M/S MERCURY CAR RENTALS PRIVATE LIMITED v. M/S SHIVA INDUSTRIAL SECURITY AGENCY GUJRAT LIMITED

1. During the pendency of these proceedings, the respondent Company has been subjected to the Corporate Insolvency Resolution Process[1] before the National Company Law Tribunal[2], Ahmedabad Bench in CP (IB) No. 4/AHM/2021. While admitting the company to CIRP, the learned NCLT, in its order dated 16 October 2023, imposed a moratorium in the following terms: “3. The moratorium under section 14 of the IBC, 2016 is declared for prohibiting all of the following in terms of Section 14(1) of the IBC, 2016: 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; “CIRP” hereinafter “the NCLT” hereinafter AN HARI SHANKAR 20:36 Signing Date:22.09.2024 20:37 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 its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; d. the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.”

2. Clearly, the moratorium imposed by the aforesaid order prohibits institution or continuation of any proceedings against the respondent, including arbitral proceedings.

3. The former Director of the respondent assailed the aforesaid order before the National Company Law Appellate Tribunal[3] by way of Company Appeal (AT) (Insolvency) No.1446 of 2023 (Sameer Sharma v Lease Plan India Pvt Ltd). The learned NCLAT, while issuing notice on the appeal, observed/ruled as under: “09.11.2023: Learned Senior Counsel for the Appellant submits that the Adjudicating Authority has admitted Section 9 Application on the ground that there was breach of Master Lease Agreement. It is submitted that with regard to the 2nd part of the Settlement regarding 120 vehicles, No-Objection-Certificate has not been issued, hence, the said settlement itself was breached. It is submitted that the Appellant without prejudice to his rights and contentions is ready to deposit an amount of ₹ 1,49,89,587/- which was rental towards unpaid lease rental in the Court.

2. Learned Counsel appearing for the Respondents has refuted the submissions made by Learned Counsel for the Appellant and submits that the amount which should be deposited is an amount of “NCLAT” hereinafter 20:36 Signing ₹ 2,28,49,880/- as was noticed in Paragraph 16 of the impugned order. He submits that with regard to sale of vehicles, there is no issue between the parties. It is submitted that vehicles are still in the custody of the Corporate Debtor which statement is denied by the Counsel for the Appellant. Submissions advanced by both the parties need scrutiny.

3. Issue Notice. Learned Counsel accepts notice on behalf of Respondents. Let a Reply be filed within three weeks. The Appellant may deposit an amount of Rs.1,49,89,587/- by way of Fixed Deposit in favour of 'Registrar, National Company Law Appellate Tribunal, New Delhi' within three weeks from today.

4. Learned Counsel for the Appellant submits that the Appellant shall still make endeavor to settle the matter with the Operational Creditor. He may do so.

5. List this Appeal on 14.12.2023. In the meantime, no further steps shall be taken in pursuance of the order dated 16.10.2023.”

4. Ms. Kaadambari Singh, learned Counsel for the petitioner submits that, as the learned NCLAT has said that no further steps be taken in pursuance of the order dated 16 October 2023, the moratorium imposed by the said order must be treated as stayed.

5. I cannot accept this submission. There is a clear distinction between a direction not to take further steps pursuant to the order dated 16 October 2023 and stay of the moratorium imposed by the said order. Had the learned NCLAT decided to stay the moratorium, it could have done so. There is no stay of the moratorium imposed by the learned NCLT, in the order dated 9 November 2023 of the NCLAT.

6. Ms. Kaadambari Singh also points out that the learned NCLAT had directed the appellant before it to deposit ₹ 1,49,89,587/- by way 20:36 Signing of a fixed deposit with the Registrar of the learned NCLAT. I do not see how this aspect is of any relevance. In the first place, the appellant before the learned NCLAT was a former Director of the respondent, and not the respondent itself. Secondly, the direction for deposit has nothing to do with the moratorium imposed by the learned NCLT against institution or continuation of judicial actions against the respondent. The direction for deposit is obviously a pre-condition for the appeal, and nothing more.

7. Ms. Kaadambari Singh has also placed reliance on the judgment of a coordinate Bench of this Court in SSMP Industries Ltd v Perkan Food Processors Pvt Ltd[4], specifically drawing attention to para 9 of the said decision which read thus:

(2019) 177 DRJ 473 20:36 Signing due to the reasons set out above, the counter claim does not deserve to be stayed under Section 14 of the Code. The suit and the counter claim would proceed to trial before this Court.”

8. This decision is of no avail to the petitioner. It holds that the counter claims by the company which is facing insolvency is maintainable even during the currency of the moratorium. This decision is clearly in terms of the moratorium imposed, as the moratorium restrains actions being instituted or taken against the corporate debtor, whereas a counter claim is a counter claim by the corporate debtor.

9. The decision in SSMP Industries is therefore clearly distinguishable.