
             2. In view of the provisions ss.14, 231 and 238 of the IBC,
      the High Court ought not to have proceeded with the auction
      of the property of the Corporate Debtor – Respondent No. 4
      herein, once the proceedings under the IBC had commenced,
      and an Order declaring moratorium was passed by the NCLT.
D     The High Court passed the impugned Interim Orders dated
      14.08.2019 and 05.09.2019 after the CIRP had commenced in
      this case. The moratorium having been declared by the NCLT
      on 04.06.2019, the High Court was not justified in passing the
      Orders dated 14.08.2019 and 05.09.2019 for carrying out auction
      of the assets of the Respondent No. 4 – Company i.e. the
E
      Corporate Debtor before the NCLT. The subject matter of the
      auction proceedings before the High Court is a vast chunk of
      land admeasuring about 330 acres, including Railway lines and
      buildings. If the assets of the Respondent No. 4 – Company are
      alienated during the pendency of the proceedings under the IBC,
F     it will seriously jeopardise the interest of all the stakeholders.
      As a consequence, this Court set aside the impugned Interim
      Orders dated 14.08.2019 and 05.09.2019 passed by the High
      Court, as parallel proceedings with respect to the main issue
      cannot take place in the High Court. The sale or liquidation of
      the assets of Respondent No. 4 will now be governed by the
G     provisions of the IBC. [Para 9] [702-B-F]
            CIVIL APPELLATE JURISDICTION : Civil Appeal Nos 8800-
      8801 of 2019.
             From the Judgment and Order dated 14.08.2019 & 05.09.2019
H     of the High Court of Orissa at Cuttack in W.P. (C) No. 7939 of 2011.
 MR. ANAND RAO KORADA RESOLUTION PROFESSIONAL                             697
          v. M/S. VARSHA FABRICS (P) LTD.

     Siddharth Bhatnagar, Sr. Adv., Ashok Jain, Pankaj Jain, Amit         A
Kasera, Bijoy Kumar Jain, Aditya Sidhra, Advs. for the Appellant.
       Vikramjeet Banerjee, ASG, C.U. Singh, Sr. Adv., Shibashish
Misra, S. Debabrata Reddy, Ashish Prasad, Ms. Mukta Dutta, Rajesh
J., Avinash Tripathi, Zain Maqbool, Rohit Sharma, Mahfooz Ahsan Nazki,
Rajesh K. Singh, R.R. Rajesh, Anshul Gupta,. Sudhakar Kulwant, Raj
                                                                          B
Bahadur Yadav, Ms. Archana Pathak Dave, Sandeep Pathak, for the
Respondents.
      The Judgment of the Court was delivered by
      INDU MALHOTRA, J.
      Leave granted.                                                      C
       1. The present Civil Appeals have been filed by the Appellant –
Resolution Professional appointed by the National Company Law
Tribunal for the Corporate Debtor – M/s Hirakud Industrial Works Ltd.,
to challenge the interim Orders dated 14.08.2019 and 05.09.2019 passed
by the Odisha High Court in W.P. (Civil) No. 7939/2011.
                                                                          D
      2. This Court vide Order dated 23.09.2019 issued Notice to all
the parties, including the Writ Petitioners i.e. the Hirakud Workers’
Union – Respondent No. 13 herein. The Appellant was directed to serve
Dasti Notice to all the Respondents, and the auction proceedings before
the High Court were directed to be stayed.
      3. Pursuant to the issuance of Notice, all the Respondents were     E
served by the Appellant, and proof of service was filed on 04.11.2019.
Respondent No. 13 – Hirakud Workers’ Union was however not
represented by Counsel. The Civil Appeals were taken up for hearing
on 13.11.2019 before this Court.
      4. The factual matrix in which the present Civil Appeals have       F
been filed is as under :–
       4.1 M/s Varsha Fabrics Pvt. Ltd. (Respondent No. 1), India
           Finance Ltd. (Respondent No. 2), Mudrika Commercial
           Pvt. Ltd. (Respondent No. 3), Hirakud Industrial Works
           Ltd. (Respondent No. 4), and Industrial Development
                                                                          G
           Corporation of Orissa Ltd. (Respondent No. 5) entered into
           a Share Purchase Agreement (“SPA”) dated 10.07.2006.
            As per the SPA, Respondent No. 5 divested its 100%
            shareholding in Respondent No. 4 in favour of Respondent
            Nos. 1 to 3. Respondent No. 4 shut down its factory on
            08.05.2007.                                                   H
698    SUPREME COURT REPORTS                       [2019] 14 S.C.R.


