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TMI Blog2017 (9) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... reement dated 1.11.2012 with the Corporate Debtor agreeing for RCC construction of additional three floors and extension of the existing floors and allied development work at its club at Baner known as Pan Card Club Ltd, Baner, for a contract price of Rs. 10,81,31,099. Thereafter, further Agreements have been entered into 18.12.2013, 18.3.2013, 30.4.2013, 19.6.2013, 23.9.2013 to do projects at Baner as well as in Durgapur West Bengal, since construction had been taken up, the Operational Creditor, in terms of the Agreement entered into, raised invoices on the Corporate Debtor from time to time as regards both the projects. 2. When the Corporate Debtor fails to make payments, as per Clause 6.2 of the General Conditions of the Contract (GCC) in respect to Pune project, the amount admissible will become due after 15th working day on the day of presentation of each bill by the contractor to the engineer. In respect to civil works in West Bengal project as per Clause 2 of the GCC, the payments for 70% of the total amount claimed in invoices will become due after 15 days of the presentation of the bill and for the balance 30% certified amount will become due after 10 days after submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence denies the allegation of liability of Rs. 6,25,42,007.04. The Debtor Counsel submits that since the Corporate Debtor initiated Arbitration proceedings before filing this case and there being no prior section 8 notice to this second application, this Petition is liable to be dismissed on the ground that dispute in respect to this claim has been in existence even before filing this case. 6. Before going into the dispute in between this Creditor and Debtor, we must reveal an interesting thing happened before issuing notices u/s 434 of the Companies Act 1956 and before filing of this petition as well, which in fact has come to the notice of this Bench while hearing their respective submissions. On perusal of the documents filed along with this Company Petition, we have noticed Annexure-19 to the petition reflecting a public notice issued by SEBI revealing an order passed by SEBI, thereafter SAT upholding the SEBI order against the debtor Company for having collected huge money from the public in the name of Holiday Plans, The debtor counsel after making all submissions on merits, submitted that this case is fit to pass orders under section 9 of the Code, he might be right, if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion - Thumb Rule Approach), issues with paperwork (no clarity), difficulty in receiving payments (difficulty in cashing out investment, in some cases, investors are encouraged to roll over their investments for further high returns). Most of us, at one or other point of time in life come across of an experience, agents working vigorously on projects like this on high commission basis to get more victims in the market. 9. By going through this Scheme, SEBI held that this Scheme is squarely falling within Section 11AA (2) of the SEBI Act because the Company was operating investment plans through its Holiday Plans which it offers to the public. Holidays Plan Certificate confirmations are issued to individual investors to purchase Holiday Plans. It is being held that during the Financial Years 2002-03 to 2013-14, this debtor company raised a sum of Rs. 7034.67crores from a total of 51,55,516 investors in 20 schemes under various Holiday Plans, room nights are awarded by notice no. l to investors to purchase Holiday plans and if the investors desire, the room nights can be rented out or surrendered to notice no. l. SEBI by seeing the balance sheet since 2001-02 to 2013-14, it has notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chemes without any registration from SEBI, therefore, directed this Debtor company and its directors that - they shall abstain from collecting any money from the investors or launch or carry out any CISs including the scheme which have been identified as a Collective Investment Schemes in the SEBI order, - they shall wind up the existing Collective Investment Scheme and refund through Bank Demand Draft or Pay order the money collected by the company under the Scheme with returns which are due to its investors as per the terms of offers within a period of three months and to file acknowledgment of receipt of funds by the investors, - they shall not alienate or dispose or sell any of the assets of the company except for the purpose of making refunds to its investors as directed above and - they shall provide full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holding of shares/securities, if held in physical form, - they shall not access the securities market prohibiting this corporate debtor as well as its directors from buying, selling or othenvise dealing in securities market for a period of 4 years, - company sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n't be so. 13. Now the point for determination is having SEBI order passed against the debtor company, whether this Petition u/s 9 can be admitted or not? 14. If we go through Section 238 of the Insolvency & Bankruptcy Code, 2016, we find non-obstante clause saying "the provisions of this Code shall have effect not withstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." 15. The essentials in this section are as below: 1. The provisions of this Code will have overriding effect. 2. This overriding effect will be over other laws, not over the provisions of this Code (notwithstanding anything in any other law occurring in a section of the law with overriding provision cannot be construed to take away the effect of any provision of the Act in which that section appears) 3. Finally to apply this overriding effect, the provision of other law or any instrument governed by other law shall be inconsistent to this provision of this Code, then deductive reasoning can be, as long as other law or jurisdiction under other law is not inconsistent with this Code, section 238 cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 SCC 315 as follows: "In determining whether a statute is a special or general one, the focus must be on the principal subject matter plus the particular perspective. For certain purposes, an Act may be general and for certain other purposes it may be special and we cannot blur distinctions when dealing with fine points of law. In law, we have a cosmos of relativity not absolutes- so too in life". 