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Jotun India Private Limited, Edelweiss Asset Reconstruction Co. Ltd., SK Networks Company Ltd. & Anr., Hanwa Company Limited, M/s. J.P. Engineering, M/s. Bhotika Trade & Services Pvt. Ltd. Versus PSL Limited

2018 (1) TMI 433 - BOMBAY HIGH COURT

Corporate insolvency resolution process - whether the Company Court has any jurisdiction to stay the proceedings filed by a Corporate Debtor before NCLT even though a previously instituted company petition by a creditor may have been admitted (and therefore does not get transferred to NCLT) but where a provisional liquidator has not been appointed? - Power to stay proceedings pending before NCLT - Held that:- Section 446 of the Companies Act, 1956 is not applicable to the present petition and th .....

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roceedings under RDB Act, for the reason that RDB Act is a special law which would prevail over the Companies Act, 1956 being the general law and even assuming that both the statutes are special enactments, the latter one would prevail over the former, if the latter law contains a provision giving an overriding effect. In the case at hand, in view of Section 34 of RDB Act, it was held that the said Act overrides the Companies Act, to the extent of any inconsistency between the two enactments. Th .....

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of Provisional Liquidator by Company Court? - Held that:- The legislative intent behind the enactment of IBC is to consolidate provisions of SICA and Companies Act. Section 15 of SICA is pari­materia to section 10 of IBC and section 22 of SICA is similar to Section 14 of IBC. IBC has been enacted to revive the Corporate Debtor by declaring a Moratorium of various proceedings and appointing an Interim Resolution Professional (IRP) to manage the affairs of the Corporate Debtor. Similarly, both SI .....

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s admittedly a successor statute to SICA, and Section 64 (2) of IBC being pari­materia to Section 22 of SICA, the argument that the Company Court has the power to injunct proceedings before under NCLT in cases of pending winding up petitions is entirely misplaced and contrary to legislative intent. - As per rule 6 of the Companies (Court) Rules, 1959, the provisions of the Code of Civil Procedure, 1908, will apply to proceedings under the Companies Act, 1956, unless such application would be .....

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tion. This application, therefore, has to succeed. The impugned order dated 19th July 2017 is recalled/vacated. Company application accordingly stands disposed. - Company Application No. 572 Of 2017 In Company Petition No. 434, 1048, 878 Of 2015 256 of 2016& 392 OF 2016 With Company Application (L) No.333 Of 2017, 417 of 2017 - Dated:- 5-1-2018 - K.R. SHRIRAM, J. Mr. Janak Dwarkadas, senior advocate a/w. Ms. Ankita Singhania, Mr. Amir Arsiwala, Mr. Omprakash Jha and Mr. Raghav Shekhar i/b. The L .....

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nor). P.C.: 1. Respondent­-applicant-­PSL Limited, who is respondent in the company petitions, has filed this application seeking the order dated 19th July 2017 in company application (lodging) no.333 of 2017 be vacated/recalled. By this non­-speaking order, the Learned Company Judge was pleased to stay the proceedings filed by respondent­-applicant under Section 10 of Insolvency and Bankruptcy Code, 2016 ( IBC ) before National Company Law Tribunal (NCLT), Ahmedabad for insolven .....

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imited against respondent-applicant (org. respondent) under Sections 433 and 434 of the Companies Act, 1956, claiming an outstanding sum of ₹ 7.25 Crores with interest in respect of unpaid invoices for goods supplied. For the purpose of this application, I am not considering the facts in other company petitions. On 19th June 2015, respondent­-applicant made a reference to Board of Industrial and Financial Reconstruction (BIFR) under Sick Industrial Companies (Special Provisions) Act, 1 .....

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cation of the Repeal Act, i.e., on or before the 31st of May 2017 for commencement of the corporate insolvency resolution process and for an order of moratorium. 4. On 9th March 2017, order admitting the present company petition no.434 of 2015 was passed. Whilst admitting the company petition, the Learned Judge observed, … since all assets of the respondent company are secured assets in favour of the secured creditors and are under their control, I do not propose to appoint official liqui .....

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n process. In this application the fact that the above company petition had been filed has been expressly disclosed. 6. On 18th July 2017, IBC Application made by respondent­-applicant was taken up for hearing by NCLT, Ahmedabad, and the secured creditors to whom notice of IBC Application was given, were also heard. After hearing the parties, NCLT, Ahmedabad, reserved the matter for orders and directed the same to be listed on 20th July, 2017. On the same day, petitioner herein, filed compan .....

