SANDEEP KHAITAN, RESOLUTION PROFESSIONAL FOR NATIONAL PLYWOOD INDUSTRIES LTD. versus JSVM PLYWOOD INDUSTRIES LTD. & ANR. on 22 April 2021

SUPREME COURT REPORTS

[2021] 4 S.C.R.

ASANDEEP KHAITAN, RESOLUTION PROFESSIONAL FORNATIONAL PLYWOOD INDUSTRIES LTD.

VERSUS

JSVM PLYWOOD INDUSTRIES LTD. & Anr.

(Criminal Appeal No.447 of 2021)

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APRIL 22, 2021

[UDAY UMESH LALIT AND K. M. JOSEPH, JJ]

Insolvency and Bankruptcy Code, 2016: ss. 14, 17 and 7 –Code of Criminal Procedure, 1973 – s. 482 – Power of High CourtCu/s. 482, if can override statutory provisions of IBC – On facts,NCLT admitted application u/s. 7 IBC against one NPIL andsubsequently appellant was appointed as Resolution Professional– Appellant alleging that the respondent-operational creditor,transferred Rs 32.50 lakhs from the Corporate Debtor’s bankDaccount without the appellant’s sanction in violation of s. 14 –Appellant then filed an FIR against the respondent – Respondentfiling petition u/s.482 before the High Court – Respondent alsofiled an application for allowing it to use its bank account overwhich lien had been created and the frozen accounts of its creditors– High Court lifted the lien created on the respondent’s bank account,Eand allowed the respondent to operate the bank account over whichlien had been created and the accounts of its creditors frozen inconnection with the FIR – On appeal, held: Power u/s. 482 may notbe available to the court to countenance the breach of a statuaryprovision – Words ‘to secure the ends of justice’ in s. 482 cannotFmean to overlook the undermining of a statutory dictate, provisionsof ss. 14 and 17 of the IBC – High Court overlooked the salutarylimits on its power u/s. 482 – Order of the High Court resulting inthe respondent No. 1 being allowed to operate the account withoutmaking good the amount of Rs 32.50 lakhs to be placed in theaccount of the Corporate Debtor, cannot be sustained – RespondentGNo.1 is allowed to operate its account subject to first remitting Rs32.50 lakhs into the account of the Corporate Debtor.

Allowing the appeal, the Court

HELD: 1.1 In this case an application filed under section 7Hof the Insolvency and Bankruptcy Code, 2016 was admitted, the

SANDEEP KHAITAN, RESOLUTION PROFESSIONAL FOR NATIONAL PLYWOODINDUSTRIES LTD. v. JSVM PLYWOOD INDUSTRIES LTD.

appellant was appointed as the interim resolution professionaland a moratorium was declared. With the declaration of themoratorium the prohibitions as enacted in section 14 came intoforce. It is clear that the assets of the company would include theamounts lying to the credit in the bank accounts. There cannotbe any dispute that well after the order under section 14 waspassed, a sum of Rs. 32.50 lakhs has been remitted into theaccount of Respondent No.1 company. No doubt it is the definitecase of the Respondent No.1 that it has had business relationswith the Corporate Debtor since more than 15 years and that theamount remitted in its account represented the price of thematerials supplied to the Corporate Debtor. Apart from thisamount a sum of rupees more than Rs.39 lakhs is still due. It isto be noticed that though an appeal was filed against the orderadmitting the petition under Section 7 the same was dismissedby the NCLAT. The appellate order was undoubtedly set asideby this court and the appeal remanded to the NCLT for itsconsideration. Setting aside the appellate order of the NCLATby this Court and remanding the appeal would not have the effectof setting aside the order admitting the application. Initially, anorder was passed on 28.02.2020. The ambiguity created by thesaid order was removed by the subsequent order of the Tribunaldated 20.03.2020. In other words, by the order dated 20.03.2020the NCLT ordered that the appellant was at liberty to act as perlaw and the words used in the earlier order dated 28.02.2020relied upon by the Respondent No.1 were found to be a merecasual observation which did not culminate into any direction.Furthermore, there is an FIR and which is pending considerationin the High Court also. The appellant is essentially aggrieved bythe transactions representing a sum of Rs. 32.50 lakhs all of whichtook place after order dated 20.03.2020. [Para 16][133-A-G]

