TMI Blog2019 (10) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... Act shall be applicable only in a case where the actual management of a tea undertaking or tea unit owned by a company has been taken over by any person or body of persons authorised by the Central Government under the Tea Act. Taking over the actual management and control by the Central Government or by any person or body of persons authorised by the Central Government is sine qua non before Section 16G of the Tea Act is made applicable. Therefore, in the facts and circumstances of the case, Section 16G(1)(c) shall not be applicable at all, as the appellant corporate debtor is continued to be in management and control of the tea units/gardens. Section 16G(1)(c) refers to the proceeding for winding up of such company or for the appointment of receiver in respect thereof. Therefore, as such, the proceedings under Section 9 of the IBC shall not be limited and/or restricted to winding up and/or appointment of receiver only. The winding up/liquidation of the company shall be the last resort and only on an eventuality when the corporate insolvency resolution process fails. As observed by this Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 16E of the Tea Act, 1953 has taken over the control of 7 tea gardens. 2.2 That the respondent is an operational creditor of the appellant. It used to supply pesticides, insecticides, herbicides etc. to the appellant. According to the respondentoperational creditor, a sum of ₹ 41,55,500/was due and payable by the appellantcorporate debtor to the respondentoperational creditor. That the respondent initiated the proceedings against the appellantcorporate debtor before the NCLT under Section 9 of the IBC. Initiation of the proceedings under the IBC by the respondent operation creditor was opposed by the appellant corporate debtor mainly and solely on the ground that, as provided under Section 16G(1)(c) of the Tea Act, once the management of tea unit has been taken over by the Central Government, then the proceedings for winding up or appointment of receiver cannot be initiated without the consent of the Central Government. It was the case on behalf of the appellant corporate debtor that, in the present case, as the prior approval of the Central Government has not been taken, as required under Section 16G of the Tea Act, the insolvency proceeding under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is expedient to do so in public interest, for such period not exceeding one year at a time, and for total period not exceeding six years. It is submitted that Section 16E refers to the power of the Central Government to restart the tea undertaking if it is found necessary in the interest of the general public. It is submitted that Section 16G specifically deals with a situation such as in the present application. It is submitted that an insolvency process is also meant to culminate in liquidation, if there is no revival. It is submitted that since the Tea Act permits for the Central Government to take over the management of a tea estate which is not run properly, the prior permission under Section 16G is applicable to such an estate, the management of which has been taken over by the Government. 4.2 It is further submitted by Shri Shyam Divan, learned Senior Advocate appearing on behalf of the appellant that the winding up process under the Companies Act, 1956 includes the insolvency proceedings under the IBC. It is submitted that, therefore, initiation of any proceedings for winding up or liquidation by way of insolvency proceedings under the IBC shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IBC. It is submitted that even the learned NCLAT in the impugned order recognizes and/or records that the provisions of the IBC and the Tea Act are not inconsistent with each other. It is submitted that the IBC process can be started if the permission is obtained from the Central Government by a financial creditor or an operational creditor. It is submitted that the provisions of Section 7 or Section 9 may not require the consent of the Central Government to initiate such proceedings, but when the management of the tea gardens have been taken over by the Central Government under the Tea Act, one will have to consider the provisions of the Tea Act which requires the consent of the Central Government. It is submitted that, therefore, the process of insolvency resolution under the IBC has not been stopped, but what it requires is an additional permission under the Tea Act for the purpose of initiation of such insolvency proceeding. It is submitted that this should be logical as the management of the tea gardens is already under the Central Government under the Tea Act for public interest and for the interest of workers of the tea gardens. 4.6 It is further submitted by Shri Shyam Div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and insolvency resolution and for matters connected therewith or incidental thereto. It is submitted that the Code, which was promulgated in 2016, has not provided for the prerequisite of obtaining consent from the Central Government for initiating corporate insolvency resolution process like the Tea Act, which is an earlier Act enacted in 1953. It is submitted that, thus, such a prerequisite of obtaining consent cannot be imported and/or read into the Code when the self contained Code itself does not provide for it. 5.2 It is further submitted that importing the requirement of obtaining consent of the Central Government prior to initiating the corporate insolvency resolution process would be completely contrary to the overriding nature of the Code, and of the clear legislative intent of keeping the arms of the Government away from the resolution process and of not delaying the process of resolution. It is further submitted that an examination of Chapter IIIA of the Tea Act reveals that the object of restarting/revival of the tea company is a writ large in the scheme of the Tea Act. It is submitted that the said object of restarting/revival is borne out from Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided for, and governed by, the Companies Act. It is submitted that, on the other hand, initiation of