Power under Section 482

In the case of Sandeep Khaitan, Resolution Professional v. JSVM Plywood Industries the Supreme Court held that the innate power of High Court under Section 482 of the Code of Criminal Procedure (Cr.P.C.) ought not be utilized to subvert statutory direct under Sections 14 and 17 of the Insolvency and Bankruptcy Code (IBC).

Section 482 of Cr.P.C. is based on latin maxim ‘Ex debito justiciae’ which means ‘in the interest of justice’ and it mainly talks about inherent power of the High Court.

Section 14 of the Insolvency and Bankruptcy Code (IBC) talks about Moratorium which is is really portrayed as a period wherein no legal procedures for recuperation, authorization of security interest, deal or move of resources, or termination of essential contracts can be instituted or continued against the Corporate Debtor.

Section 17 of the Insolvency and Bankruptcy Code is titled as ‘Management of Affairs of Corporate Debtor by Interim Resolution Professional’. This section proclaims that the powers of the Board of Directors or accomplices are to be practiced by the IRP (Interim Resolution Professional) and financial institutions are to follow the guidelines of the IRP.

An appeal filed by an IRP (appellant) was heard at the Supreme Court against a judgement passed by the Gauhati High Court. The respondent (JSVM Plywood) had claimed to be an operation creditor and laid down a claim regarding the due amount from the Corporate Debtor. Here the former Managing Director of the Corporate Debtor conspired with the respondent of Rs. 32.50 lakh without authority from the appellant. An FIR was registered and a cyber complaint was filed by the appellant under the Section 19 and Section 23(2) of IBC. In consequence the ICICI bank froze those accounts deeming it fit in lieu of the FIR. Later, the respondent addressed his disagreement by challenging the FIR of the appellant under Section 482 of CrPc. On 4th April 2021, the High Court allowed this application and which led to the current day hearing.

The bench headed by the Justices UU Lalit and KM Joseph in the judgement of the Supreme Court held that the High Court shall not pass orders which are interim in nature as it may fail to observe the worthwhile restrictions on its potentiality under the section 482 of the Code of Criminal Procedure. The Court held that the impact of the moratorium under the IBC, incorporates the forbidding of transferring, hindrance, estrangement or even discarding of its assets by the Corporate Debtor. Further, it ruled that from the acceptance date of application and appointment of IRP, the management of every affair of the Corporate Debtor will be bestowed upon them. The Court was also of the view that with the appointment of the IRP, the powers of Corporate Debtors, Board of Directors and even the partners will cease. The Court further emphasized that Section 17 and its declaration states that the capacity and ability of the Board of Directors or the partners shall be put into exertion by the IRP. The IRP will also be responsible to make the financial institutions act on their directions embedded.

The Court continued to change the order passed by the High Court and permitted the respondent to work its record subject to it initially dispatching into the record of the Corporate Debtor, the measure of Rs 32.50 lakh which stood paid to it by the administration of the Corporate Debtor.

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