1.2 In the interim order passed by the NCLT Guwahati,the Tribunal had directed the Directors to refund the amount ofthe Corporate Debtor less any amount paid for supplies. It isalso true that the review petition filed by the Appellant isdismissed, essentially based on the limitations on the power ofreview. [Para 17][133-G-H]

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A1.3 The provisions of the IBC contemplate resolution ofthe insolvency if possible, in the first instance and should it notbe possible, the winding up of the Corporate Debtor. The role ofthe insolvency professional is neatly carved out. From the dateof admission of application and the appointment of InterimResolution Professional, the management of the affairs of theBCorporate Debtor is to vest in the Interim ResolutionProfessional. With such appointment, the powers of the Board ofDirectors or the partners of the Corporate Debtor as the casemay be are to stand suspended. Section 17 further declares thatthe powers of the Board of Directors or partners are to beCexercised by the Interim Resolution Professional. The financialinstitutions are to act on the instructions of the Interim ResolutionProfessional. Section 14 is emphatic, subject to the provisions ofsub section (2) and (3). The impact of the moratorium includesprohibition of transferring, encumbering, alienating or disposingof by the Corporate Debtor of any of its assets. Furthermore,DSection 14 (2A) was inserted with effect from 28.12.2019. Nodoubt under this provision goods or services not covered bySection 14(2) are also covered. The call however is to be takenby the IRP/RP. Raw material supply could fall within the provision.The IRP/RP must take a decision guided purely by the object ofEthe IBC and the provisions and the factual matrix. [Para 18,22][134-A-D; 135-C-D]

1.4 With the appointment of Committee of Creditors, aResolution Professional is to be appointed. The ResolutionProfessional is thereafter to conduct the resolution process andFmanage the operations. Section 23 (2) makes it clear that hispower is the same as the powers of the Interim ResolutionProfessional. Undoubtedly, the Resolution Professional is boundto seek prior approval of the Committee of Creditors in matterscovered by Section 28. [Para 23][135-D-F]

G1.5 The High Court appears to have, in passing theimpugned order, which is an interim order for that matter,overlooked the salutary limits on its power under Section 482.The power under Section 482 may not be available to the Courtto countenance the breach of a statuary provision. The words ‘tosecure the ends of justice’ in Section 482 cannot mean to overlookH

SANDEEP KHAITAN, RESOLUTION PROFESSIONAL FOR NATIONAL PLYWOODINDUSTRIES LTD. v. JSVM PLYWOOD INDUSTRIES LTD.

the undermining of a statutory dictate, which in this case is theprovisions of Section 14, and Section 17 of the IBC. [Para 24][135-F-G]

1.6 Having regard to the orders passed by the NCLTadmitting the application, under Section 7, and also the orderingof moratorium under Section 14 of the IBC and the orders whichhave been passed by the tribunal otherwise, the order of the HighCourt resulting in the Respondent No. 1 being allowed to operatethe account without making good the amount of Rs 32.50 lakhsto be placed in the account of the Corporate Debtor cannot besustained. The appellant has also no objection in the RespondentNo. 1 being allowed to operate its account subject to it remittingan amount of Rs. 32.50 lakhs into the account of the CorporateDebtor. The Respondent No.1 is allowed to operate its accountsubject to it to first remitting into the account of the CorporateDebtor, the amount of Rs 32.50 lakhs which stood paid to it bythe management of the Corporate Debtor. The assets of theCorporate Debtor shall be managed strictly in terms of theprovisions of the IBC. [Para 25][135-G-H; 136-A-C]

CRIMINAL APPELLATE JURISDICTION : Criminal AppealNo. 447 of 2021.

From the Judgment and Order dated 04.02.2021 of the High Courtof Gauhati at Gauhati in I.A.(Crl.)/453 of 2020 in Crl. Pet./454 of 2020.

Anand Varma, Abhishek Prasad, Ms. Astha Ahuja, Advs. for theAppellant.

Harish Pandey, C.K. Rai, Anshuman Tiwari, Shuvodeep Roy, Advs.for the Respondents.

The Judgment of the Court was delivered by

K. M. JOSEPH, J.

Leave granted.

1. The appeal is directed against order dated 04.02.2021 passedby the Hon’ble High Court of Guwahati. In the impugned order, theHigh Court has allowed an interlocutory application filed by theRespondent No. 1 to allow it to operate its bank account maintainedwith the ICICI Bank Bhubaneswar and to unfreeze the bank account ofits creditors over which the lien has been created and the accounts frozen

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Apursuant to the lodging of an FIR by the appellant before us. It wasmade subject to conditions.