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7. This order for convenience is hereinafter referred to as impugned order dated 19th July 2017 . 8. On 20th July 2017 appeal (lodging) no.280 of 2017 was filed by respondent­-applicant challenging the order dated 19th July 2017. 9. On 1st August 2017 order was passed by the Division Bench of this Court in the said appeal­clarifying that the question whether the Learned Single Judge, acting as the Company Court, had the jurisdiction to pass the impugned order would expressly be kept open .....

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asically are as under : (a) The stay granted by the Learned Single Judge is continuing, and causing great prejudice to the statutory rights of respondentapplicant and all of its creditors, whether secured, unsecured, financial or operational, from seeking the benefit of the remedies provided under IBC, i.e., the commencement of corporate insolvency resolution process. (b) IBC is a later and special statute dealing with the subject of the insolvency resolution of corporate persons in a time bound .....

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er a winding up petition filed in the High Court (notice whereof has been given to respondent company) was liable to be stayed by reason of a subsequent petition filed by another creditor before NCLT came to be considered by Dhanuka J. in the matter of Ashok Commercial Enterprises v. Parekh Aluminex Ltd. Order dated 11th April 2017 in Company Petition No.136 of 2014. Alternatively, (2017) 202 Comp Cas 148 (Paragraphs 5763) . Dhanuka J. has held that the intention of the legislature is clear from .....

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ly curtails the power of this Court to pass any injunction against respondent­-applicant from pursuing the pending IBC Application. (f) The impugned order dated 19th July 2017 is clearly contrary to the view taken in Ashok Commercial Enterprises (Supra) in as much as in the impugned order, primacy has been given to winding up proceedings filed before this court. This despite the mandate of Section 64 (2) of IBC which is an express bar against any court granting any injunction in respect of p .....

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SCC Online 1025 2. Mobilox Innovations Private Limited V/s. Kirusa Software Private Limited (2017) SCC Online SC 1154 3. National Textile Workers' Union v. P.R. Ramakrishnan & Ors. (1983) 1 SCC 228) 4. Madura Coats Ltd. v. Modi Rubber Ltd. and Anr., (2016) 7 SCC 603 5. Bank of New York Mellon v. Zenith Infotech (2017) 5 SCC 1 6. West Hills Realty Pvt. Ltd. v. Neelkamal Realtors Tower Pvt. Ltd. Company Petition No. 331 of 2016 with Company Application (L) No.766 of 2016 dated 23rd Decembe .....

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imited vs. United Industrial Bank Limited (1983) 4 SCC 625 13. Real Value Appliances Ltd. vs. Canara Bank (1998) 5 SCC 554 14. M/s. Rishabh Agro Industries Ltd. vs. P.N.B. Capital Services Ltd. (2000) 5 SCC 515 12. Mr. Gupta, counsel for intervenor ­ Edelweiss, did not make any oral submissions but simply stated that they adopt the submissions made by Mr. Dwarkadas. Intervenor's advocates, however, gave written submissions and the submissions are as under : (I) Power to stay proceedings .....

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their rights will get affected, but in fact the right, if any, will get adjudicated. Petitioner, however, for reasons best known to them, is averse to the same and wants the proceedings before NCLT to be stayed. 15. The issue is whether this Court can stay proceedings before NCLT, especially in light of the provisions of IBC, which specifically bars such intervention? It cannot, otherwise, in light of the fact that on admission of petition before NCLT, petition before this Hon ble Court gets sta .....

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ntervenor from pursuing the pending application. 17. The power of this Court to pass order to restrain proceedings before any other Court is under Section 446. The provisions of IBC, by virtue of Section 238 of IBC will override the provisions of the Companies Act to that extent. 18 Further, the powers of this Court, while acting as a Company Court under Companies Act, 1956, is in exercise of its ordinary and original jurisdiction and not any extraordinary or inherent jurisdiction. In furtheranc .....

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more particularly Section 238, came to a conclusion that even Statutory Injunction under Maharashtra Relief Undertaking Act (MRU Act) will not come in the way of Secured Creditor to initiate proceedings under IBC. 20. Similar overriding provision came up for consideration of Hon ble Supreme Court in the matter of Jagdish Singh Vs. Heeralal & Ors. (2014) 1 SCC 479) where the Apex Court has held that the provision of SARFAESI Act, 2002, will override the provisions of Civil Procedure Code and .....