A     4.2 Subsequently, Respondent Nos. 1 to 3 sold their stake in
          Respondent No. 4 to Indo Wagon Engineering Ltd.
           Respondent No. 13 – the Hirakud Workers’ Union filed
           W.P. (Civil) No. 12479/2009 before the Odisha High Court
           praying inter alia for cancellation of the SPA dated
B          10.07.2006, and payment of the arrears and current salaries
           of the workmen.
      4.3 Respondent No. 13 filed another Writ Petition bearing W.P.
          (Civil) No. 7939/2011 on 28.03.2011 for payment of their
          dues before the Odisha High Court.
C     4.4 The High Court vide Order dated 14.03.2012 directed the
          Deputy Labour Commissioner, Sambalpur Division
          (Respondent No. 10 herein) to recover the workmen’s dues
          by sale of the assets of Respondent No. 4 – Company
          through a public auction.
      4.5 These proceedings culminated in the Order dated
D         03.08.2015 passed by this Court, wherein it was directed
          that the issue of quantifying the compensation payable to
          the workmen should be determined by the Labour Court.
          It was further directed that if Respondent Nos. 1 to 3 fail
          to make the payment of compensation to the workmen, the
E         assets of Respondent No. 4 would be sold through public
          auction, and the proceeds would be used for disbursement
          of the arrears of the workmen.
      4.6 The Labour Court, Sambalpur vide Order dated 11.11.2016
          quantified the amount payable to the workmen as Rs.
          45,66,67,133/-.
F
      4.7 The High Court vide Order dated 12.01.2017 directed the
          Deputy Labour Commissioner, Sambalpur Division to sell
          a parcel of Respondent No. 4’s land admeasuring 157.27
          acres to the Hirakud Dam Project.
           Upon receipt of the sale proceeds of Rs. 10,04,12,105/-
G
           from the Government of Orissa, this amount was disbursed
           towards the arrears of the workmen’s dues.
      4.8 During the pendency of proceedings before the High Court
          in W.P. (Civil) No. 7939/2011, M/s Nandakini Contractors
          Pvt. Ltd – a Financial Creditor filed a Petition under
H         Section 7 of the IBC, 2016 bearing CP (IB) No. 01/CTB/
 MR. ANAND RAO KORADA RESOLUTION PROFESSIONAL                                 699
 v. M/S. VARSHA FABRICS (P) LTD. [INDU MALHOTRA, J.]

             2019, before the National Company Law Tribunal, Cuttack          A
             Bench (“NCLT”) for initiation of the Corporate Insolvency
             Resolution Process (“CIRP”) against the Corporate Debtor
             – Respondent No. 4, since it had committed a default in
             paying the financial debt of Rs. 24,11,975/-.
        4.9 The NCLT vide Order dated 04.06.2019 admitted the                 B
            insolvency petition, and declared a moratorium in
            accordance with the provisions of Sections 13 and 15 of
            the IBC. The moratorium was declared for the purpose
            referred to in Section 14 of the IBC. The Appellant herein
            was appointed as the Insolvency Resolution Professional.
                                                                              C
       4.10 During the pendency of the moratorium, W.P. (Civil) 7939/
            2011 was posted for hearing on 14.08.2019 before the High
            Court. The Additional Government Advocate submitted
            that the valuation of the land in Mouza – Tara Nagar owned
            by Respondent No. 4 was Rs. 6,05,000/- per acre. The
            High Court directed the Additional Government Advocate            D
            to file an affidavit with respect to the valuation conducted.
       4.11 The High Court by a further Order dated 05.09.2019,
            recorded the submission of the Appellant – Resolution
            Professional that there were other companies which had
            expressed an interest to participate in the public auction.       E
            The matter was posted for further hearing on 17.09.2019.
       4.12 The Appellant – Resolution Professional filed the present
            Civil Appeals to challenge the Interim Orders dated
            14.08.2019 and 05.09.2019 passed by the Odisha High
            Court in W.P. (Civil) No. 7939/2011 on the ground that since
                                                                              F
            the CIRP against Respondent No. 4 had commenced, the
            proceedings before the High Court in W.P. (Civil) No.
            7939/2011 ought to be stayed.
     5. We have heard the learned Counsel appearing for the
Appellant – Resolution Professional, Respondent Nos. 1 to 3, and
Respondent No. 8 – HINDALCO.                                                  G
       6. The IBC was published in the Gazette of India on 28.05.2016.
It was framed as a complete code to consolidate and amend the laws
relating to insolvency resolution of corporate entities, partnership firms,
and individuals in a time-bound manner, for maximisation of the value
of the assets of such persons, and balance the interest of all the            H
700             SUPREME COURT REPORTS                         [2019] 14 S.C.R.