2. An application under Section 7 of the Insolvency and BankruptcyCode, 2016, hereinafter referred to as the IBC was admitted on26.08.2019 against one National Plywood Industries Limited (NPIL).BThe Appellant was appointed as the Interim Resolution Professional. Amoratorium also came to be passed by the very same order within themeaning of Section 14 of the IBC. The Appellant came to be appointedas the Resolution Professional by an order dated 08.11.2019. In themeantime, the Respondent No.1 claiming to be an operational creditorlay the claim for the amounts due to it from the Corporate Debtor beforeCthe Appellant vide communication dated 22.11.2019. It would appearthat the former Managing Director of the Corporate Debtor challengedthe order of the NCLT, Guwahati, admitting the application under Section7. The NCLAT by order dated 24.11.2019 dismissed the appeal interaliaholding that the application under Section 7 was not barred by limitation.DCivil Appeal No. 9142 of 2019 filed by the former Managing Director ofthe Corporate Debtor came to be however allowed by this Court by anorder dated 20.01.2020. The NCLT was directed to consider the matterin accordance with law. It would appear that on 28.01.2020 interlocutoryapplication 7 of 2020 filed by the former Managing Director of theCorporate Debtor seeking an injunction restraining the RespondentsEtherein from interfering in the operation of the Corporate Debtor and todisperse the cost of the CIRP was disposed of interalia as follows: -

i.“Today the Respondents submitted across the Bar thatexcept ratifying the expenses of the IRP, no major decisionshave been taken by the COC in the yesterday’s COCFmeeting. Both the respondents informed that they areconscious about the order passes by the Hon’ble SupremeCourt and the legal consequences thereof.

ii.In view of the above submissions of the respondents, thisTribunal expects that the respondents would maintain status-Gquo in respect of the IRP proceedings. As the main companypetition was remanded back to the Hon’ble NCLAT forfresh disposal in accordance with law, this Tribunal is ofthe considered opinion that the petitioner has to approachthe Hon’ble NCLAT for any further directions in the abovematter and accordingly above application stands disposedH

SANDEEP KHAITAN, RESOLUTION PROFESSIONAL FOR NATIONAL PLYWOODINDUSTRIES LTD. v. JSVM PLYWOOD INDUSTRIES LTD. [K. M. JOSEPH, J.]

of with the above observations. Even otherwise, the orderof admission of the company petition has not attained finalityand, therefore, no interim orders as prayed for needs to bepassed today.

iii.In the result, IA No. 07 of 2020 is disposed of with theabove observations.”

Thereafter there is order dated 20.03.2020 passed which we willadvert to.

3. It is the case of the Appellant that the former Managing Directorof the Corporate Debtor in conspiracy with the Respondent No.1engaged in an illegal transaction to the tune of Rs. 32.50 lakhs withoutauthority from the Appellant and in violation of Section 14 of the IBC. Itis his complaint that initially, the Managing Director made a transactionof Rs. 500. Thereafter, he proceeded by virtue of 4 consecutivetransactions to transfer a sum of Rs. 32.50 lakhs to the Respondent No.1. It is also complaint of the Appellant that the former Managing Directorproceeded to transfer another sum of Rs. 3.29 lakhs from another accountand the amount was transferred to his close associate.

4. On 23.04.2020, the Appellant filed a cyber complaint. This wasfollowed on the same date by filing an application under Section 19 readwith Section 23 (2) of the IBC alleging non corporation by the previousmanagement of the Corporate Debtor. On 27.04.2020, the Appellant gotlodged an FIR. On 04.05.2020 the ICICI Bank created a lien upon thebank account of the Respondent No. 1 based on the allegedly illegaltransaction. The next development to be noticed is the order dated20.05.2020 passed by the NCLT, Guwahati. The order is passed in I.A.No. 37 of 2020. The relief sought therein was for direction to the Directorsof the Corporate Debtor to hand over the management of the company.The order reflects the controversy relating to the payment of Rs. 32.50lakhs violating the moratorium. Tribunal finds that the directors of theCorporate Debtor were not giving maximum assistance. On the basis ofits findings the tribunal issued directions to the suspended Board of theCorporate Debtor to cooperate with the Appellant. The Auditors wereto complete the audit expeditiously interalia. More importantly theDirectors were directed to refund the amount withdrawn less the amountif any paid to the alleged supplier as the cost of raw materials. Theinterlocutory application was posted before the regular bench for hearingafter lifting the lockdown.