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1956 arose. The Supreme Court has held that leave of the Company Court is not required in order to commence proceedings under RDB Act, for the reason that RDB Act is a special law which would prevail over the Companies Act, 1956 being the general law and even assuming that both the statutes are special enactments, the latter one would prevail over the former, if the latter law contains a provision giving an overriding effect. In the case at hand, in view of Section 34 of RDB Act, it was held tha .....

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ether NCLT can entertain a petition after the order of admission or appointment of Provisional Liquidator by Company Court? 22 The order of admission or the order of appointment of Provisional Liquidator, will not create any bar on filing of petition and passing of orders by NCLT as the order of admission is merely commencement of proceedings and not final order of winding up which is passed under Section 481 of the Companies Act, 1956. Till the company is ordered to be wound up, i.e., the final .....

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e proceedings pending before other courts are stayed as per Section 22 of SICA, the situation is analogous to the filing of petition under Section 7 of IBC by virtue of which, NCLT is empowered to declare Moratorium under Section 14 of IBC. 24 In view of the aforesaid, the legislative intent behind the enactment of IBC is to consolidate provisions of SICA and Companies Act. Section 15 of SICA is pari­materia to section 10 of IBC and section 22 of SICA is similar to Section 14 of IBC. 25 IBC .....

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isions of IBC will prevail in view of Section 238 of IBC. The provisions give overriding effect to any other law for time being in force, in case of any inconsistency or conflict with respect thereof. In view of Section 238, the judgment relied upon will apply with much greater force. The judgment followed the law laid down in the earlier pronouncement of Apex Court even in the matter of Real Value Appliances Ltd. (Supra) and various High Courts took the same view. 26 Even under the Companies Ac .....

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ny. 27 Mr. Andhyarujina, counsel for petitioner opposing this application submitted as under : (I) Saved winding up petitions : 28 The petitions filed under Section 433 (e) of the Companies Act, 1956 (the 1956 Act), pending in the Hon ble High Court as on 15th December 2016 (Saved Petitions), have been saved under the following provisions - a. Section 434 of the Companies Act, 2013 (the 2013 Act), inter alia, deals with the transfer of the proceedings, pending under the 1956 Act before any Distr .....

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d, namely: - 434. Transfer of certain pending proceedings. - (1) On such date as may be notified by the Central Government in this behalf,- (a) …… (b) ….. (c) all proceedings under the Companies Act, 1956, including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to dea .....

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39 (1) of IBC empowers the Central Government to make rules for carrying out the provisions of IBC and states as follows ­ 239. Power to make rules (1) The Central Government may, by notification, make rules for carrying out the provisions of this Code. (2)….. d. Therefore, in accordance with Section 434 of the 2013 Act read with Section 239 of IBC, the Central Government issued the Companies (Transfer of Pending Proceedings) Rules 2016 (hereinafter referred to as the Transfer Rules ) .....

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West Hills Realty Pvt. Ltd. (Supra) and further, clarified in his order dated 17th January 2017. f. The Transfer Rules were amended by the Central Government vide the Companies (Transfer of Pending Proceedings) Second Amendment Rules, 2017 notified on 29th June 2017 (hereinafter referred to as the Amended Transfer Rules ). Rule 5 of the Amended Transfer Rules, inter alia, provided that the petitions under Section 433(e) of the 1956 Act filed against the same company (as other Saved Petitions), s .....

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ved to respondent and all other petitions pending against the same Company in the High Court where notice was not served to respondent. (ii) all petitions not saved, i.e., petitions that may have been filed in the High Court, but not served to respondent. g.2 In terms of the petitions in class (i), the legislative intent is that the petitions shall be dealt with and disposed of in accordance with the 1956 Act to the complete exclusion of IBC. g.3 In terms of the petitions in class (ii), the legi .....

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238 of IBC. 30 Upon demurrer, that there is no bar against the proceedings continuing simultaneously before the High Court under the 1956 Act and NCLT under IBC and that Section 238 of IBC, as relied upon by respondent­-applicant, has no application in this present case. 30.1 In the matter of M/s. Ashok Commercial Enterprises (Supra), it has been, inter alia, held that ­ 62. In my view, it is clear that all winding up proceedings shall not stand transferred to the NCLT. It is clear that .....

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ce of Petition before or after 15th December 2016. In my view, there is thus, no embargo on this Court to hear this Petition along with other companion Petitions, in view of the admitted position that the notice under Rule 26 of the Companies (Court) Rules, 1959 has been served on the respondent prior to 15th December 2016. 63. In my view, since there is no inconsistency in the provisions of the Insolvency and Bankruptcy Code, 2016 and the Companies Act, 2013 or Companies Act, 1956 in respect of .....

