TMI Blog2019 (1) TMI 1681X X X X Extracts X X X X X X X X Extracts X X X X ..... appears that the Financial Creditor IDBI Bank has informed the CoC about the order dated 25.1.2017 passed by the Hon ble High Court liquidating the Corporate Debtor. Given the provision of Sec 11(d) of the IB Code the corporate debtor was not entitled to make an application for initiation of Corporate Insolvency Process U/S 10 of the I B Code. But the corporate debtor has filed the petition U/S 10 of the code, after suppressing material facts that the company was wound up by the order dated 25.1.2017 of the Hon ble High Court. After liquidation order passed in a winding-up petition against the corporate debtor then it is barred from filing a petition under section 10 of the Code. Here the corporate debtor has not only suppressed the material fact that the winding up petition has not only been filed and admitted, but liquidation order has also been passed against the corporate applicant/corporate debtor liquidator has been directed to expedite liquidation proceedings expeditiously. The corporate applicant suppressed this material fact, knowing it to be material, and filed the petition under section 10 and in contravention of Rule 10 of Insolvency and Bankruptcy (Applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company, this petition was filed under section 10 of the Code, after suppressing the material facts by the Corporate Applicant, without disclosing that the company has been wound up by order of the Hon ble High Court. The Ld. Counsel appearing on behalf of IDBI bank has drawn our attention towards the order of the Hon ble High Court, Bombay, dated 25.1.2017 passed in Company Petition No. 7/2015. In the said case Hon ble High Court passed the following order: 2. Ld. Counsel for the respondent states that the proceedings before AFFIR stand abated. The Respondent Company is already wound up. 3. Given these admitted facts, the Official Liquidator is directed to proceed with the procedure of winding up of the respondent company expeditiously. The Petitioner is at liberty to file affidavit of claim before the Official Liquidator. Official Liquidator s Report is disposed of in the terms above. The company s above petition is also disposed of in the aforesaid terms. 2. On perusal of the above order, it is apparent that liquidation order was passed against the corporate debtor/corporate applicant, and the Official Liquidator had been directed to proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst them u/s. 65 of the I B Code. 5. In reply to the above notice, Suspended Directors of the Corporate Director, Pratima P Shah has filed affidavit wherein it is stated that the applicant has filed a reference with the BIFR and the same was registered as Case No.55 of 2014. The reference was filed in the background of the Company Petition No.289 of 2013 which was admitted and order of winding up was passed by the Hon ble High Court of Bombay on 27.8.2014. The above reference was preferred by the applicant, i.e. Corporate Debtor company for removal of its sickness and revival pursuant to the law laid down by Hon ble Supreme Court in the matter of Rishabh Agro Industries Pvt Ltd vs. PNB Capital Services Ltd (2000) 5 SCC 515 and Madura Coats Ltd. vs. Modi Rubber Ltd Anr. (2016) 7 SCC 603 and also in Real Value Appliances Ltd. vs. Canara Bank (1998) 5 SCC 554. It is further stated that as the winding up order was passed by the Hon ble High Court and Official Liquidator was appointed to take over the control and management of the Corporate Debtor, the Board of Directors of the Corporate Debtor, pursuant to the law laid down by Hon ble Supreme Court proceeded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht in the prescribed form. Therefore, the plea of the Corporate Applicant is not tenable/ weaker and putting responsibility on office of NCLT is also not tenable. 7. The Axis Bank, a Member of CoC, submitted an Affidavit stating that Corporate Debtor has obtained the Admission Order dated 16.6.2017 by suppressing the facts of the revival of winding up proceedings concealing the same from this Tribunal. It is further stated in the affidavit that in the light of suppression of the material facts, the Application of the Corporate Debtor under section 10 of I B Code be dismissed, as not maintainable. In the CoC meeting dated 17.11.2017 the issue regarding the passing of the winding up order was discussed, and after considering the sequence of the event, the RP decided that the CIRP is valid and continued with the same. It is also stated in the affidavit that Section 11(d) of IB Code, 2016 expressly bars a Corporate Debtor in respect of whom a Liquidation Order has been made from initiating the CIRP. It is further stated in the Affidavit of Axis Bank that the corporate debtor has initiated the insolvency resolution process under the Code with malafide and fraudulent intentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Company s winding up petition cannot take place during the pendency of the Appeal before AAIFR. Copy of Hon ble High court s order dated 15.11.2016 is annexed along with Affidavit as Annexure F. The Corporate Debtor, during proceeding in CP No. 7/2015, informed the Hon ble High Court that proceedings before AAIFR by the Corporate Debtor is also abated and the Corporate Debtor is already wound up. Given the said admitted fact, the Hon ble High Court vide order dated 25.1.2017 was pleased to direct the Official Liquidator to proceed with the procedure of winding up expeditiously. 11. It is further contended by IDBI Bank that Corporate Debtor being fully aware of our proceedings, filed a Company Petition No.1053 of 2017 under section 10 of IB Code, without informing the order of liquidation passed by the Hon ble High Court. It is further contended by the IDBI Bank that the Financial Creditor vide email dated 16.11.2017 intimated to the Resolution Professional about the winding order of the Hon ble High Court dated 25.1.2017, whereby Official Liquidator was directed to proceed with the procedure of winding up of the Corporate Debtor. It is further stated that representat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther stated that the officers of the IDBI Bank attended the 2nd CoC meeting 17.11.2017 and categorically informed the entire CoC that the Hon ble High Court vide order dated 27.8.2014 had already liquidated the Corporate Debtor and proceedings under I B Code is bad in law. It is further stated in the Affidavit that the said discussion was recorded in the minutes of the CoC as agenda item No.10. A copy of the minutes has been annexed as Annexure - J with the Affidavit. On perusal of the minutes of CoC, it appears that the Financial Creditor IDBI Bank has informed the CoC about the order dated 25.1.2017 passed by the Hon ble High Court liquidating the Corporate Debtor. 