TMI Blog2019 (1) TMI 1442X X X X Extracts X X X X X X X X Extracts X X X X ..... we are not interfering with the Appellate Tribunal's order dismissing the appeal, we grant liberty to the appellant before us to apply under the proviso to Section 434 of the Companies Act (added in 2018), to transfer the winding up proceeding pending before the High Court of Delhi to the NCLT, which can then be treated as a proceeding under Section 9 of the Code. - Civil Appeal No. 818 of 2018 - - - Dated:- 22-1-2019 - R. F. Nariman And Navin Sihna, JJ. JUDGMENT Rohinton F. Nariman, J. The present matter arises from an Operational Creditor's appeal to continue with a winding up petition that has been filed by the said creditor way back in 2014. The facts relevant for disposal of this appeal are as follows:- 2. A winding up petition, being No. 42 of 2014, was filed by the present appellant before the High Court of Delhi on 10.01.2014, against Respondent No. 2-Company, alleging (under Section 433(e) of the Companies Act) inability to pay dues. Notice in this petition had been served, as is recorded by an order dated 20.01.2014 of the High Court of Delhi. Further orders which have been pointed out to us by learned counsel for the appellant, have gone on to stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings before the High Court should continue and not proceedings filed by other creditors under the Code. 6. Mr. Sanjiv Sen, learned senior counsel appearing on behalf of Respondent No. 1, countered these submissions and has placed before us all the relevant materials, statutory and otherwise, to state that the whole object of the Code would be frustrated if petitions for winding up in the High Court were to continue in the face of the insolvency petitions that have been filed under the Code. He referred to some of our judgments to buttress this submission and, in particular, to Section 238 of the Code. According to him, as has been held in some of our judgments, the proceedings that were initiated under Section 7 or Section 9 of the Code are independent proceedings, which must reach their logical conclusion unhampered by any winding up petition that may be pending in a High Court. According to him, it is also important to remember that the basic objective of the Code is to infuse life into a corporate debtor who is in the red, and it is only if the resuscitation process cannot be completed in accordance with the provisions of the Code that liquidation takes place under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this section. 9. On and from 17.08.2018, Section 434 was substituted again. This time, the provision reads as follows:- 434. Transfer of certain pending proceedings.-(1) On such date as may be notified by the Central Government in this behalf,- (a) all matters, proceedings or cases pending before the Board of Company Law Administration (herein in this section referred to as the Company Law Board) constituted under sub-section (1) of Section 10-E of the Companies Act, 1956, immediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act; (b) any person aggrieved by any decision or order of the Company Law Board made before such date may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may if it is satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 (31 of 2016). (2) The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this section. (Emphasis supplied.) 10. When the Code was enacted with effect from 01.12.2016, two Notifications both dated 07.12.2015 were made. The first Notification, which was titled as the Companies (Transfer of Pending Proceedings) Rules, 2016 laid down in Rule 5 as follows: 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 dealt with in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, as the case may be, in accordance with the provisions of the Code: Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under this Rule and remains in the High Court and where there is another petition under clause (e) of Section 433 of the Act for winding up against the same company pending as on 15th December, 2016 such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent. 13. Rules 26 and 27 of the Companies (Court) Rules, 1959 read as follows: Rule 26. Service of petition .- Every petition shall be served on the respondent, if any, named in the petition and on such other persons as the Act or these rules may require or as the Judge or the Registrar may direct. Unless otherwise ordered, a copy of the petition shall be served along with the notice of the petition. Rule 27. Notice of petition and time of service .- Notice of every petition required to be served upon any person shall be in Form No. 6, and shall, unless otherwise ordered by Court or provided by these rules, be served not less than 14 days before the date of hearing. Provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court strongly relied upon Form No. 6 appended to Rule 27 and the expression was admitted occurring in the Notice of Petition contained in the said Form. 16. We are of the view that Rules 26 and 27 clearly refer to a pre-admission scenario as is clear from a plain reading of Rules 26 and 27, which make it clear that the notice contained in Form No. 6 has to be served in not less than 14 days before the date of hearing. Hence, the expression was admitted in Form No. 6 only means that notice has been issued in the winding up petition which is then fixed for hearing before the Company Judge on a certain day. Thus, the Madras High Court view is plainly incorrect whereas the Bombay High Court view is correct in law. 17. The resultant position in law is that, as a first step, when the Code was enacted, only winding up petitions, where no notice under Rule 26 of the Companies (Court) Rules was served, were to be transferred to the NCLT and treated as petitions under the Code. However, on a working of the Code, the Government realized that parallel proceedings in the High Courts as well as before the adjudicating authority in the Code would stultify the objective sought to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any inconsistency between Section 434 as substituted and the provisions of the Code, the latter must prevail. We are of the view that the NCLT was absolutely correct in applying Section 238 of the Code to an independent proceeding instituted by a secured financial creditor, namely, the Alchemist Asset Reconstruction Company Ltd. This being the case, it is difficult to comprehend how the High Court could have held that the proceedings before the NCLT were without jurisdiction. On this score, therefore, the High Court judgment has to be set aside. The NCLT proceedings will now continue from the stage at which they have been left off. Obviously, the company petition pending before the High Court cannot be proceeded with further in view of Section 238 of the Code. The writ petitions that are pending before the High Court have also to be disposed of in light of the fact that proceedings under the Code must run their entire course. We, therefore, allow the appeal and set aside the High Court's judgment. 19. Mr. Sen also referred us to a judgment of the learned Single Judge of the High Court of Bombay reported, in (2018) 2 AIR Bom R 350 in PSL Limited v. Jotun India Private Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idation order has been made. Explanation - For the purposes of this section, a corporate debtor includes a corporate applicant in respect of such corporate debtor. 22. This Section is of limited application and only bars a corporate debtor from initiating a petition under Section 10 of the Code in respect of whom a liquidation order has been made. From a reading of this Section, it does not follow that until a liquidation order has been made against the corporate debtor, an Insolvency Petition may be filed under Section 7 or Section 9 as the case may be, as has been held by the Appellate Tribunal. Hence, any reference to Section 11 in the context of the problem before us is wholly irrelevant. However, we decline to interfere with the ultimate order passed by the Appellate Tribunal because it is clear that the financial creditor's application which has been admitted by the Tribunal is clearly an independent proceeding which must be decided in accordance with the provisions of the Code. 23. Though, we are not interfering with the Appellate Tribunal's order dismissing the appeal, we grant liberty to the appellant before us to apply under the proviso to Section 434 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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