A     stakeholders. The Corporate Insolvency Resolution Process (“CIRP”)
      could be initiated when a corporate debtor commits a default, either by
      a financial creditor, or an operational creditor, or the corporate debtor
      itself.
              Section 12 of the IBC provides a time-frame to complete the
B     CIRP.
             As per Section 13 of the IBC, the Adjudicating Authority i.e. the
      National Company Law Tribunal (“NCLT”) shall declare a moratorium
      for the purposes referred to in Section 14 of the IBC.
            Section 14 provides that on the insolvency commencement date,
C     the Adjudicating Authority shall by order, declare a moratorium
      prohibiting 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 any other authority. Section 14 reads as follows :

D             “14. Moratorium. –
               (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: -
E                  (a) the institution of suits or continuation of pending
                       suits or proceedings against the corporate debtor
                       including execution of any judgement, decree or
                       order in any court of law, tribunal, arbitration
                       panel or other authority;
                   (b) transferring, encumbering, alienating or disposing
F
                       off 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 its property including any action under
G                      the Securitisation and Reconstruction of Financial
                       Assets and Enforcement of Security Interest Act,
                       2002 (54 of 2002);
                  (d) the recovery of any property by an owner or lessor
                      where such property is occupied by or in the
H                     possession of the corporate debtor.
 MR. ANAND RAO KORADA RESOLUTION PROFESSIONAL                                701
 v. M/S. VARSHA FABRICS (P) LTD. [INDU MALHOTRA, J.]

        (2) The supply of essential goods or services to the                 A
            corporate debtor as may be specified shall not be
            terminated or suspended or interrupted during
            moratorium period.
        (3) The provisions of sub-section (1) shall not apply to —
            (a) such transaction as may be notified by the Central           B
                Government in consultation with any financial
                regulator;
            (b) a surety in a contract of guarantee to a corporate
                debtor.
        (4) The order of moratorium shall have effect from the date          C
            of such order till the completion of the corporate
            insolvency resolution process:
      Provided that where at any time during the corporate
      insolvency resolution process period, if the Adjudicating
      Authority approves the resolution plan under sub-section (1)           D
      of section 31 or passes an order for liquidation of corporate
      debtor under section 33, the moratorium shall cease to have
      effect from the date of such approval or liquidation order,
      as the case may be.”
       7. Section 238 gives an overriding effect to the IBC over all other
laws. The provisions of the IBC vest exclusive jurisdiction on the NCLT      E
and the NCLAT to deal with all issues pertaining to the insolvency
process of a corporate debtor, and the mode and manner of disposal
of its assets. Section 238 reads as follows :
      “238. Provisions of this Code to override other laws. –
      The provisions of this Code shall have effect, notwithstanding         F
      anything inconsistent therewith contained in any other law
      for the time being in force or any instrument having effect
      by virtue of any such law.”
       8. Section 231 of the IBC bars the jurisdiction of civil courts in
respect of any matter in which the Adjudicating Authority i.e. the NCLT      G
or the NCLAT is empowered by the Code to pass any Order. Section
231 is set out hereinbelow for ready reference :
      “231. Bar of jurisdiction. –
      No civil court shall have jurisdiction in respect of any matter
      in which the Adjudicating Authority or the Board is                    H
702            SUPREME COURT REPORTS                        [2019] 14 S.C.R.