18. In the backdrop of these legal propositions, if you see the test given in Kishorebhai Khamanchand Goyal (Supra), there is no conflict between SEBI Act and Insolvency and Bankruptcy Code because SEBI deals with investor protection issues whereas Bankruptcy code deals with creditor issues. The jural relationship between the parties is also different. In SEBI, it is between the investors and the company, whereas in I&B Code, it is between the creditors and the debtor, therefore, we don't find any subject matter conflict in between the two statutes. 19. To emphasise this, we must say that overriding effect in a law is not meant for punching exercise that takes place in Boxing Ring to knockout each other and courts are not like referee in the Ring, the legislature, while bringing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yond. 21. The statutory scheme in both the Acts is in complete variance with each other therefore, if this Code is taken to the places that do not belong to, it is like a bull in china shop, breaking the backs of all other statutes laid out to apply to the objects meant for. Looking at non-obstante clause in one enactment, we cannot play fast and loose, one cannot trample over other laws working for the objectives enunciated under the respective enactment, more specially, when law with non-obstante clause making baby steps, it is the duty of the court to apply it in such a way that it does not bulldoze the areas not of its concern. So, overriding effect of a provision of this code will rein in only when the operation of other provision is inconsistent with the operation of the provision of the Code. 22. A doubt may come to anybody as to why a thought to come to the mind of NCLT about the validity of the SEBI order when section 14 of the Code suspends all other pending proceedings - admission of petition declaring moratorium will suspend any suit or proceeding pending before any other court. If at all any such doubt comes, our answer is that such doubt has to come only when Adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Legislature had before provided for individually, unless an intention to do so, is specially declared." (Emphasis supplied) 25. Overriding effect of a provision of this code will rein in only when the operation of other provision is inconsistent with the operation of the provision of the Code. Under the Scheme of modern legislation, non-obstante clause has a contextual and limited application. The Hon'ble supreme court held in Jik Industries Ltd. v. Amarlal V. Jumani (2012 (3) SCC 235) as follows: "48. The insertion of a non-obstante clause is a well known legislative device and in olden times it had the effect of non-obstante aliquo statuto in contrarium (notwithstanding any statute to the contrary). 49. Under the Stuart reign in England the Judges then sitting in Westminster Hall accepted that the statutes were overridden by the process but this device of judicial surrender did not last long. On the device of non-obstante clause, William Blackstone in his Commentaries on the Laws of England (Oxford: The Claredon Press, 1st Edn. 1765- 1769) observed that the device was "...effectually demolished by the Bill of Rights at the revolution, and abdicated Westminster Hall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect to illegal business running without Registration Certificate and cheating gullible victims, at the most it may be coined as relation in between investor and the company, and here it is on jural relationship in between creditor and debtor, which is entirely on different footing. Perhaps, for this reason only, Apex Court and trend in English Law also reflect that the use of non-obstante clause shall remain contextual. 30. In view of the reasons above, without going into the merits on the claim made by the petitioner, this petition is hereby dismissed without costs with liberty to the petitioner to proceed if any other remedy is available. CP 1085/2017 31. This Petitioner, namely Sadashiv Lazman Jogalekar, filed this application u/s 9 against the same Corporate Debtor stating that this Operational Creditor invested Rs. 90,000, obtained a receipt for an amount of Rs. 90,000 invested in Corporate Debtor Company thereafter a surrender value payment certificate has been issued by the Corporate Debtor, for that amount not being paid, this Petitioner issued notice u/s 8 of the Insolvency & Bankruptcy Code, 2016 making a claim for an amount of Rs. 1,23,480 plus interest @ 18% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decipher this definition, the essentials are :- 1. That debt must be in relation to goods or services. 2. It must arise from under any law for time being in force, means it shall be recognised by a law. 37. Here in the present case, it is designed as collective investment scheme falling under Section 11AA of the SEBI Act but whereas to do such business, no permission has been taken from the SEBI. Therefore even if is to be taken as Operational Creditor, since there is no lawful agreement recognisable by SEBI creating jural relationship in between the petitioner and the company, this relationship between the petitioner and the corporate debtor can't be considered either as relation in between the investor and the company or as relation in between the creditor and debtor, whereby we hereby hold that this Petitioner is not entitled to tile this Petition as Creditor before this Bench. 38. In respect to overriding effect of Section 238 of the Code, since it has been already discussed in the case above, the same is applicable to this case also. 39. In view of the reasons above mentioned, this Petition is also hereby dismissed without costs. 40. The Registry is hereby directed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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