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A5. A perusal of the order reveals that the Directors of the companysought to defend the withdrawal of Rs.32.50 lakhs as one intended topay for the raw materials. It is further noticed that the Tribunal noticedthat there was no proof for the same. More importantly it was foundthat even if done to discharge debt due to supplies during the CIRP,without permission and knowledge of the Resolution Professional, it wasBin violation of Section 14 of the Code.

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6. The Appellant moved an application for review of the orderdated 20.05.2020. The Tribunal in its order dated 05.06.2020 noticed thelimitations flowing from Rules 154 and 155 of the NCLT, Rules, 2016 inthe matter of review. It is observed that for the reasons highlighted inCthe 20.05.2020 the former Directors of the Corporate Debtor are foundprima facie liable to refund the amount unauthorisedly withdrawn fromthe account of the Corporate Debtor. It is also noticed that the Directorsof the suspended board were not made respondents. The application forreview came to be dismissed.D

7. The genesis of the impugned order is the FIR lodged againstthe Appellant and arose from the payment effected into the account ofRespondent No.1 in a sum of Rs. 32.50 lakhs. The said FIR came to bechallenged in a petition under Section 482 of the Cr.P.C. by theRespondent No.1 by filing Criminal Petition No. 454 of 2020. In theEsame the Appellant also filed I.A. No. 453 of 2020.

8. On 19.01.2021 the NCLT, Guwahati passed an order in I.ANo. 37 of 2020. By the said order the Appellant was directed to dischargehis duties as per the provisions of the IBC. Thereafter, it also passed thefollowing directions: -Fi.

i.“The Learned Counsel for the Respondents has confirmedthat the Suspended Management has been co-operating andproviding assistance to RP to complete the CIRP in time.The Corporate Debtor is directed to submit its reply Affidavitto the allegations made relating to the transactions of Rs.G35.795 lakhs serving a copy upon the RP.

ii.Any amount of the Corporate Debtor lying in any Bank isto be transferred to the account being operated by the RP.Banks having account of the Corporate Debtor are directedto lift the lien, if any, on any amount of the Corporate Debtorand allow the operation of the account by the RP only.H

iii.The RP is directed to utilize the funds of the CorporateDebtor under CIRP judiciously keeping the Unit in its fulloperation.”

9. Thereafter, in the petition filed by the Respondent No.1 underSection 482, the High Court admitted the petition. The case was directedto be listed for regular hearing in usual course. (According to theAppellant the High Court had directed investigation to be continued.This is not seen reflected in the order which is produced). In the I.A No.453 of 2020 filed in the Section 482 resulting in the impugned order, theprayers sought has already been noted. It is to allow the RespondentNo.1 and its creditors to operate their bank account over which lien hasbeen created and those accounts which have been frozen based on theFIR dated 27.04.2020.

THE IMPUGNED ORDER

10. After noticing the contentions of the parties, the Learned SingleJudge in the impugned order proceeds to hold as follows:- i.“From the material on record, it is apparent that there wasbusiness relation between the petitioner company and theNPIL, which is evident from the various documentsannexed to the petition. Only question raised in this FIR isthat the money was transferred by the suspended CMDwithout any authority, inasmuch as, the entire state of affairsof NPIL was vested with the Respondent No. 2, who hasbeen appointed as resolution professional. Only incriminatingallegation against the petitioner is that the suspended CMDhas personal interest in the petitioner company being anassociate company, which is however, a disputed factrequired to be investigated by police.

ii.Be that as it may, having considered the entire gamut of thematter and the nature of accusation brought against thepresent petitioner, I am of the view that freezing of all thebank account as indicated above would certainly causeunnecessary hardship, which may not be necessary for theinvestigation of the present FIR in view of the nature of theaccusation made therein as well as in view of the offermade by the petitioner to furnish a bond. Therefore, in myconsider view, the petitioner is entitled to the interim relief A

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as sought for. Accordingly, it is provided that the lien createdupon the bank account no. 149905001306 maintained withthe ICICI Bank Limited, Chandrasekarpur Branch,Bhubaneswar be lifted, the petitioner and its creditors shallbe allowed to operate the bank account over which lien hasbeen created and the accounts have been frozen pursuantto the instruction of the Respondent No. 2 in connectionwith Margherita P.S. Case No. 0112/2020, until further orderof the Court.

