TMI Blog2018 (8) TMI 1892X X X X Extracts X X X X X X X X Extracts X X X X ..... vision in the Code prior to 06.06.2018 that require a special resolution passed by the shareholders of the Corporate Debtor to trigger Corporate Insolvency Resolution Process by a Corporate Applicant u/s.10 of the IB Code. Such a condition precedent is for the first time introduced by way of Ordinance by replacing the earlier Sec. 10(3) and by substituting Sec. l0(3)(a)(b)(c), which came into force with effect from 06.06.2018 - Therefore, it is not a case where an existing right has been taken away. It is a case where a special condition is made applicable for filing of, Applications by the Corporate Applicants u/s.10 of the IB Code. In the case on hand, the petition is filed on 09.05.2018, much prior to coming into force of amended Sec. 10(3)(c), which came into force on 06.06.2018 - Therefore, it is not just and proper to direct the Corporate Applicant to take the approval of the shareholders by applying the amended Section 10(3)(c) of the Code. But, in the instant case, a condition, which is not there prior to the amendment of Sec. l0(3)(c) of the IB Code, has been introduced by the legislature by way of an Ordinance for the first time with effect from 06.06.2018, such bur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equest to trigger Corporate Insolvency Resolution Process in respect of Supraja Textiles Private Limited, hereinafter called as 'the Corporate Debtor'. 4. The Corporate Debtor is having Financial Creditors, Operational Creditors besides Statutory Dues. 5. The Corporate Debtor has committed default in payment of ₹ 16,13,67,283/-. According to the Corporate Applicant, the date of default is 28.12.2016. 6. The Corporate Applicant filed the following documents to prove the existence of default and the amount in default:- a) Copy of Form No. 8 dated 17.04.2006 for creation of Charge for ₹ 12.36 Cr. as filed with the Registrar of companies, Andhra Pradesh. b) Copy of Form No. 8 dated 03.01.2007 for creation of Charge for ₹ 15.44 Cr. as filed with the Registrar of Companies, Andhra Pradesh. c) Copy of the Certificate of Registration of Charge for creation of charge dated 03.01.2007 for ₹ 15.44 Cr. issued by The Registrar of Companies, Andhra Pradesh. d) Copy of Form No.8 dated 23.03.2008 for creation of Charge for ₹ 23.72 Cr. as filed with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India under Rule 8(1) of Security Interest (Enforcement) Rules, 2002. s) Copy of Sale Notice dated August 19, 2017 issued by State Bank of India under Rule 8(6) of Security Interest (Enforcement) Rules, 2002. t) Copy of letter No. SAMBII/HYD/LRS/1197 dated Oct. 31, 2017 of State Bank of India, SAM Branch, Hyderabad approving One Time Settlement of ₹ 12,09,87,013/- to the Corporate Debtor. u) Copy of letter No. SAMB/HYD-II/LRS/18 dated April 02, 2018 of State Bank of India, SAM Branch, Hyderabad intimating cancellation of One Time Settlement to the Corporate Debtor. v) Copy of letter dated April 16, 2018 issued by State Bank of India, SAM Branch, Hyderabad intimating publication of e-auction sales notice dated April 13, 2018 April 14, 2018 on fixing the date for sale of secured assets through e-auction on May 23, 2018. w) Copies of e-auction notice published in New Indian Express, Vijayawada Edition on April 14, 2018. x) Copies of e-auction notice published in New Indian Express, Hyderabad Edition on April 14, 2018. 7. The Corporate Debtor proposed the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,038/- but, thereafter, the Corporate Debtor did not pay any amount, as per the terms of OTS. Financial Creditor cancelled the OTS sanctioned to the Corporate Debtor and the Corporate Debtor was liable to pay the total outstanding amount. 20. After the expiry of 30 days, from the date of notice issued prior to sale, SBI got issued an intimation of sale of properties through e-auction on 14.04.2018 to the Corporate Debtor. 21. It is stated by the SBI that the Corporate Debtor having full knowledge of all these proceedings, invoked the provisions of IB Code, only to stall the proceedings under SARFAESI Act. 22. It is stated by SBI that this petition is filed with a mala fide intention but not to have a Resolution Plan or for Revival of the Company. 