TMI Blog2018 (11) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... by suitably extending the last date of submission of such claims in accordance with the provisions of the IBC, 2016 and relevant regulations and thereafter the Resolution Professional shall take necessary steps for completion of the resolution process in accordance with law. In case the forum under the IBC of 2016 which is National Company Law Tribunal, fails to revive or successfully implement the resolution plan, this Court seized of the winding up petitions would proceed to deal with these petitions in accordance with law and till then the effect of the order dated 21.3.2017 passed by this Court appointing provisional Official Liquidator is kept in abeyance. All the connected applications are disposed of accordingly. Company Application is also disposed of accordingly. - Company Application No. 10 of 2017 In Company Petition No. 6 of 2012 - - - Dated:- 2-11-2018 - S.B. Shukre, J Shri S. V. Manohar, Senior Advocate and Shri H. V. Thakur, Advocate with him for applicant Murli Industries Limited Shri A. C. Dharmadhikari, Advocate for respondent no. 1 Primo Pick Dr Anjan De, Advocate for respondent no. 2 Official Liquidator Shri M. G. Bhangde, Senior Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p petitions having been served upon the Corporate Debtor under rule 26 of the Companies (Court) Rules, 1959 before the cut off date, have not been transferred to the National Company Law Tribunal (NCLT) and have been retained by this Court. (c) One of the financial creditors of the Corporate Debtor, viz. Edelweiss Asset Reconstruction Company Limited (EARC) filed an application, registered as C.P. No. 66/I BP/NCLT/MAH/2017, under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short, the IBC ) before the NCLT, Mumbai Bench seeking initiation of Corporate Insolvency Resolution process against the Corporate Debtor. By an order dated 5th April 2017, the NCLT admitted the application filed by the EARC and thus initiated the insolvency resolution process against the Corporate Debtor. It appointed the present applicant Vijaykumar Iyer as an Interim Resolution Professional ( IRP for short). Pursuant to the Admission Order, the IRP published a Public Announcement dated 12th April 2017 as per Section 13 of the IBC read with Regulation 6 (2) (b) (I) of the Insolvency and Bankruptcy Board of India (Insolvency Process for Corporate Persons) Regulations, 2016 (for short the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, the Resolution Professional proceeded with the process and took various steps, and on the other, respondent no. 2 refrained from taking steps regarding taking possession of the assets of the Corporate Debtor on account of resolution process having been commenced. (h) The resolution professional's contention has been that the IBC is a complete Code by itself and it has come into being as an effective alternative to the proceedings under the Act of 1956 and the Companies Act, 2013 regarding winding up of the Corporate Debtor on the ground of inability of the Corporate Debtor to pay its debts. The Resolution Professional also feels that interests of the Corporate Debtor and its various stake holders including its financial creditors would be seriously hampered if the parallel proceedings in the nature of winding up of the Corporate Debtor under Section 433 of the Act of 1956 are proceeded with. The Resolution Professional is of the view that the IBC, a special law, has been enacted to aid the rehabilitation and revival of the financial companies in order to maximize the value of assets and to make best efforts to save the company from going into liquidation and so the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion process under the IBC. 6. The interveners in Company Applications No. 3 of 2018 and 4 of 2018 have vehemently opposed this application and other similar applications. But, the intervener CoC, in Company Application No. 15 of 2018, is in favour of granting of the application. 7. I have gone through the applications, replies filed by the respondents and all interested parties and also the written submissions filed by them. I have heard learned Senior Advocates and learned counsel for the respective parties. 8. Shri S. V. Manohar, learned Senior Advocate for the applicant/Resolution Professional submits that even though no leave under Section 446 of the Act of 1956 to proceed with the Insolvency Resolution Process is required in view of the provisions of the IBC, as a matter of caution, the Resolution Professional has filed this application. He submits that this is because of the fact that under Section 238 of the IBC, the provisions of the IBC have been given an overriding effect over all other laws to the extent of inconsistency of the provisions in the other laws with the provisions of the IBC. He further submits that even in the case of Jotun India Private Ltd. or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmits that the provisional liquidator has already been appointed in this case after the company petitions were retained by this Court and so this Court need not wait till NCLT decides the matter. I must say, this submission of learned counsel for respondent no. 2 is contrary to written submission dated 6th June 2017 filed on record of the case by respondent no. 2. In the written submission, respondent no. 2 has stated that in view of order dated 5.4.2017 passed by the NCLT under the IBC and also the fact that the Resolution Professional had taken possession of the property of the Company, no possession of Registrar's office of the Company was taken by the Official Liquidator on 17.5.2017. It is further submitted therein that Section 238 of the IBC has given overriding effect to the IBC. Finally, it is submitted in the written submission that till completion of the Insolvency Resolution Process under the IBC, liquidation proceedings may be dispensed with. 12. Shri M. G. Bhangde, learned Senior Advocate for the intervener in Company Application No. 3 of 2018 submits that the Resolution Professional cannot be permitted to say that no leave under the Act of 1956 is required. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of revival of the company, is more objective and inexpensive as compared to the resolution process undertaken under the IBC, for, according to the applicant- intervener, the Resolution Professional is a private person and crores of rupees are required to be paid as fees to the Resolution Professional and ultimately, the amount of fees will be taken from the sale proceeds of the assets of the Company which will proportionately decrease the amount to be distributed amongst the creditors towards discharge of their respective debts. He also submits, the resolution process under the IBC is quite complicated. 15. Shri Bhangde further submits that apart from the expenses and certain degree of complexity of the resolution process, the settled law would tell us that at any cost, two parallel proceedings must be avoided, which, otherwise would be inevitable, if the leave is granted. He submits that in any case, if the leave is granted, it would be effective only from the date of leave and, therefore, resolution process would have to be started afresh from the date of leave and this would only add to inconvenience, delay and complications. 16. Learned Senior Advocate has also critici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the workers. He further submits that the amount reserved for settling the claims of the workers appears to be more than what the workers would probably get if they confine themselves only to winding- up proceedings. He also submits that under the scheme of IBC, the Resolution Professional is not a private person, but a qualified professional who can secure interests of all the stakeholders in a much better way and that he functions under the supervision and control of the Insolvency and Bankruptcy Board of India. He further submits that the resolution plan under the scheme of IBC is required to be approved by the CoC under Section 30 (4) of the IBC and then it is required to be considered by the Adjudicating Authority in terms of Section 31 of the IBC. These provisions, learned Senior Advocate further submits, would ensure transparency, efficiency and serving of interests of all the stakeholders in a best possible manner, which does not appear to be so in case the leave is not granted. He also submits that the IBC being a better legislation, the leave deserves to be granted. 19. Shri S. P. Dharmadhikari further submits that pendency of the company petitions before this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofessional. 23. Section 238 of the IBC, Rule 5 of the Rules of 2016 and Clause (2) of the Order, 2016, in my view provide sufficient guidance for us to find out the answer to the question. They read as follows: Section 238 of IBC 238. Provisions of this Code to override other laws. The provisions of this Code shall have effect, notwithstanding 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. - Rule 5 of Rules of 2016 5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts. (1) All petitions relating to winding up under clause (e) of section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not 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 sub section (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f provision of Section 1 (3) of the IBC and not all the pending company petitions have been transferred to the NCLT and some petitions, in terms of rule 5 of the Rules of 2016, have been permitted by law to be retained by the High Court. Under rule 5, only those petitions in which there is no service made upon the respondent as required under rule 26 of the Companies (Court) Rules, 1959 have been transferred to the Tribunal established under sub section (4) of Section 419 of the Companies Act, 2013. However, those company petitions in which service has been effected in the manner as contemplated under rule 5, have been retained by the Company Court and, therefore, they are required to be dealt with in accordance with the provisions of the Act of 1956. Clause 2 to the Order, 2016 settles this aspect of the matter. It lays down in no uncertain terms that those proceedings relating to winding- up of the Company which have not been transferred to the NCLT, shall be dealt with in accordance with the provisions of the Act of 1956 and the Company (Court) Rules, 1959. 26. Now, we have a situation where Section 238 prescribes that the IBC shall prevail upon any other law for the time in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution issue or revival issue and also opined that in case the forum under the IBC would fail to revive or successfully implement the resolution plan, then only the Company Judge seized of winding- up petitions, would deal with those petitions in accordance with law. 28. Such a harmonious interpretation would also have to be made in the present case in view of the provisions of Section 238 IBC and also the provisions made under rule 5 of the Rules of 2016 and clause (2) of Order, 2016 which owe their origin to the same enactment, the IBC. 29. 