Though after the judgement of the Hon’ble Supreme Court in the matter of Alchemist Asset Reconstruction Company Limited v. M/s Hotel Gaudavan Private Limited, the issue of continuation of arbitration proceedings during the moratorium period is more or less settled. But there exists another alternative view under the scheme of the code which can be deciphered with the help of cannons of interpretations to mean that section 14 of the Insolvency Code applies only to institution of suit, continuation of pending suits and the proceedings in the said suits. Section 14 offcourse puts a moratorium on the execution of the award, decree against the corporate debtor but the intent of the legislature was not to put a complete embargo on the continuation of all proceedings during the period of moratorium.
It is pertinent to note that the use of word “proceedings” in various sections of the Insolvency and Bankruptcy Code, 2016:
(a) Section 5(6) of the IBC, 2016 specifically states “dispute” includes a suit or “arbitration proceedings”. The use of the word “arbitration proceedings” clearly signifies the fact that the legislature is aware of the fact that ‘arbitration proceedings’ have to be held separately than a normal ‘proceedings’.
(b) Section 8(2) of the IBC, 2016 uses the word “arbitration proceedings” while referring to arbitration. Therefore, wherever the legislature wanted to refer to arbitration it has referred the same by name of “arbitration proceedings” and thus when proceedings are referred in section 14, the legislature was conscious of the fact that it was not for the purpose of arbitration, otherwise, it would have mentioned “arbitration proceedings” as against “proceedings”.
(c) Section 25(2) while referring the powers and duties of resolution professional, states that the resolution professional can represent and protect the interests of the Corporate Debtor before “judicial, quasi-judicial or arbitration proceedings”. Interestingly, over here as well, instead of using a general word proceedings, the legislature has used the word “judicial, quasi-judicial or arbitration proceedings”. Nothing stopped legislature to similarly use the same expression, however the same has been avoided meaning thereby the proceedings only refer to the proceedings under the suit and nothing more. Also, it is interesting to note that the word “Suit” has been omitted here as there is a specific prohibition of continuation of suit and proceedings thereunder under section 14 of the Code, therefore there was no need for any representation during the resolution process. Had it not been the case, the Resolution Professional would have been given the duty to represent in suit as well.(d) Section 26 refers to “proceedings of the corporate insolvency resolution process”, these proceedings are also against the Corporate Debtor, therefore with the prevalent interprestation, the same shall also be prohibited under section 14 of the Code, 2016. Such kind of definition does not and cannot hold good.
(e) Section 33 (5) provides that when a liquidation order has been passed, no suit or other legal proceedings, shall be instituted against the corporate debtor, here again the legislature has used the word “other” to distinguish between the two i.e. suit and other legal proceedings and whereas in section 14, the word ‘other’ has not been used and the word proceedings has been used in continuance and in relation to suits or continuation of pending suits only.
(f) Section 35(k) provides that the liquidator has the power and duty to institute or defend “any suit, prosecution or other legal proceedings, civil or criminal” in the name of the Corporate debtor. The use of the word “other” defines that the legislature was always conscious of the distinction between suit and other proceedings.
The forgoing paragraph clearly indicates that the legislature was always aware that there can be various proceedings, which can be instituted by and against corporate debtor and the legislature as per the need of the Act and section has used and referred different proceedings, which primarily could be referred as below:
(i) Arbitration proceedings;
(ii) Judicial and quasi judicial proceedings;
(iii) Suits and proceedings thereunder
(iv) Suits and other legal proceeding.
(v) Insolvency Proceedings.
The reference to the different kind of proceedings at different places indicate that the legislature is conscious that the general word “proceedings” is of very wide import and thus cannot be used without qualifications and it is for this purpose the word “proceedings” in section 14 of the Act has to be read in accordance with principles of noscitur a sociss.