23. Mr. Guntupalli Srinivasa Rao, who is holding 48% of the voting rights in the Corporate Debtor, filed reply, raising the following objections:- i) The management ought to have taken prior written consent of all the parties to the MOU, dated 23.12.2013, before filing this petition. ii) On account of the financial irregularities and misappropriati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neers Consultants Ltd. v. Canara Bank and Standard Chartered bank in Company Appeal (AT) (Insolvency) No. 100 of 2017, in contended that, this Adjudicating Authority has to see only the existence of debt occurrence of default and that the Corporate Applicant is not suffering for any disqualification u/s. 7 of the Code. 30. Learned Counsel appearing for the petitioner contended that this Adjudicating Authority cannot go beyond the scope of the above said three aspects and see whether the Application is complete or not. 31. A perusal of the Petition, filed by the Corporate Debtor, discloses that it is complete in all respects except filing Special Resolution passed by the shareholders of the Corporate Debtor, as required by Sec. l0(3)(c) of the Code, that came into force with effect from 06.06.2018, by virtue of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018. 32. The material on record further discloses the existence of debt and occurrence of default. The Corporate Applicant also proposed the name of the Insolvency Professional to act as IRP and filed his written communication in Form-2. 33. The contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36 of the Arbitration Act removes such automatic stay and it further contemplate filing of an Application by the Applicant seeking stay and discretion is given to the Court whether to grant stay of the execution of the Award or not laying down certain conditions. The question that fell for consideration of Hon'ble Supreme Court and Hon'ble High Court of Bombay in the decisions stated supra is whether amended Sec. 36 of Arbitration Act is applicable to the Applications filed u/s. 34 of Arbitration Act prior to 23.10.2015. 43. It is held that the amended Sec.36 is not retrospective in operation but the Hon'ble Supreme Court held that the amended Sec. 36 is applicable even for Arbitration proceedings that were initiated prior to 23.10.2015. 44. A distinction was made between the Arbitration proceedings that were initiated prior to 23.10.2015 and the Applications before Court u/sec.34 that were filed prior to 23.10.2015. 45. It is held by the Hon'ble Supreme Court that if an Application is filed u/s.34 prior to 23.10.2015, the amended Sec.36 is not applicable. If an application is filed u/s.34 on or after 23.10.2015, amended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned Court wherein an Application u/s. 34 is filed even as per amended Sec. 36(2) of Arbitration Act. 55. In the case on hand, the petition is filed on 09.05.2018, much prior to coming into force of amended Sec. 10(3)(c), which came into force on 06.06.2018. 56. Therefore, it is not just and proper to direct the Corporate Applicant to take the approval of the shareholders by applying the amended Sec. 10(3)(c) of the Code. 57. Learned Counsel appearing for the shareholders cum secured creditors relying upon the decision of the Hon'ble Supreme Court in CIT v. Gold Coin Health Food Private Ltd. contended that when the amendment is clarificatory in nature, it must be given retrospective effect. 58. The said decision relates to Sec. 271(l)(c)(iii) Explanation 4(a) of the Income-tax Act, as amended by Finance Act, 2002 with effect from 01.04.2003. 59. In that case, the Hon'ble Supreme Court held that the amendment is clarificatory in nature. 60. The Hon'ble Supreme Court held that Explanation 4 of Section 271(c) of the Income-tax Act is clarificatory and not substantial and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70. The Hon'ble Supreme Court in the above said decision laid down the ambit and scope of an amended Act its retrospective operations are as follows:- (i) 'A statute which affects substantive rights is presumed to be prospective in operation unless made retrospective, either expressly or by necessary intendment, whereas a statute which merely affects procedure, unless such a construction is textually impossible, is presumed to be retrospective in its application, should not be given an extended meaning and should be strictly confined to its clearly-defined limits. (ii) Law relating to forum and limitation is procedural in nature, whereas law relating to right of action and right of appeal even though remedial is substantive in nature. (iii) Every litigant has a vested right in substantive law but no such right exists in procedural law. (iv) A procedural statute should not generally speaking be applied retrospective where the result would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished. (v) A statute which not only c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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