corporate insolvency resolution process is provided for, and governed by, the Insolvency and Bankruptcy Code, 2016. It is submitted that both these processes are distinct from one another and not synonymous with one another. It is submitted that the power of the Parliament to make any law relating to winding up can be traced to Entry nos. 33 and 34 of the Union List of the Seventh Schedule of the Constitution. It is submitted that, on the other hand, the power of the Parliament to make any law relating to insolvency can be traced to Entry no. 9 of the Concurrent List of the Seventh Schedule of the Constitution. It is submitted that, thus, winding up and insolvency proceedings are not one and the same as they have been mentioned under two separate entries in two separate lists in the Seventh Schedule. It is submitted that, as such, Section 16G(1)(c) of the Tea Act, which mandates that no winding up proceeding can lie in any court against a company which has been taken over by the Tea Board without consent of the Central Government, does not and cannot be interpreted to mean that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of such company shall be given effect to unless approved by the Central Government; ( c) no proceeding for the winding up of such company or for the appointment of receiver in respect thereof shall lie in any court except with the consent of the Central Government. ( 2 ) Subject to the provisions contained in subsection (1), and to the other provisions contained in this Act, and subject to such other exceptions, restrictions and limitations, if any, as the Central Government may, by notification in the Official Gazette specify in this behalf, the Companies Act, 1956, shall continue to apply to such company in the same manner as it applied thereto before the issue of the notified order. 7.1 In the present case, it is true that by notification dated 28.01.2016 issued under Section 16E of the Tea Act, the Central Government authorised the Tea Board to take over the management or the control of the seven tea estates mentioned in the said notification. However, the appellant challenged the said notification before the High Court of Calcutta and the learned Single Judge of the High Court dismissed the said petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is made applicable. Therefore, in the facts and circumstances of the case, Section 16G(1)(c) shall not be applicable at all, as the appellant corporate debtor is continued to be in management and control of the tea units/gardens. 7.2 Now, so far as the main issue, namely, whether before initiation of the proceedings under Section 9 of the IBC, a prior consent of the Central Government as provided under Section 16G(1)(c) of the Tea Act is required or not and/or in absence of any such consent of the Central Government, the proceedings under Section 9 of the IBC shall be maintainable or not, is concerned, at the outset, it is required to be noted that the IBC is a complete Code in itself. In a recent decision of this Court in the case of Swiss Ribbons Pvt. Ltd. (supra), this Court had an occasion to consider the Statement of Objects and Reasons of the IBC and also the Preamble of the IBC, which when noted by this Court in its earlier decision in Innoventive Industries Ltd. (supra), in paragraphs 25 and 26 in the case of Swiss Ribbons Pvt. Ltd. (supra), this Court has referred to the Statement of Objects and Reasons of the IBC and the Preamble of the IBC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The Code seeks to provide for designating NCLT and DRT as the adjudicating authorities for corporate persons and firms and individuals, respectively, for resolution of insolvency, liquidation and bankruptcy. The Code separates commercial aspects of insolvency and bankruptcy proceedings from judicial aspects. The Code also seeks to provide for establishment of the Insolvency and Bankruptcy Board of India (Board) for regulation of insolvency professionals, insolvency professional agencies and information utilities. Till the Board is established, the Central Government shall exercise all powers of the Board or designate any financial sector regulator to exercise the powers and functions of the Board. Insolvency professionals will assist in completion of insolvency resolution, liquidation and bankruptcy proceedings envisaged in the Code. Information Utilities would collect, collate, authenticate and disseminate financial information to facilitate such proceedings. The Code also proposes to establish a fund to be called the Insolvency and Bankruptcy Fund of India for the purposes specified in the Code. 4. The Code seeks to provide for amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme -workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximise their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. (See ArcelorMittal [ArcelorMittal (India) (P) Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1] at para 83, fn 3). 28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of proceedings under Section 9 of the IBC, the consent of the Central Government as provided under Section 16G(1)(c) of the Tea Act is to be obtained, in that case, the main object and purpose of the IBC, namely, to complete the corporate insolvency resolution process in a timebound manner, shall be frustrated. The sum and substance of the above discussion would be that the provisions of the IBC would have an overriding effect over the Tea Act, 1953 and that no prior consent of the Central Government before initiation of the proceedings under Section 7 or Section 9 of the IBC would be required and even without such consent of the Central Government, the insolvency proceedings under Section 7 or Section 9 of the IBC initiated by the operational creditor shall be maintainable. 8. In view of the above and for the reasons stated above, the present appeal fails and the same deserves to be dismissed and is accordingly dismissed. The impugned judgment and order dated 20.06.2019 passed by the learned NCLAT holding that insolvency petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 initiated by the respondent operation creditor shall be maintainabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
