In Atibir Industries Company Limited & Ors. Vs. Indian Bank, the Hon’ble High Court stated that with respect to Section 96 of the IBC, it was clearly observed in Gouri Prasad Goenka (supra) that the moratorium envisaged in Section 14 of the IBC creates no hindrance to a wilful defaulter declaration proceeding, which, as held by the Supreme Court in several judgments, is “to disseminate credit information pertaining to wilful defaulters for cautioning banks and financial institutions so as to ensure that further bank finance is not made available to them” and not for recovery of debts or assets of the corporate debtor, which could hamper the corporate insolvency resolution process.
Thus, a wilful defaulter proceeding does not come within the contemplation of Section 14 or Section 96 of the IBC, which primarily pertains to legal actions to foreclose, recover or enforce security interest, or recovery of any property of the debt-in-question.
In P. Mohanraj (supra), the Supreme Court has repeatedly highlighted that the moratorium concerns not merely recovery of debt but any legal proceeding even indirectly relatable to recovery of any debt. Hence, the moratorium applies to recovery proceedings and proceedings which directly or indirectly “relatable” to such recovery. A wilful defaulter proceeding cannot, by any stretch of imagination, be said to be even remotely relatable to recovery of debt but is merely an off-shoot of the debt. The corpus of debt is not the subject-matter of a wilful defaulter proceeding, unlike a recovery proceeding, but is a mere stimulus to spur the wilful defaulter proceeding into motion.
Thus, the argument of the petitioners that the pendency of a proceeding under Section 95, IBC automatically entails a moratorium under Section 96 on a wilful defaulter proceeding is also not tenable in the eye of law.
Reference: Hon’ble Calcutta High Court Judgment dated 20.03.2024 in the matter of Atibir Industries Company Limited & Ors. Vs. Indian Bank