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r. Sen, the learned Counsel appearing for the petitioner is right in his submissions that Section 238 of the Code has no application in this situation on the ground that there is no conflict between the provisions of the Code and the provisions of the Companies Act, 1956 or the Companies Act, 2013. 30.2 In the matter of Innoventive Industries Ltd. (Supra) (paragraph nos.12 - 15), the Ld. Members of NCLT, Mumbai vide its order dated 27th July 2017 has held that - Therefore, we are of the view tha .....

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al bench to be constituted by the Hon ble President of NCLT, in the matter of Union Bank of India v Era Infra Engineering Ltd. The issues have been heard by the bench constituted by the President of the NCLT and has been reserved for Orders. ­ 1. Whether the process under the Insolvency and Bankruptcy Code, 2016 can be triggered in the face of the pendency of the winding up petitions before the respective High Courts or it is to be considered as an independent process? 2. In case the process .....

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jecting it within the fixed time frame? 4. In case if the petition is adjourned sine die and if the winding up petition is dismissed or set aside in appeal subsequently, whether there is scope in such an eventuality for power of revival within the frame work of the Code conferred on this Tribunal? (III) Respondent s submissions on the effect of Sections 63 and 64 of IBC : 32 It is the legislative intention of the saving provisions that the saved petitions shall proceed before the Company Court u .....

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BC read as a whole must necessarily suggest and lead to the construction that Section 63 and Section 64 of IBC cannot apply to Saved Petitions. (IV) Section 14 of IBC : 36 When an application under IBC is admitted by NCLT, a moratorium under Section 14 of IBC is declared and all proceedings, including the present company petition will be stayed. In the present matter, this Court has, in exercise of its discretionary powers, stayed the proceedings in NCLT, Ahmedabad prior to admission of the appl .....

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risdiction with respect to such companies or to allow the Adjudicating Authority to also deal with application with respect to such Companies. In this context, it is also relevant, as the operational creditor does not form a part of the Committee of Creditors under Section 21 of IBC and the operational creditor cannot propose or initiate liquidation proceedings against the Company, the operational creditors are in fact at a considerable disadvantage under IBC. Accordingly, in appropriate cases w .....

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e moratorium will not apply to Saved Petitions. The effect of Section 14 of IBC would otherwise, snatch away irreversibly the jurisdiction of the Company Court which is expressly saved under Section 434 of the 2013 Act irretrievably. 39 The fact that if a contrary view is taken, the jurisdiction of the Company Court will be irretrievably lost is apparent from Section 6 to Section 54 of IBC, which result in entering a resolution or a liquidation under IBC. IBC has no provision to permit the Saved .....

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urt so that it may hear and dispose of such Saved Petitions. 41 It is not disputed even by Respondent that the Hon ble High Court retains its jurisdiction and powers under the 1956 Act with respect to the Saved Petitions. 42 It is also relevant that the Central Government vide its notification dated 7th December 2016, issued the Companies (Removal of Difficulties) Fourth Order, 2016 amending Section 434 of the 2013 Act, which, inter alia, provides that ­ 2. In the Companies Act, 2013, in Sec .....

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dance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959. 43 The powers of the Company Court in this regard are plenary as is evident from what is stated below. a. The Company Court retains its inherent powers, as provided by Rule 9 of the Companies (Court) Rules, 1959 - 9. Nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the Court to give such directions or pass such orders as may be necessary for the ends of justice or to .....

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the company is pending in the Supreme Court or in any High Court, apply to the Court in which the suit or proceeding is pending for a stay of proceedings therein; and (b) where any suit or proceeding is pending against the company in any other Court, apply to the Court having jurisdiction to wind up the company, to restrain further proceedings in the suit or proceeding; and the Court to which application is so made may stay or restrain the proceedings accordingly, on such terms as it thinks fit .....

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restrain proceedings in any other court , which has been construed as any adjudicating authority which is required to act judicially and is empowered to pass orders binding on the company including the Company Law Board. d. Under the powers conferred under Section 443 (1) (c), the Company Court has the power to issue any interim orders that it thinks fit in aid of the final relief of winding up. Section 443 reads as under - 443. Powers of Tribunal on hearing petition (1) On hearing a winding up .....