1st December 2016 is the date from which provisions of Section 238 have come into force. This Section gives overriding effect to the IBC. A later date, 15th December 2016, prescribed under Rules of 2016 and Order, 2016 brings into force from this date onward rule 5 and clause 2. These provisions pave the way for transfer of company petitions as well as retention of the company petitions and also lay down that all retained and pending petitions be dealt with, not by the provisions of IBC, but in accordance with the Act of 1956, which is the case here. 30. So, by a later rule, made in exercise of the rule -making power given by the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Corporate debtor under chapter II, against whom a liquidation proceeding is pending before the Company Court, why any leave to initiate or continue with such process is required, especially when the IBC contains no such provision ? Any negative answer to this question, to my mind, would be a naivety. A harmonious interpretation of the IBC and the Act of 1956, in my view, should go a long way in finding out a reasonable answer to the question. 33. The IBC, as held in the case of Innoventive Industries Ltd. v. ICICI Bank ors reported in AIR 2017 SC 4084 , is a complete Code in itself, and is exhaustive of what it provides for. So, the IBC would apply with full force to any application filed for resolution of insolvency of a Company facing liquidation before the Company Court. But, such complete dominance of the IBC would start the moment the resolution application is filed and not before that and it would continue till the resolution process ends one way or the other. This is because of the fact that the Company or the Corporate Debtor, which cannot file a resolution application and which is already facing a liquidation proceeding in a saved petition, in respect of whom resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting a provision of law when the language of the provision is clear. With due respect, I must submit that in the present case, the statutory language of the provisions of law discussed earlier, is not so clear as not to restrain us from resorting to the aims and objects of the IBC. The Hon'ble Apex has also considered them in the case of Innoventive Industries (supra). So, it would be useful for us also to bear them in mind while resolving the conflict between the IBC arising from Section 238 and the provisions of Part VII, in particular Section 446, of the Act of 1956. 36. The object of the IBC is to consolidate and amend the law relating to re organization and insolvency resolution of the corporate persons, partnership firms and individuals in a time- bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders. The whole theme of IBC is based upon efficacy and speed to be achieved in making efforts to revive a dying Company, and securing protection of the interests of its creditors and other stakeholders. The object of the IBC is not to repeal the Companies act, 1956 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Advocate for respondent No.1, and Shri Kohli, learned Advocate for the workers, strongly oppose the grant of leave. Learned Senior Advocates for the resolution professional and intervenor CoC have adverted to the various advantages that are to be found in the IBC as against the Act of 1956 to make out a case for grant of leave. On the other hand, learned Senior Advocate for the other intervenor- ex director of the Company under liquidation, learned Advocates for respondent No.1 and the workers have spoken about equally efficacious provisions of law allowing rehabilitation of a company being present under the Act of 1956 and also about the need for avoiding at any cost the multiplicity of proceedings and the NCLT having lost its jurisdiction altogether to deal with the process initiated for resolution of insolvency and possibly the liquidation as well. As regards the argument about NCLT having no jurisdiction, I would say, the issue has already been answered by me. But the other arguments require consideration. 40. In the present case, creditors of Corporate Debtor have initiated proceedings for winding up of the Company or the Corporate Debtor under Part VII of the Act of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provals of the CoC and ultimately, the Adjudicating Authority. No doubt, he is a private person and the process is somewhat expensive as compared to liquidation process under the Act of 1956. But, the control exercised over the Resolution Professional would not allow him to compromise his independence and the output that he is going to give, using his expertise, would far outweigh the cost of the resolution process. Besides, this whole process takes care of interests of all the creditors, which should allay the apprehension expressed by respondent no. 1 in this case. 42. As regards the process of liquidation, it would be seen that it has been dealt with in a separate chapter, Chapter III , Part II of the IBC. Presently, so far as the proceedings before the IBC are concerned, the provisions contained in Chapter III, Part II of the IBC should not be and are not the subject matter of our attention. That stage would arrive only upon the rejection of the resolution plan by the Adjudicating Authority and if that happens, the situation then obtaining would have to be dealt with by considering the fact that the issue of liquidation of Corporate Debtor is also being dealt with by this Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 446 (1) of the Act of 1956 to continue with the process of insolvency resolution. 