A           empowered by, or under, this Code to pass any order and
            no injunction shall be granted by any court or other
            authority in respect of any action taken or to be taken in
            pursuance of any order passed by such Adjudicating
            Authority or the Board under this Code.”
B            9. In view of the provisions of the IBC, the High Court ought
      not to have proceeded with the auction of the property of the Corporate
      Debtor – Respondent No. 4 herein, once the proceedings under the
      IBC had commenced, and an Order declaring moratorium was passed
      by the NCLT. The High Court passed the impugned Interim Orders
      dated 14.08.2019 and 05.09.2019 after the CIRP had commenced in
C     this case.
            The moratorium having been declared by the NCLT on
      04.06.2019, the High Court was not justified in passing the Orders dated
      14.08.2019 and 05.09.2019 for carrying out auction of the assets of the
      Respondent No. 4 – Company i.e. the Corporate Debtor before the
D     NCLT. The subject matter of the auction proceedings before the High
      Court is a vast chunk of land admeasuring about 330 acres, including
      Railway lines and buildings.
            If the assets of the Respondent No. 4 – Company are alienated
      during the pendency of the proceedings under the IBC, it will seriously
      jeopardise the interest of all the stakeholders.
E
             As a consequence, we set aside the impugned Interim Orders
      dated 14.08.2019 and 05.09.2019 passed by the Odisha High Court, as
      parallel proceedings with respect to the main issue cannot take place
      in the High Court. The sale or liquidation of the assets of Respondent
      No. 4 will now be governed by the provisions of the IBC.
F
             10. It is open for Respondent No. 13 – Hirakud Workers’ Union
      to file an application under Regulation 9 of the Insolvency and
      Bankruptcy Board of India (Insolvency Resolution Process for
      Corporate Persons) Regulations, 2016 for payment of arrears, salaries
      and other dues before the competent authority. Regulation 9 reads as
G     follows :–
            “9. Claims by workmen and employees.
            (1) A person claiming to be a workman or an employee of
            the corporate debtor shall submit claim with proof to the
            interim resolution professional in person, by post or by
H           electronic means in Form D of the Schedule:
 MR. ANAND RAO KORADA RESOLUTION PROFESSIONAL                                703
 v. M/S. VARSHA FABRICS (P) LTD. [INDU MALHOTRA, J.]

      Provided that such person may submit supplementary                     A
      documents or clarifications in support of the claim, on his
      own or if required by the interim resolution professional,
      before the constitution of the committee.
      (2) Where there are dues to numerous workmen or employees
      of the corporate debtor, an authorised representative may              B
      submit one claim with proof for all such dues on their behalf
      in Form E of the Schedule.
      (3) The existence of dues to workmen or employees may be
      proved by them, individually or collectively on the basis of -
        (a) records available with an information utility, if any; or        C
        (b) other relevant documents, including -
              (i) a proof of employment such as contract of
                  employment for the period for which such workman
                  or employee is claiming dues;
             (ii) evidence of notice demanding payment of unpaid             D
                  dues and any documentary or other proof that
                  payment has not been made; or
             (iii) an order of a court or tribunal that has adjudicated
                   upon the non-payment of a dues, if any.”
       11. Mr. C.U. Singh, Senior Advocate appeared for Respondent           E
No. 8 – HINDALCO, which had participated in the public auction of
the aforesaid chunk of land before the High Court. The Counsel raised
serious objections to the stay of the auction proceedings. He sought
permission to file an application before the appropriate authority for
deciding the objections raised by Respondent No. 8.
                                                                             F
      Mr. Siddharth Bhatnagar, Senior Advocate who was representing
the Appellant – Resolution Professional, reserved his right to raise all
pleas and contentions, including the plea of locus standi, if such an
application is filed by Respondent No. 8.
      The parties are granted liberty to pursue whatever remedies are
                                                                             G
available in accordance with law.
      The Civil Appeals are allowed in the aforesaid terms.

Ankit Gyan                                                Appeals allowed.

                                                                             H