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iii.It is however, made clear that the interim relief granted tothe petitioner as above with regard to unfreezing the bankaccount and lifting of lien shall be subject to the conditionthat the petitioner shall withdraw the WP (C) No. 118/2020filed before the Itanagar Permanent Bench of this Courtand furnishing an indemnity bond undertaking to refund theamount of Rs. 32.50 Lakhs if required, subject to finaloutcome of the criminal case.”

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11. We heard the Learned Counsel for the Appellant Shri AnandVarma and the Learned Counsel for the Respondent No. 1, Shri HarishPandey. The State is represented by Shri Shuvodeep Roy.

SUBMISSIONSE

12. The Learned Counsel for the Appellant contended that theimpugned order proceeds on an erroneous basis namely that theallegations about the co-accused (former Managing Director of theCorporate Debtor) having an interest in the Respondent No.1 Companywas a disputed fact which had to be investigated. It is the case of theFAppellant that there is a report of the auditing firm. Also, the said findingof the High Court is contrary to the documents of the Respondent No. 1itself. It is also urged that the High Court itself has permitted theinvestigation to go on in the petition under section 482. Secondly, hepointed out that the impugned order was contrary to Section 14 of theGIBC. He drew support from the judgment of this Court in P Mohanrajvs. M/S. Shah Brothers Ispat Pvt. Ltd. in Civil Appeal No. 10355 of2018. According to him, the whole purpose of the moratorium would bedefeated if members of the previous management of the Corporate Debtorare left free to transfer the funds of the Corporate Debtor. TheRespondent No. 1 was a related party of the Corporate Debtor. He H

reiterates that with the appointment of Appellant as the ResolutionProfessional under Section 25 (2) a of the IBC he is to take custody andcontrol of all the assets of the Corporate Debtor. Finally, he alsoemphasized the nature of the jurisdiction under Section 482 of the Cr.P.C.The High Court has overlooked the limits of its power in passing theimpugned order, he complains. He points out that the order admitting theapplication under section (7) has not been stricken by the remand by thisCourt of the appeal against the order admitting the application.

13. Per contra Shri Harish Pandey, Learned Counsel, contendedthat the order may not be interfered by this Court. The RespondentNo.1 was a related party and it was always known to be such relatedparty. He referred to the fact that the Respondent No.1 was supplier ofraw material to the Corporate Debtor. He pointed out goods worth morethan Rs.2 crores have been supplied by it to the Corporate Debtor.Payments were being made. In fact, a sum of more than Rs.39 lakhs isfurther due from the Corporate Debtor to the Respondent No. 1. It isemphasized as a MSME it would cause grave prejudice to it if theimpugned order is set aside.

14. It is the case of the Respondent No. 1 further that the businessrelationship between the Respondent No. 1 and Corporate Debtor hasexisted for more than 15 years. The Corporate Debtor has been declareda sick industry on 18.04.2006. It was nursed back by the RespondentNo. 1. Our attention is drawn to the minutes of the first meeting of theCommittee of Creditors dated 23.09.2019. The minutes reveal thatcommittee of creditors observes that a substantial part of the rawmaterials is purchased from Respondent No.1 and that the relatives ofthe Corporate Debtor directors or shareholders hold more than 51 percentshareholding of the first respondent. It is further noted that the processesto assess the veracity and reasonableness of the transaction in suchsituation were let known and the purchases/sales must be benchmarkedagainst arm’s length transactions and open market transactions. (Wemay also notice that the meeting resolved that all the banks were to acton the instructions of the appellant interalia.) It is the case of theRespondent No. 1 that right from the beginning, it was known that theRespondent No. 1 was a related party. It is the further case of theRespondent No. 1 that its claim for over 6 crores of rupees was vetted,verified and admitted by the Appellant. After the commencement ofCIRP Respondent No. 1 had made regular substantial supplies to the ABC

