Partly allowed

Nilratan Datta v. Kotak Mahindra Bank Limited

DRAT15 May 2024REGULAR APPEAL/30/2021

Case brief

AI extract

What is this about?

The DRAT permitted stay of ongoing debt recovery proceedings only against the personal guarantors (Defendants 2, 3, 4) due to Section 96 interim moratorium, allowing proceedings to continue against other defendants.

What did the court decide?

ICA 661 of 2021 allowed to stay proceedings against Defendants 2, 3, and 4 only. Proceedings against other defendants continue.

Nilratan Datta versus Kotak Mahindra Bank Limited — Insolvency and Bankruptcy | DRAT (2024)

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Reportable/Non-Reportable

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Appeal No. 30 of 2021-DRAT-Kolkata

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA

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CHAIRPERSON

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Appeal No. 30 of 2021

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(Arising out of O.A. 189 of 2019 in DRT-III, Kolkata)

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Nilratan Datta, CL-89, Salt Lake City, Sector-II, Kolkata – 700091;

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Niloy Datta, CL-89, Salt Lake City, Sector-II, Kolkata – 700 091;

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Tapasi Datta, CL-89, Salt Lake City, Sector-II, Kolkata – 700 091.

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… Appellant

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-Versus-

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Kotak Mahindra Bank Limited, 27B, B K C, C-27, G-Block, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051. .… Respondents

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.… Respondents

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Multiple Educational & Manpower Development Trust, 13, Dum Dum Road, Kolkata – 700 074;

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Smt. Jyotsna Rani Datta (Trustee), CL-89, Salt Lake City, Sector-II, Kolkata – 700091;

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Ms. Namrata Datta (Trustee), CL-89, Salt Lake City, Sector-II, Kolkata – 700091;

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Camellia Educational & Manpower Development Trust, 13, Dum Dum Road, Kolkata – 700 074;

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Multiple Hotels Private Limited0, 6, Milan Pally, Deshapriya Nagar, Belghoria, West Bengal – 700 056 and also at 13, Dum Dum Road, Kolkata – 700 074;

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Camellia Educare Trust, 13, Dum Dum Road, Kolkata – 700 074.

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… Proforma Respondents

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Counsel for Appellants …	Mr. Shaunak Mitra (through virtual mode) Ms. Priyanka Kundu Mr. Amandeep Singh Mr. Soham Bandopadhyay
Counsel for Respondents …	Mr. Sarathi Dasgupta (through virtual mode) Mr. Pratik Ghose Mr. Avishek Roy Chowdhury
JUDGMENT :	15^thMay, 2024
THE APPELLATE TRIBUNAL :

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Appeal No. 30 of 2021-DRAT-Kolkata Instant appeal has arisen against judgment and order dated 15.3.2021, passed by Learned DRT-III, Kolkata, in I.A. 661 of 2021 arising out of O.A. 189 of 2019 (Kotak Mahindra Bank Limited -vsMultiple Educational & Manpower Development Trust & Others). 2. O.A. 189 of 2019 was filed by the Applicant Bank against the Respondents. I.A. 661 of 2021 was filed by the Defendants for stay of the proceedings of O.A. 189 of 2019 under Section 96 of the Insolvency And Bankruptcy Code, 2016 (hereinafter referred to as the Code) on the ground that in the O.A. proceedings Defendants have put in their appearance after filing of the written statement on 16.12.2019. An application, being I.A. 577 of 2021, was moved for amendment for bringing on record certain subsequent developments. Pending proceedings, Defendants preferred an application under Section 7 of the Insolvency And Bankruptcy Code against Defendant No. 8, viz. Multiple Hotels Private Limited before NCLT, Kolkata being CP (1B) No. 204/KB/2019 wherein NCLT declared a moratorium in accordance with law under Section 14 of the Code. Interim Resolution Professional was also appointed.

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Being aggrieved by the order dated 4.10.2019, one of the Directors of Defendant No. 8 preferred an Appeal No. 1138 of 2019 before the National Company Law Appellate Tribunal wherein vide order dated 25.10.2019, Hon’ble NCLAT restrained the Interim Resolution Professional from constituting Committee of Creditors till the next date of

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Appeal No. 30 of 2021-DRAT-Kolkata hearing; which order was subsequently vacated on 17.12.2019. A Committee of Creditors had been constituted.

