The Supreme Court has ruled that the inherent power of the High Court under Section 482 of the Code of Criminal Procedure should not be used to undermine statutory dictate under Sections 14 and 17 of the Insolvency and Bankruptcy Code (IBC).
The appellant, Sandeep Khaitan, the Resolution Professional has challenged the order passed by the High Court of Guwahati. In the impugned order, the High Court has allowed an interlocutory application filed by the Respondent, JSVM Plywood Industries Ltd. to allow it to operate its bank account maintained with the ICICI Bank Bhubaneswar and to unfreeze the bank account of its creditors over which the lien has been created and the accounts frozen pursuant to the lodging of an FIR by the appellant before us. It was made subject to conditions.
The former Managing Director of the Corporate Debtor in conspiracy with the respondent engaged in an illegal transaction to the tune of Rs. 32.50 lakh without authority from the appellant and in violation of Section 14 of the IBC.
The appellant filed a cyber complaint and an FIR was lodged against the respondent. This was followed by filing an application under Section 19 read with Section 23 (2) of the IBC alleging non corporation by the previous management of the Corporate Debtor.
Consequently, the ICICI Bank created a lien upon the bank account of the respondent based on the allegedly illegal transaction.
The respondent challenged the FIR by way of a criminal petition under Section 482 of CrPC. An application was also filed to allow the respondent and its creditors to operate their bank account over which lien had been created and those accounts which had been frozen based on the FIR.
The High Court on February 4, 2021 allowed this application leading to the present appeal by the IRP.
The division bench of Justices Uday Umesh Lalit and K.M.Joseph said that the High Court appears to have, in passing the impugned 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 Court to countenance the breach of a statutory provision.
The words ‘to secure the ends of justice’ in Section 482 cannot mean to overlook the undermining of a statutory dictate, which in this case is the provisions of Section 14, and Section 17 of the IBC, the court added.
The Supreme Court while modifying the High Court’s order, allowed the Respondent to operate its account subject to it first remitting into the account of the Corporate Debtor, the amount of Rs 32.50 lakhs which stood paid to it by the management of the Corporate Debtor. The assets of the Corporate Debtor shall be managed strictly in terms of the provisions of the IBC. The Appellant as RP will bear in mind the provision of Section 14 (2A) and the object of IBC.
“We however make it clear that our order shall not be taken as our pronouncement on the issues arising from the FIR including the petition pending under Section 482 of the Cr.P.C..” the court said.
The court clarified that the judgment will not stand in the way of the Respondent pursuing its claim with regard to its entitlement to a sum of Rs.32.50 lakhs and any other sum from the Corporate Debtor or any other person in the appropriate forum and in accordance with law.
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