The Tax Publishers 2020 TaxPub(CL) 1092 (NCLAT-Del)

INSOLVENCY AND BANKRUPTCY CODE, 2016

Section 238

As the moratorium was in operation and section 238 has overriding effect over provisions of other law, set off of amount due allowed by the NCLT was against the object of I&B Code and hence, such order was set aside.

Provisions of I&B Code to override other laws - Appeal against set-off permitted by NCLT - Not right to set-off when moratorium declared - Set-off being violative of basic principles and against the objective of I&B Code--Whether set-off against any dues as per Accounting Conventions possible while Moratoriums in operation

CIRP against Corporate Debtor (Aircel entities) was commenced under section 10 and Moratorium was in force when NCLT had permitted set off of certain amount to be paid by Aircel Companies to the Airtel Companies (Respondents) against the settlement amount to be paid as per Spectrum Trade Agreement. Resolution Professional (RP) had filed an appeal against such order contending that permitting such set-off NCLT had given respondents a preferential payment over other operational creditors and was also against the objective of Insolvency and Bankruptcy Code and Article 14 of the Constitution. The set off was also prejudicial to the interest of secured creditors who have a first charge over the spectrum assets and beneficial interest in the proceeds from any sale of the spectrum assets and no provision under the code permits such set off. Held: Accounting Conventions could not supersede any express provisions of the laid down provisions of the specific law on the subject. The I&B Code, 2016 provides the mechanism of Moratorium during the CIRP till the Resolution Plan is approved or Liquidation order is passed. Section 238 of the Code shall have an over-riding effect over other law. Hence, even in presence of such provisions in any other law, the I&B Code, 2016 would prevail over that. Thus, order of NCLT was set aside and Airtel was directed to pay the amount being set-off by them to the Aircel Entities.

REFERRED : Indian Overseas Bank v. Dinkar T. Venkatasubramaniam Resolution Professional for Amtek Auto Ltd Company Appeal (AT) (Insolvency) No. 267 of 2017 dated 15-11-2017 and MSTC Ltd. v. Adhunik Metaliks Ltd & Ors Company Appeal (AT) (Insolvency) No.519 of 2018 dates 17-7-2018, Liberty House Group Pvt. Ltd v. State Bank of India & Anr. 2020 TaxPub(CL) 0079 (NCLAT-Chd).

FAVOUR : In favour of appellant.

A.Y. :



IN THE NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI

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