16. It is further stated that the RP vide email dated 21.11.2017 shared the copy of the minutes of the 2nd CoC meeting with all the members of CoC. It is also stated that IDBI Bank informed the RP that the Corporate Debtor is also barred by Section 11(d), Chp. II of IB Code, 2016 from initiating the CIRP. Copy of the mail communication which was sent to the members of CoC is annexed with the reply of the IDBI Bank as Annexure K. 17. It is also stated in the Affidavit of IDBI Bank that vide le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been passed by the Hon ble High Court. 22. It is pertinent to mention that the Corporate Debtor has filed the petition under section 10 of the IB Code, 2016 vide CP No.1053 of 2017 on 29.5.2017 without disclosing that a liquidation order has already been passed by the Hon ble High Court. Section 11 of the I B Code provides that: 11. Persons not entitled to make application.- The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process under this Chapter, namely- (a) a corporate debtor undergoing a corporate insolvency resolution process; or (b) a corporate debtor having completed corporate insolvency resolution process twelve months preceding the date of making of the application; or (c) a corporate debtor or a financial creditor who has violated any of the terms of resolution plan which was approved twelve months before the date of making of an application under this Chapter; or (d) a corporate debtor in respect of whom a liquidation order has been made. Explanation.- For the purposes of this section, a corporate debtor includes a corporate applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus it is clear that where the corporate debtor initiates corporate insolvency process after suppressing material facts, then he will be liable for punishment u/s 77 of the I B Code 2016. 26. The Ld counsel representing the Resolution Professional and counsel appearing on behalf of Corporate Debtor, i.e. corporate applicant emphasized that based on various judicial pronouncement and existing rules the corporate debtor was within its right to apply with BIFR. Accordingly, the application filed by the corporate debtor was accepted and winding up proceedings were suspended. 27. It is pertinent to mention that here we are not concerned with the views of Resolution Professional or any of the Financial Creditor regarding the right of the corporate debtor in applying Section 10 of the I B Code. Here point in issue is not the right of the corporate applicant for initiation of CIRP. But we are only examining whether the application U/S 10 of the IB Code 2016 is filed after the suppression of material facts known to be material. Following issue arise for our determination: 1. Whether the corporate debtor /corporate applicant has filed the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent company is liable to pay the Petitioner under the Facility Agreement dated 25th January 2010 which the Respondent-company has failed to pay. Cheques issued by the respondent have been dishonoured. 2. The respondent-company has filed reply stating that the statutory notice has not been sent. The learned Counsel for the Petitioner submitted that notice is sent to both the registered address of the company as well as the address mentioned in the correspondence. Perusal of the reply shows that no substantial reason has been given as to why the debt is being disputed. The company petition No.517 of 2012 and other connected matters have been admitted against the respondent company and advertisement has been directed to be issued. 3. In the circumstances, the company petition is admitted. Thus it is clear that the corporate debtor was in the knowledge of the winding up proceedings, and it was contested by the corporate debtor. It is further necessary to mention the order of the Hon ble High Court dated 15th Nov 2016 which is as follows: 1.Reference was filed by the Company during `liquidation before the BIFR. That reference was dispo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the NCLT was in the infancy stage and the Form 6 requested for specific information which was duly provided. Form 6 did not prescribe or require the corporate Applicant/corporate Debtor to furnish any additional information nor was any procedure/requirement pointed out by the office of NCLT which mandated the Corporate Debtor to submit any additional information. 32. The corporate applicant has relied on the following provision of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003. Section 4. Consequential provisions 4. Consequential provisions.-On the dissolution of the Appellate Authority and the Board,- (b) On such date as may be notified by the Central Government in this behalf, any appeal preferred to the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted, but liquidation order has also been passed against the corporate applicant/corporate debtor liquidator has been directed to expedite liquidation proceedings expeditiously. The corporate applicant suppressed this material fact, knowing it to be material, and filed the petition under section 10 and in contravention of Rule 10 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The alleged act of the corporate applicant is punishable under section 77 (a) of the Insolvency and Bankruptcy Code 2016. The Registrar of Companies, Mumbai is directed to lodge prosecution against the corporate applicant under section 77(a) of the insolvency and bankruptcy code in 2016. 36. Since the petition has been filed under section 10 of the Insolvency and Bankruptcy Code 2016 after the suppression of the material facts, which were known to be material, therefore the petition is rejected with cost ₹ 10 lakhs which shall be paid by the Corporate Applicant. The cost will be deposited in the account of the Prime Ministers National Relief Fund. It is to be clarified that by the order dated 25.1.2017 of Hon ble Bombay High Court, the Corporate Applican ..... X X X X Extracts X X X X X X X X Extracts X X X X
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