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ACorporate Debtor for which the payment were being made (they relateto the period from 26.08.2019 to 31.03.2020). This is shown as amountingto Rs. 2,70,84,982. The Respondent No. 1 lays store by the order of theNCLT, Guwahati dated 28.01.2020 which we have already referred to.E-mails addressed to the Appellant to clarify did not evoke any response.BIn March 2020, orders were placed by the Corporate Debtor forapproximately Rs. 30 lakhs. The lockdown intervened. On 18.04.2020 itis not disputed that the Corporate Debtor made a payment of Rs 32.50lakhs through online net banking transfer against material supplied duringthe period that the corporate debtor was under CIRP. The LearnedCounsel for the Respondent No.1 would point out that the order of theCNCLT dated 20.05.2020 passed by the NCLT directed the directors ofthe Corporate Debtor to refund the amount withdrawn less any amountsupplied to the alleged supplier. It is therefore, pointed out creating a lienon the accounts of the Respondent no. 1 was not justified. The LearnedCounsel also drew our attention to the order dated 24.03.2021 passed byDthe NCLT Guwahati Bench. This is in an effort at showing the mannerin which the appellant has been functioning. The Tribunal in the saidorder refers to the Impugned Order and the Interim order passed by thisCourt in this matter. The Tribunal noted that the production has beensuspended and layoff notice is also issued in regard to the CorporateEDebtor. The objectives of the IBC are being defeated on the basis of theclaims and the FIR interalia. The Appellant was directed to file the copyof the FIR in this case among other documents. The Learned counselfor the Respondent no. 1 would submit that the having regard to theorders passed by the tribunal the Impugned Order passed by the HighFCourt may not be interfered with. Having regard to the dismissal of thereview petition filed against the 20.05.2020 there is no merit in the presentappeal.

15. The Learned Counsel for the Appellant would point out thatthe Appellant is prevented from disbursing the salary of the workers.GNearly four months’ salary would be disbursed with the amount whichwas paid by the former management without any authority as noticed. Itis the case of Appellant that the transactions between the RespondentNo.1 and the Corporate Debtor was not authorised by the Appellantduring the period from 21.02.2020 to 27.04.2020.

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FINDINGS

16. The contours of the jurisdiction under 482 of the Cr.P.C. arefar too well settled to require articulation or reiteration. Undoubtedly, inthis case by 26.08.2019 an application filed under section 7 of the IBCwas admitted, the appellant appointed as the interim resolutionprofessional and what is more a moratorium declared. With thedeclaration of the moratorium the prohibitions as enacted in section 14came into force. It is clear that the assets of the company would includethe amounts lying to the credit in the bank accounts. There cannot beany dispute that well after the order under section 14 was passed, a sumof Rs. 32.50 lakhs has been remitted into the account of RespondentNo.1 company. No doubt it is the definite case of the Respondent No.1that it has had business relations with the Corporate Debtor since morethan 15 years and that the amount remitted in its account representedthe price of the materials supplied to the Corporate Debtor. Apart fromthis amount a sum of rupees more than Rs.39 lakhs is still due. It is to benoticed that though an appeal was filed against the order admitting thepetition under Section 7 the same was dismissed by the NCLAT. Theappellate order was undoubtedly set aside by this court and the appealremanded to the NCLT for its consideration. We would think that settingaside the appellate order of the NCLAT by this court and remanding theappeal would not have the effect of setting aside the order admitting theapplication. Initially, as was noticed by us an order was passed on28.02.2020. The ambiguity created by the said order was removed bythe subsequent order of the Tribunal dated 20.03.2020. In other words,by the order dated 20.03.2020 the NCLT, Guwahati ordered that theappellant was at liberty to act as per law and the words used in theearlier order dated 28.02.2020 relied upon by the Respondent No.1 werefound to be a mere casual observation which did not culminate into anydirection. We need not say anything further particularly in view of thefact that there is an FIR and which is pending consideration in the HighCourt also. It is significant only for us to notice that the Appellant isessentially aggrieved by the transactions representing a sum of Rs. 32.50lakhs all of which took place after order dated 20.03.2020.

17. It may be true that in the interim order passed by the NCLTGuwahati, the Tribunal had directed the Directors to refund the amountof the Corporate Debtor less any amount paid for supplies. It is also truethat the review petition filed by the Appellant is dismissed, essentiallybased on the limitations on the power of review.

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A18. The provisions of the IBC contemplate resolution of theinsolvency if possible, in the first instance and should it not be possible,the winding up of the Corporate Debtor. The role of the insolvencyprofessional is neatly carved out. From the date of admission of applicationand the appointment of Interim Resolution Professional, the managementof the affairs of the Corporate Debtor is to vest in the Interim ResolutionBProfessional. With such appointment, the powers of the Board of Directorsor the partners of the Corporate Debtor as the case may be are to standsuspended. Section 17 further declares that the powers of the Board ofDirectors or partners are to be exercised by the Interim ResolutionProfessional. The financial institutions are to act on the instructions ofCthe Interim Resolution Professional. Section 14 is emphatic, subject tothe provisions of sub section (2) and (3). The impact of the moratoriumincludes prohibition of transferring, encumbering, alienating or disposingof by the Corporate Debtor of any of its assets.