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has no assets. (2)….. (3)…. e. The powers conferred upon the Court under Sections 442 and 443 of the 1956 Act are to lend assistance to the High Court in order to effectively exercise its powers under Sections 446 and 466 of the 1956 Act. It was further observed in the matter of the Official Liquidator vs. Dharti Dhan Ltd. 1977 2 SCC 166 that the object of the provisions is to create a right to get speedier adjudication from the Court where the winding up proceeding is taking place .....

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Dhanuka and the Hon ble Mr. Justice A. S. Gadkari have duly exercised their aforesaid discretionary powers in passing the Orders dated 9th March 2017 (hereinafter referred to as the Admission Order ) and 19th July 2017 (hereinafter referred to as the Stay Order ), respectively. 45 This Court in the Admission Order, has considered the relevant facts and has exercised its powers under Sections 442 and 443 of the 1956 Act restraining respondent from approaching NCLT. The Hon ble Judge has in conte .....

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er with CP (IB) No. 37 of 2017. (VII) Harmonious construction of the 1956 Act, the 2013 Act and IBC : 47 With respect to the Saved Petitions, the provisions of the 1956 Act, the 2013 Act and IBC must be read in a harmonious and purposive manner. NCLT being the Adjudicating Authority under IBC, in fact derives its powers from the provisions of the 2013 Act. Section 5(1) of IBC defines the Adjudicating Authority as follows ­ Adjudicating Authority for the purposes of this Part, means National .....

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to the report of Bankruptcy Law Reforms Committee 2015 ( Reforms Committee ) in order to gain an insight into why IBC was enacted and purpose for which it was enacted. Briefly stated the Reforms Committee examined whether in the case of a company which has committed a default in repaying its debt obligations, whereas secured creditors are able to repossess the fixed assets which are pledged with them, there are several creditors and lenders who are not secured lender and when default takes plac .....

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the company into liquidation or to negotiate a debt restructuring, where the creditors accept a reduced amount on NPV basis, in the hope that negotiated value exceeds the liquidation value. A third possibility would be to sell the firm as a going concern and pay off the creditors. Many hybrid structures of these broad categories can be envisioned. The Reforms Committee after examination came to the conclusion that it would be better that only one forum evaluates such possibilities and makes a d .....

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wn with time on account of high economic rate of depreciation. As noted at Pg.7 of Innoventive (supra) the Reforms Committee has stated: The Committee believes that there is only one correct forum for evaluating such possibilities, and making a decision: a creditors committee, where all financial creditors have votes in proportion to the magnitude of debt that they hold. In the past, the laws in India have brought arms of the government (legislature, executive or judiciary) into this question. T .....

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shift to creditors rather than the management who was retaining control after default. It is apparent from a reading of the object and purpose for which IBC has been enacted is to set up an Insolvency and Bankruptcy resolution process, which has to be implemented in a strict time bound manner, by the appointment of an IRP and creation of a creditors Committee. These are powers which can be exercised only by NCLT and not by the Company Court. It is for this reason that pending the Insolvency Reso .....

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CA and IBC : 50 Prior to the enactment of IBC, SICA required, what were defined as Sick Industrial Companies to file a reference before BIFR. Once a reference was filed, the moratorium under section 22 of SICA kicked in, as a result whereof proceedings such as winding up, execution and the like could neither be filed nor proceeded with, if filed. SICA, however, did not apply to all companies. It applied to only those industrial undertakings as were set out in the Schedule of the said Act. Experi .....

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supra) has certain features which mark a healthy departure from the failings of SICA. Briefly stated they are: (i) IBC applies to all companies (public and private); (ii) Since it is now well settled that a company has various stakeholders other than just shareholders like workmen, creditors etc. as held in National Textile Workers' Union v. P.R. Ramakrishnan & Ors. (supra), a company which has suffered a temporary financial set back maybe revived, by granting it a temporary reprieve by .....

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held by the Supreme Court in Innoventive (supra) speed is of essence for the working of the bankruptcy code Paragraph 16 page 7. The Supreme Court has held that there cannot be any relaxation of the time lines prescribed in the Code Paragraph 16 page 7 and Paragraph 28 page 18. (v) The initial period of attempting a resolution process is 180 days from the admission of the Petition which can be extended by a further period of 90 days only if 75% of the committee of creditors consent. (vi) What i .....

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rity of 75% of the committee of financial creditors (COC); (viii) If on the other hand, (a) NCLT does not receive a resolution plan under Section 30(6) of IBC, within the expiry of the insolvency resolution process period of 180 days or its further extension by ninety days, or (b) it rejects the resolution plan under 31 for non­compliance of the requirements specified therein or (c) the resolution professional intimates NCLT that the committee of creditors decide to liquidate the corporate d .....

