Supreme Court says CrPC Sec 482 powers cannot be invoked to subvert Section 14, 17 of IBC

The Supreme Court has said that the Gauhati High Court has overlooked the salutary limit on its power given under Section 482 of the Code of Criminal Procedure, while passing an interim order on an interlocutory application preferred by JSVM Plywood Industries Ltd (‘operational creditor’).

The power under Section 482 may not be available to the Court to countenance the breach of a statutory provision, said the Apex Court. (Sandeep Khaitan, Resolution Professional for National Plywood Industries Ltd. vs JSVM Plywood Industries Ltd & Anr.)

A bench of Justice U.U. Lalit and Justice K.M. Joseph said, “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 single judge of Gauhati High Court provided relief to the JSVM Plywood Industries Ltd by allowing JSVM to operate its bank account and subsequently 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 i.e. Sandeep Khaitan ( hereinafter referred as “Resolution Professional”), for corporate debtor i.e. National Plywood Industries.
Allowing the appeal preferred by Sandeep Khaitan, the bench modified the order of the High Court of Gauhati and held, “The Respondent No.1 (JSVM) allowed to operate its account subject to it to first remitting into the account of the Corporate Debtor, the amount of Rs 32.50 lakh 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 CrPC.”

It is to be noted that soon after admitting the application filed under Section 7 of IBC, an interim resolution professional was appointed for National Plywood Industries Ltd (Corporate Debtor). The moratorium was imposed upon NPIL in accordance with Section 14 of IBC. IRP was appointed, later on, the managing director on behalf of the corporate debtor approached NCLAT, challenging the NCLT order of approving an application under Section 7 of IBC, it was subsequently dismissed by NCLAT stating that the application was not barred by limitation.
The appellant i.e Resolution Professional alleged that the former Managing Director of the Corporate Debtor in conspiracy with Respondent No.1 (JSVM) 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, upon which FIR was lodged against the Appellant and therefore, the appellant moved to High court under Section 482, CrPC.

The findings of the apex court are as follows –

1) “We need not say anything further particularly in view of the fact that there is an FIR and which is pending consideration in the High Court also. It is significant only for us to notice that the Appellant is essentially aggrieved by the transactions representing a sum of Rs 32.50 lakh all of which took place after order dated 20.03.2020.

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2) It is to be noticed that though an appeal was filed against the order admitting the petition under Section 7 the same was dismissed by the NCLAT. The appellate order was undoubtedly set aside by this court and the appeal remanded to the NCLT for its consideration.”