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3. Subsequently, Bank filed an application under Section 95 (1) of the Code against Defendant No. 2 Nilratan Datta who gave his personal guarantee, before the NCLT, Kolkata on 4.12.2020 registered as IB (IBC)/1375 (KB) of 2020 wherein the Defendant No. 2 has been given an opportunity to file affidavit. Further, two separate applications bearing Nos. C.P.(IB) 13993/KB/2020 and C.P. (IB) No. 13992/KB 2020 were filed against Defendants No. 3 and 4, viz. Tapasi Datta and Nilratan Datta invoking their personal guarantee before the NCLT, Kolkata on 11.12.2020 wherein they put in their appearance. In terms of the provisions of Section 96 of the Code on filing the application under Section 95 of the Code, Interim Moratorium was commenced on the date of the application in relation to all the debts. Accordingly, prayer was made for stay of all the proceedings of the O.A. 4. Learned DRT dismissed the application on the ground that while granting stay, the Tribunal should consider the prima facie case, balance of convenience and irreparable loss which does not find favour with the Bank. Accordingly, I.A. 661 of 2021 was dismissed.

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I have heard the Learned Counsel for the parties and perused the record.

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5. Section 95 and 96 of the Insolvency And Bankruptcy Code, 2016 reads as under :

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Appeal No. 30 of 2021-DRAT-Kolkata

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“95. Application by creditor to initiate insolvency resolution process

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(1) A creditor may apply either by himself or jointly with other creditors, or through a resolution professional to the Adjudicating Authority for initiating an insolvency resolution process under this section by submitting an application.

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(2) A creditor may apply under sub-section (1) in relation partnership debt owed to him for initiating an insolvency esolution process against-

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(a) any one or more partners of the firm; or (b) the firm.

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(3) Where an application has been made against one partner in a firm, any other application against another partner in the same firm shall be presented in or transferred to the Adjudicating Authority in which the first mentioned application is pending for adjudication and such Adjudicating Authority may give such directions for consolidating the proceedings under the applications as it thinks just.

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(4) An application under sub-section (1) shall be accompanied with details and documents relating to -

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(a) the debts owed by the debtor to the creditor or creditors submitting the application for insolvency resolution process as on the date of application;

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(b) the failure by the debtor to pay the debt within a period of fourteen days of the service of the notice of demand; and

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(c) relevant evidence of such default or non-repayment of debt.

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(5) The creditor shall also provide a copy of the application made under sub-section (1) to the debtor.

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(6) The application referred to in sub-section (1) shall be in such form and manner and accompanied by such fee as may be prescribed.

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(7) The details and documents required to be submitted under sub-section (4) shall be such as may be specified.

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96. Interim moratorium

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(1) When an application is filed under section 94 or section 95 -

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(a) an interim moratorium shall commence on the date of the application on the date to all the debts and shall cease to have effect of admission of such application; and

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(b) during the interim-moratorium period -

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(i) any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed; and

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Appeal No. 30 of 2021-DRAT-Kolkata

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(ii) the creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt.

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(2) Where the application has been made in relation to a firm, the interim- moratorium under sub-section (1) shall operate against all the partners of the firm as on the date of the application.

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(3) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.”

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6. In Writ Petition Civil No. 1284 of 2021 (Dilip B Jiwrajka -vs- Union of India & Others) decided on 9.11.2023 Hon’ble Apex Court has considered the issue on the impact of word moratorium under Section 14 of Part-II on one hand and on interim-moratorium under Section 96 of Chapter III of Part III on the other. In paragraph 57 of the judgment, Hon’ble Apex Court held that