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t of India in the case of Madura Coats Ltd. (Supra), that even during the regime of SICA, SICA was held to have primacy over the provisions of the Companies Act. By the virtue of Section 252 of IBC, SICA stands repealed with effect from 1st December 2016. Under section 4 (b) of the Repeal Act, all proceedings before the BIFR/AAIFR stood abated and in respect of such abated proceedings, provision has been made to permit a Company, to make a reference within a period of 180 days from 1st December .....

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application to NCLT under Section 10 of IBC and this Court had declined to grant further time or wait till the company applied to NCLT. In my view, these are all irrelevant so long as the application under Section 10 was made in time. 53 It has now been held by the Supreme Court in Bank of New York Mellon (Supra) that by virtue of Section 252 of IBC, even in the case of a company where a winding up order has been passed, it is open to such a company, whose reference was deemed to be pending wit .....

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Appellate Authority or any reference made or inquiry pending to or before the Board or any proceeding of whatever nature pending before the Appellate Authority or the Board under the Sick Industrial Companies (Special Provisions) Act,1985 (1 of 1986) shall stand abated: Provided that a company in respect of which such appeal or reference or inquiry stands abated under this clause may make reference to the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 within one hun .....

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ner contends is correct, a reference sought to be made by a Company under the provisions of Section 252 of IBC, in a situation where a post notice winding up petition which is governed by the Companies Act, 1956 against the same company (and which is retained by the Company Court), cannot be entertained by NCLT and if entertained will be nullified. There is no express or implied saving of any substantive provisions of the Companies Act, 1956 to warrant this interpretation. (V) Admission of a win .....

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whilst enacting the provisions of IBC (Competition Commission of India v. Steel Authority of India Ltd. and Anr. (2010) 10 SCC 744)) as well as the fact that company petitions that may have been filed prior to IBC coming into force may have been admitted and pending final disposal in the jurisdictional High Court. 58 In the transfer of proceedings rules dated 7th December 2016 it has been provided that winding up petitions in respect of which notice has been issued to the respondent company or .....

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e said so, either in IBC or in the transfer rules Notification. 60 On the contrary, the provisions of Section 64 (2) of IBC would indicate that the legislature did not intend that the Company Court would have the power to injunct proceedings before NCLT. Furthermore, when IBC was enacted and the provisions of SICA were repealed by the Notification dated 21st December 2016, companies which had filed a reference under SICA were given a period of 180 days to file a petition under the provisions of .....

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17 respondent­-applicant filed its petition under Section 10 before NCLT, Ahmedabad, i.e., within the prescribed period of 180 days. 62 In fact, the Hon ble Supreme Court in the case of Madura Coats Ltd. v. Modi Rubber Ltd. (supra) has held that the provisions of SICA would prevail over the provisions of the Companies Act and proceedings under the Companies Act must give way to proceedings under SICA. Therefore, since SICA is repealed and replaced by IBC (S. 252 read with VIII Schedule of IB .....

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), including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer: Provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the C .....

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t been served on the respondent as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub­section (4) of section 419 of the Act, exercising territorial jurisdiction and such petitions shall be treated as applications under sections 7, 8 or 9 of the Code, as the case may be, and dealt with in accordance with Part II of the Code: … 6. Transfer of pending proceedings of Winding up matters on the grounds other th .....

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ties) Fourth Order, 2016 issued under sub­section (1) of section 470 of the Companies Act, 2013 states as under: 1. Short title and commencement.­ (1) This Order may be called the Companies (Removal of Difficulties) Fourth Order, 2016. (2) It shall come into force with effect from the 15th December, 2016. 2. In the Companies Act, 2013, in Section 434, in sub­section (1), in clause (c), after the proviso, the following provisos shall be inserted, namely:­ … Provided further .....

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d to be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959 . 67 The fact that post notice winding up petitions continue to be governed by the Companies Act, 1956 only means ­ that to those proceedings it will be the Companies Act, 1956 which will apply. It does not, however, mean that if, in a post­notice winding up petition a new proceeding is filed under IBC, and where orders are passed by NCLT, including under Section 14 of IBC, t .....

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ion on the part of the legislature to (i) take away the right to file winding up petitions under the Companies Act, 1956; and (ii) to apply the provisions of IBC without exception to all proceedings undertaken regarding insolvency resolution and revival of companies. This is also apparent from the peremptory and express language of Sections 14, 63 and 64 (2) of IBC. 69 It is also clear from the Companies (Removal of Difficulties) Fourth Order that in fact what is saved are only the proceedings o .....