The word ‘proceedings’ is a general word and applying the principle of nositur a sociss, requires that “the meaning of a word is to be judged by the company it keeps”. In the current provision, the word ‘proceedings’ is provided as a natural extension of the words, ‘institution of suits or continuation of pending suits’, therefore the meaning which is to be attached to the word ‘proceedings’ is the proceedings related to the suits and not all kind of proceedings. As provided elsewhere, the legislature could have stated the kind of proceeding which are covered in section 14, however the intent was only to put a moratorium on suits and proceedings thereunder, and therefore the words like ‘other’, ‘judicial’, ‘quasi judicial’, ‘arbitration’ has not been used. At this juncture, it may be mentioned that the words “institution of suit”, “continuation of pending suits” will cover pleadings, evidence and arguments, whereas the word proceedings covers all the applications for various purposes which are moved by the parties in the suit.
It is further interesting to note that the word ‘proceedings’ has been further restricted by the use of the word of “ ‘including’ execution of any judgement, decree or order…”. The word include may in certain contexts be a word of limitation. Privy council in the matter in Dilworth vs. Commissioner of Stamps, (1899) AC99, pg. 105, 106 has held that “the word ‘include’ is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases must be construed as comprehending , not only such things, as they signify accordingly to their natural import, but also those things which the interpretation clause declares that they shall include. But the word, ‘include’ is susceptible of another construction, which may become imperative, if the context of the act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions used. It may be equivalent to “mean and include” and in that case it may afford an exhaustive explanation of the meaning which for the purpose of the Act must invariably be attached to those words or expressions”. Thus, the word include may in certain contexts be a word of limitation. The setting, context and object of an enactment may provide sufficient guidance for interpretation of the word “includes” for the purposes of such enactment.
Reference to the judgment of Hon’ble Supreme Court in the matter of Godfrey Philips India Limited vs. State of Uttar Pradesh, 2005(2)SCC515 is invited, wherein the Hon’ble Supreme Court observed:
“70. Where two or more words are susceptible of analogous meaning are clubbed together, they are understood to be used in their cognate sense. They take, as it were, their colour from and are qualified by each other, the meaning of the general word being restricted to a sense analogous to that of the less general. As said in Maxwell on the interpretation of Statues 12 th Edn. P.289. "Words, and particularly general words, cannot be read in isolation; their colour and their content are derived from their context, A-G v Prince Ernest Augustus of Hanover (1957) AC 436, per Viscount Simonds, at 461.” The court further observed
“75. We are aware that the maxim of noscitur a sociis may be a treacherous one unless the 'societas' to which the 'socii' belong, are known. The risk may be present when there is no other factor except contiguity to suggest the 'societas'. But where there is, as here, a term of wide denotation which is not free from ambiguity, the addition of the words such as 'including' is sufficiently indicative of the societas. As we have said the word 'includes' in the present context indicates a commonality or shared features or attributes of the including word with the included. “
Had it been the intention of the legislature of the include all kind of proceedings, there was no need to further use the word including and specify the execution proceedings. It is needless to add that ‘execution’ of judgement, decree or order arises in the case of suits which of course has been held to be governed and instituted under the Code of Civil Procedure, 1908.
Another indication to the above referred intent can be gathered from section 60(6) of the Insolvency Code which only provides exclusion of moratorium period for the purposes of limitation only for suit or application and not other proceedings. Attention is invited to Section 60(6) of IBC, 2016 which provides that where an order of moratorium has been made, while computing the period of limitation for any suit or application, such period moratorium shall be excluded. Bare reading of this clause makes it clear that period of limitation is saved for only suit or application and not any other proceeding meaning thereby all other proceedings (given the prevalent interpretation by the courts) would stand lapsed. With utmost respect and humility, that cannot be the intention of the legislature to rob off the common man his remedy of recourse to law under the garb of moratorium. The intention of the legislature has always been to put institution of suits, continuation of pending suit and the proceedings thereunder in moratorium and not all possible proceedings without defining the same.
Therefore, applying the principle of noscitur a sociis, it should be interpreted that the reference of word “proceedings” under section 14 is only limited to suit and proceedings there under.