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“ 57. Section 96, as its marginal note indicates, deals with an "interim-moratorium". in terms of Section 96, the interim moratorium takes effect on the date of the application. In other words, the very submission of an application under Section 94 or Section 95 triggers the interim moratorium which then ceases to have effect on the date of the admission of the application (under Section 100). The consequences which flow from an interim moratorium are specified in clause (b) of sub-section (1) of Section 96. The impact of the interim-moratorium under Section 96 is that a legal action or proceeding pending in respect of any debt is deemed to have been stayed and the creditors or the debtors shall not initiate any legal action or proceedings in respect of any debt. The crucial words which are used both in clause (b)(i) and clause (b)(ii) of sub-section (1) of Section 96 are "in respect of any debt". These words indicate that the interim-moratorium which is intended to operate by the legislature is primarily in respect of a debt as opposed to a debtor. Clause (b) of sub-section (1) indicates that the purpose of the interim-moratorium is to restrain the initiation or the continuation of legal action or proceedings against the debt.”

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7. It was further held that the purpose of interim moratorium under Section 96 of the Code has prescribed the

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Appeal No. 30 of 2021-DRAT-Kolkata object of the moratorium is to restrain the secured creditors from the institution of legal actions or the continuation of the legal actions or proceedings in respect of the debts. It is held by the Hon’ble Apex Court that the crucial words which are used both in Clause (b) (i) and Clause (b) (ii) of Subsection 1 of Section 96 of the Code are “in respect of any debt”. These words indicate that the interim moratorium which is intended to operate by the Legislature is primarily in respect of a debt as opposed to a debtor. It was further held in concluding paragraph 86 sub-para 8 that the purpose of the interim moratorium under Section 96 of the Code is to protect the debtor from further legal proceedings.

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8. The Hon’ble Apex Court had specifically held that the purpose of interim moratorium under Section 96 of the Code is to protect the debtor from further legal proceedings. In the present case, Bank preferred three applications under Section 95 of the Code against Defendants No. 2, 3 and 4, viz. Nilratan Datta, Niloy Datta and Tapasi Datta, who were the personal guarantors. As far as the matter of Defendant No. 8, Multiple Hotels Private Limited, is concerned, moratorium was secured under Section 14 of the Code and the matter is pending before Hon’ble Apex Court. But as far as the question of interim moratorium under Section 96 of the Code is concerned, it will operate only against Defendants No. 2, 3 and 4 against whom application under Section 95 of the Code was filed.

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9. Submission is made by the Learned Counsel for the Appellant that the whole proceedings of the O.A. should be

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Appeal No. 30 of 2021-DRAT-Kolkata stayed. I am unable to agree with the submission made by the Learned Counsel. Hon’ble Apex Court, in the case of Dilip B Jiwrajka (supra), has specifically held that the purpose of interim moratorium under Section 96 of the Code is to protect the debtor from further proceedings. The adjudicating authority does not have to decide the credential of the application rather as soon as an application under Section 96 of the Code is filed, an interim moratorium shall commence. Accordingly, I am of the considered view that the interim moratorium, under Section 96 of the Code, has commenced against Defendants No. 2, 3 and 4, viz. Nilratan Datta, Niloy Datta and Tapasi Datta. The proceedings of O.A. 189 of 2019 would be stayed against them only. However, O.A. proceedings shall continue against other Defendants except Multiple Hotels against whom moratorium is declared under Section 14 of the Code and the matter is pending before the Hon’ble Apex Court. Accordingly, appeal is liable to be partly allowed.

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O R D E R E D

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Appeal is partly allowed. I.A. 661 of 2021 is allowed to an extent that O.A. proceedings against Defendants No. 2, 3 and 4, viz. Nilratan Datta, Niloy Datta and Tapasi Datta, shall remain stayed as interim moratorium under Section 96 of the Code has commenced. Further proceedings of O.A. 189 of 2019 against other Defendants except Multiple Hotels shall continue before the Learned DRT.

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No order as to costs.

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Appeal No. 30 of 2021-DRAT-Kolkata Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

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File be consigned to Record room.

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Order signed, dated and pronounced in open Court.

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(Anil Kumar Srivastava,J) Chairperson

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Dated: 15^th May, 2024

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Nilratan Datta v. Kotak Mahindra Bank Limited

Case brief

What is this about?

What did the court decide?

Nilratan Datta v. Kotak Mahindra Bank Limited

Case brief

What is this about?

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