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ided under the Companies Act, 1956 only as a transitional provision. It only provides that winding up proceedings under Section 433 (1) (e) pending in the High Court would continue in the High Court ­ Prasanta Kumar Mitra (Supra). 71 Furthermore, this transitional provision cannot in any way affect the remedies available to a person under IBC, vis­à­vis the company against whom a winding up petition is filed and retained in the High Court, as the same would amount to treating .....

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ding in the High Court where a notice may not have been issued which would not get transferred, if a winding up petition against such a company has already been admitted. But even in such a case, there is no express or implied bar from other creditors of such a company or the corporate debtor from filing fresh proceedings under IBC. If at all, such creditors/corporate debtors are barred from approaching the High Court and not NCLT under IBC. 73 The mere fact that post notice winding up proceedin .....

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or authority shall have jurisdiction to entertain any suit or proceedings in respect of any matter on which National Company Law Tribunal or the National Company Law Appellate Tribunal has jurisdiction under this Code. 64. Expeditious disposal of applications: (1) … (2) No injunction shall be granted by any court, tribunal or authority in respect of any action taken, or to be taken, in pursuance of any power conferred on the National Company Law Tribunal or the National Company Law Appell .....

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ed by virtue of section 63 of IBC. Further, by virtue of Section 64(2) of IBC, the Company Court is prohibited from injuncting NCLT from exercising its jurisdiction under IBC. By virtue of section 238 of IBC, it overrides the provisions of the Companies Act, 1956. The Apex Court has, in a few cases, considered provisions similar to Section 64 (2) of IBC. In GhanshyamSarda v. Shiv Shankar Trading Company (supra), the Hon ble Supreme Court considered the bar of the Civil Court s jurisdiction under .....

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in and no civil court shall have jurisdiction in respect of any matter which the Appellate Authority or the Board is empowered by, or under, this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act. The Hon ble Supreme Court held that in view of the express bar of jurisdiction contained in SICA, the jurisdiction of the Civil Court, even to grant temporary injunct .....

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, in the exclusive domain of the BIFR and by virtue of Section 26 there is an express exclusion of the jurisdiction of the Civil Court in that behalf. 30. As laid down by this Court the Act is a complete Code in itself. The Act gives complete supervisory control to the BIFR over the affairs of a sick Industrial Company from the stage of registration of reference and questions concerning status of sickness of such company are in the exclusive domain of the BIFR. Any submission or assertion by any .....

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r the Act. The aspects of revival of such company being completely within its exclusive domain, it is the BIFR alone, which can determine the issue whether such company now stands revived or not. The jurisdiction of the civil court in respect of these matters stands completely excluded. 31. Unlike cases where the existence of jurisdictional fact or facts, on the basis of which alone a Tribunal can invoke and exercise jurisdiction, is or are doubted, stand on a different footing from the one wher .....

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view, the BIFR having correctly assumed jurisdiction and when all the financial affairs of such company were directly under the supervisory control of the BIFR, the power to decide whether it has since then lost the jurisdiction or not, is also in the exclusive domain of the BIFR. The BIFR alone is empowered to determine whether net worth has become positive as a result of which it would cease to have such jurisdiction. Any inquiry into such issue regarding net worth by anyone outside the Act i .....

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examine the audited balance sheet and satisfy itself whether the net worth had turned positive. 76 In Mardia Chemicals Ltd. (supra), the Hon ble Supreme Court considered the bar of jurisdiction contained in Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 ( SARFAESI Act ). Insolvency and Bankruptcy Code, 2016 SARFAESI Act, 2002 64. (2) No injunction shall be granted by any court, tribunal or authority in respect of .....

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ny action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993). The Hon ble Supreme Court held as follows: 50. It has also been submitted that an appeal is entertainable before the Debt Recovery Tribunal only after such measures as provided in sub­section (4) of Section 13 are taken and Section 34 bars to entertain any proceeding in respect of a matter which the Debt Recover .....

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rred in respect of matters which a Debt Recovery Tribunal or appellate Tribunal is empowered to determine in respect of any action taken "or to be taken in pursuance of any power conferred under this Act". That is to say the prohibition covers even matters which can be taken cognizance of by the Debt Recovery Tribunal though no measure in that direction has so far been taken under sub­section (4) of Section 13. It is further to be noted that the bar of jurisdiction is in respect of .....

