SC declines to stay Bombay HC proceedings against MEP Infrastructure

The Supreme Court on Monday refused to stay the proceedings before the Bombay High Court that restrained toll company MEP Infrastructure, which had defaulted payment of Rs 5,500 crore to the Municipal Corporation of Delhi (MCD), from disposing of its shareholdings in any of its 31 subsidiary companies. The HC had also asked these 31 firms to give details of their assets.

A Bench led by Justice Sanjiv Khanna dismissed the debt-laden MEP’s appeal that sought stay on the court proceedings on the grounds that the attachment of properties could not have been passed since the National Company Law Tribunal had on March 28 admitted it to CIRP and a moratorium order under Section 14 had come into force.

Challenging the HC various orders that directed its 31 companies to give details of its assets, as called for by the Tehsildar, MEP said that the HC failed to appreciate that it is a well settled proposition of law that applicability of the provisions of Section 14 against a company also includes execution of suits and proceedings.

The company said that it was unable to pay the agreed weekly toll remittances of Rs 23.12 crore due to Covid pandemic.

The HC has “erred” in not appreciating that once the petition under Section 7 of the IBC is admitted, no proceedings can be continued against the corporate debtor i.e. MEP, the appeal stated.

The HC had passed a series of orders on the two petitions by MCD, which is entrusted with the collection of toll tax from commercial vehicles entering Delhi from 124 toll points around the capital, seeking recovery of Rs 3927 crore with interest from MEP Infrastructure towards toll tax and environmental compensation charge between 2017 and 2020. The corporation had also sought directions to attach and recover shares owned by the company in its 31 subsidiaries and joint ventures.The HC had observed that “such recovery is of public money, hence, it concerns an issue involving immense public interest.”The MCD had issued warrants of distress or recovery certificates for attaching MEP’s properties for recovering tax arrears. Since some of these properties were located in Maharashtra, the municipal body had sought assistance from the state district collectors under the Revenue Recovery Act.

While MCD’s petitions against MEP under Section 9 of the Insolvency and Bankruptcy Code were dismissed by NCLT, Mumbai Bench and also by the NCLAT since there was a ‘pre-existing dispute’, the HC had allowed the municipal body’s plea to take action against the company for recovery of dues from MEP as arrears of land revenue.

MCD had contended that for want of funds the salaries payable to its employees are adversely affected, as such payment is being systematically defeated.