19. Sub section 2 reads as follows:-

D“The supply of essential goods or services to the corporate debtoras may be specified shall not be terminated or suspended or interruptedduring moratorium period.”20. Essential goods and services referred to in Section 14(2) hasbeen defined by Regulations. Regulation 32 of the INSOLVENCY ANDEBANKRUPTCY BOARD OF INDIA (INSOLVENCYRESOLUTION PROCESS FOR CORPORATE PERSONS)REGULATIONS, 2016, reads as follows:- “Essential Supplies.

The essential goods and services referred to in section 14(2) shallFmean-

i.Electricity;

ii.water;

iii.telecommunication services; and

Giv.information technology services, to the extent these are nota direct input to the output produced or supplied by thecorporate debtor.

Illustration- Water supplied to a corporate debtor will be essentialsupplies for drinking and sanitation purposes, and not for generationHof hydro-electricity.”

21. Also, undoubtedly Section (2A) of Section 14 of the THEINSOLVENCY AND BANKRUPTCY CODE, 2016 provides asfollows:

“Where the interim resolution professional or resolutionprofessional, as the case may be, considers the supply of goods orservices critical to protect and preserve the value of the corporatedebtor and manage the operations of such corporate debtor as agoing concern, then the supply of such goods or services shall notbe terminated, suspended or interrupted during the period ofmoratorium, except where such corporate debtor has not paiddues arising from such supply during the moratorium period or insuch circumstances as may be specified.”

22. This provision was inserted with effect from 28.12.2019. Nodoubt under this provision goods or services not covered by Section14(2) are also covered. The call however is to be taken by the IRP/RP.Raw material supply could fall within the provision. The IRP/RP musttake a decision guided purely by the object of the IBC and the provisionsand the factual matrix.

23. With the appointment of Committee of Creditors, a ResolutionProfessional is to be appointed. The Resolution Professional is thereafterto conduct the resolution process and manage the operations. Section 23(2) makes it clear that his power is the same as the powers of the InterimResolution Professional. Undoubtedly, the Resolution Professional isbound to seek prior approval of the Committee of Creditors in materscovered by Section 28.

24. We have to also in this context bear in mind that the HighCourt appears to have, in passing the impugned order, which is an interimorder for that matter, overlooked the salutary limits on its power underSection 482. The power under Section 482 may not be available to theCourt to countenance the breach of a statuary provision. The words ‘tosecure the ends of justice’ in Section 482 cannot mean to overlook theundermining of a statutory dictate, which in this case is the provisions ofSection 14, and Section 17 of the IBC.

25. It would appear to us that having regard to the orders passedby the NCLT admitting the application, under Section 7, and also theordering of moratorium under Section 14 of the IBC and the orderswhich have been passed by the tribunal otherwise, the impugned order

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Aof the High Court resulting in the Respondent No. 1 being allowed tooperate the account without making good the amount of Rs 32.50 lakhsto be placed in the account of the Corporate Debtor cannot be sustained.The Learned Counsel for the Appellant has also no objection in theRespondent No. 1 being allowed to operate its account subject to itremitting an amount of Rs. 32.50 lakhs into the account of the CorporateBDebtor. In such circumstances, Appeal is allowed. The Impugned orderis modified as follows:

i.The Respondent No.1 is allowed to operate its accountsubject to it to first remitting into the account of theCorporate Debtor, the amount of Rs 32.50 lakhs which stoodCpaid to it by the management of the Corporate Debtor. Theassets of the Corporate Debtor shall be managed strictly interms of the provisions of the IBC. The Appellant as RPwill bear in mind the provision of Section 14 (2A) and theobject of IBC. We however make it clear that our orderDshall not be taken as our pronouncement on the issues arisingfrom the FIR including the petition pending under Section482 of the Cr.P.C.

ii.We also make it clear that the judgment will not stand in theway of the Respondent No.1 pursuing its claim with regardEto its entitlement to a sum of Rs.32.50 lakhs and any othersum from the Corporate Debtor or any other person in theappropriate forum and in accordance with law. There willbe no order as to costs.

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Appeal allowed.

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