45. In a given case, however, depending on the facts and circumstances of that case, the discretion to grant leave may not be justifiably exercised. Considering the myriad colours the facts and circumstances of each case may display, it is not possible to state a few of such situations to illustrate the point. Suffice it to say it here that in the instant case, the facts and circumstances do justify the grant of leave. The reasons being that though Provisional Official Liquidator has been appointed, he has not taken over the possession of assets and so the liquidation process has not even taken off the ground and that what has been said about ₹ 400 crore or so resolution plan prepared or being prepared would hold out a reasonable assurance about taking care of interests of all creditors and stakeholders, in the resolution process. 46. The discussion made thus far would lead me to hold that in the situation the Corporate Debtor is presently going through, it would be in the best of interests of the Corporate Debtor as well as its creditors and all stake holders that leave under Section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such proceedings could be multiple proceedings but only in number and not in terms of their impact and efficacy for injecting life into an otherwise a dying Company. Therefore, if the parties are allowed to make an attempt of revival by resorting to best possible procedure, which is under the IBC, the net result would only be of avoidance of unnecessary litigation and multiplicity of further proceedings. 49. In the case of Harihar Nath and others vs. State Bank of India and others, (2006)4 SCC 457 , the Hon'ble Apex Court elaborating upon the object and scope of Section 446 of the Act of 1956 has held that the object of this Section is not to cancel, nullify or abate any claim against the Company and its object is to save the Company which has been ordered to be wound up, from unnecessary litigation and multiplicity of proceedings and also provide effective assistance for equitable distribution of money generated in the process amongst creditors and shareholders of the Company. The relevant observations of the Hon'ble Apex Court as they appear in paragraph 18 are reproduced thus : The object of Section 446 of the act is not to cancel, nullity or abate any claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Official Liquidator of the Company. So, the possibility of the creditors who have initiated proceedings relating to liquidation of the Corporate Debtor before this Court seeking transfer of the resolution proceeding pending before NCLT cannot be ruled out and in the event any such application is moved, this Court would have to decide as to whether or not to exercise its power under Section 446(2)(a). On the other hand, the proceeding pending before NCLT for resolution of the insolvency of the Corporate Debtor would also become vulnerable in law. The best resolution of this dilemma, in my considered opinion, would occur by deciding to grant leave under Section 446(1) of the Act of 1956 so that whatever possibly can be done in the best interests of the Corporate Debtor and all the stakeholders is done and speedily too. All this, in my opinion, would make out a case for grant of leave under Section 446 (1) of the Act of 1956. 52. Shri Bhangde, learned Senior Advocate for the other intervenor has submitted that even if leave under Section 446(1) of the Act of 1956 to continue with the proceeding before the NCLT is granted, it would be effective only from the date of the leave as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned. The view commeds to me and following the same that I have drawn my conclusions as stated earlier in the present case. Learned Senior Advocate Shri Bhangde for the other intervenors, has further referred to me the case of Indorama Synthetics (I) Ltd. Nagpur vs. State of Maharashtra and others 2016(4) Mh.L.J. 249 wherein the Division Bench of this Court has held that the main purpose of Section 446(1) of the Act of 1956 is to see that assets of the Company are not frittered away and to ensure that payment of debts of secured, unsecured creditors and shareholders takes place in an equitable manner and in accordance with law, I have borne in mind this decision as well while recording my findings so far. 56. Learned Senior Advocate Shri M.G. Bhangde for the other intervenors, has further relied upon the cases of Escorts Ltd. vs. Commissioner of Central Excise, Delhi II (2004)8 SCC 335, Sumtibai and others vs. Paras Finance Co. Regd. Partnership firm Beawer (Raj.), through Mankanwar (Smt) w/o. Parasmal Chordia (dead) and others (2007)10 SCC 82, Union of India and others vs. Dhanwanti Devi and others (1996) 6 SCC 44 . Shri Sunil Manohar, learned Senior Advocate for the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n process fails, this Court already seized of the winding up petitions (saved petitions) would proceed to deal with the saved petitions in accordance with law. This would mean that the application would have to be allowed partly, by imposing suitable conditions. Hence, the following order: ORDER (1) Company Application No. 10 of 2017 is partly allowed and leave is granted to continue with the Corporate Insolvency Resolution Process to the extent it is carried out under Chapter II, Part II of the Insolvency and Bankruptcy Code, 2016. (2) All the creditors and also the operational creditors including the workers having preferential claims under Section 529A of the Companies Act, 1956 shall be allowed to submit their respective claims by the Resolution Professional by suitably extending the last date of submission of such claims in accordance with the provisions of the IBC, 2016 and relevant regulations and thereafter the Resolution Professional shall take necessary steps for completion of the resolution process in accordance with law. (3) In case the forum under the IBC of 2016 which is National Company Law Tribunal, fails to revive or successfully implement the resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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