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T is not a court subordinate to the High Court and hence as prohibited by the provisions of Section 41 (b) of the Specific Relief Act, 1963 no injunction can be granted by the High Court against a corporate debtor from institution of proceedings in NCLT. 78 Section 41 (b) of the Specific Relief Act, 1963 states: 41. Injunction when refused.­An injunction cannot be granted­ … (b) to restrain any person from instituting or prosecuting any proceeding in a court not subordinate to tha .....

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ile considering whether DRT was subordinate to the High Court in paragraph 19 that: 19. It is, thus, clear that the DRT is not a court subordinate to this court when the latter exercises its ordinary original civil jurisdiction. If that is so, this court cannot, whilst hearing a suit in its ordinary original civil jurisdiction, injunct any bank from prosecuting a proceeding before the DRT. 80 In the case of Cotton Corporation of India Limited (Supra), the Hon ble Supreme Court has held in paragr .....

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ncted from approaching the court set up to grant relief by an action brought by the opposite side against whom he has a claim and which he wanted to enforce through court, he would have first to defend the action establishing that he has a just claim and he cannot be restrained from approaching the court to obtain relief. A person having a legal right and complains of its violation or infringement, can approach the court and seek relief. When such person is injuncted from approaching the court, .....

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on 41(b) and statutorily provided that an injunction cannot be granted to restrain any person from instituting or prosecuting any proceeding in a court not subordinate to that from which the injunction is sought. … At any rate the court is precluded by a statutory provision from granting an injunction restraining a person from instituting or prosecuting a proceeding in a court of coordinate jurisdiction or superior jurisdiction. … (emphasis supplied) 81 It may also be noted that ap .....

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xercise of its inherent power in cases not covered by 0.39 C.P.C. But while exercising this inherent power, the court should not overlook the statutory provision which clearly indicates that injunction to restrain initiation of proceeding cannot be granted. Section 41(b) is one such provision. And it must be remembered that inherent power of the court cannot be invoked to nullify or stultify a statutory provision. … 82 Besides there is an express bar contained in Section 64 (2) of IBC whi .....

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e the power to injunct proceedings before BIFR. The Supreme Court in the case of Real Value Appliances Ltd. (supra) while considering this issue and whether the High Court had the power under the Companies Act, 1956, i.e., the very same provisions which petitioner is now relying on to contend that proceedings under the IBC can be injuncted, has held: Whether, once the BIFR had registered the reference dated 17.7.97 on 24.7.97 under Section 15 of the Act read with the Regulations, it was permissi .....

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s that the word 'may' in that section shows that the BIFR has power to reject a reference summarily without going into merits and that it is only when the BIFR takes up the reference for consideration on merits under Section 16(1) that it can be said that the 'inquiry' as contemplated by section has commenced. It is argued that if the reference before the BIFR is only at the stage of registration under Section 15, then section 22 is not attracted. This contention, in our opinion, .....

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prescribed in the Regulations, it will be clear that it contains more than fifty columns regarding extensive financial details of the Company's assets, liabilities, etc. Indeed, it will be practically impossible for the BIFR to reject a reference outright without calling for information/documents or without hearing the Company or other parties. Further, the Act is intended to revive and rehabilitate sick industries before they can be wound up under the Companies Act, 1956. Whether the Compa .....

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fore, in our view, the High Court of Allahabad in Industrial Finance Corporation v. Maharashtra Steels Ltd., AIR 1988 All 170, the High Court of Andhra Pradesh in Sponge Iron India Ltd. v. Neelima Steels Ltd., the High Court of Himachal Pradesh in Orissa Sponge Iron Ltd. v. Rishab Ispat Ltd., (1993) 78 Comp. Cas 264 are right in rejecting such a contention and in holding that the inquiry must be treated as having commenced as soon as the registration of the reference is completed after scrutiny .....

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ion 22 ­ be deemed to have commenced. Section 22 and the prohibitions contained in it shall immediately come into play. … 32. For the aforesaid reasons, the order passed by the Division Bench on 28.7.97 appointing Receiver and the order passed by another Bench of the High Court on 8.8.97 restoring the provisional liquidator, are set aside. The Civil appeals are accordingly allowed. There will be no order as to costs. The respondents are free, if need be, to approach the BIFR under sec .....

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established that an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or sanctioned scheme is under implementation or an appeal under Section 25 to an industrial company is pending. But it cannot be said that despite existence of any of the aforesaid exigencies the provision of Section 22 would not be attracted after the order of winding up of the company is passed. The words "no proceeding for winding up of the industrial company or for ex .....

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