TMI Blog2019 (12) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the winding up petition (C.P 1 of 2016) along with all connected applications be stayed? - Should the winding up petition along with all connected applications be transferred to NCLT to be further heard by it? Does NCLT have the jurisdiction to hear out the petitions filed by the intending purchasers? - HELD THAT:- The applications filed by the intending purchasers of the flats / units developed by the said company cannot be decided by the NCLT, it requires declaratory orders to be passed with regard to civil rights of the parties as also direction for execution of conveyance and making over possession. The NCLT does not possess the jurisdiction under IBC for passing of such orders. The IRP, however, will be free to approach the Provisional Liquidator and take inspection and obtain copies of the documents and information as required by it for preparing the resolution plan to be submitted before the NCLT. The Provisional Liquidator under no circumstances shall make over the originals of the book and the possession of the assets of the said Company to the IRP. If the IRP has to inspect any asset of the said Company for the preparation of the Resolution Plan he should approach th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d over the books, documents and assets to the IRP or directed personal presence of the Provisional Liquidator while hearing an application under Section 7 of the IBC when it knew that the Provisional Liquidator has been appointed by the Company Judge of this Court in a saved petition. This Court possesses the jurisdiction to hear out the winding up petition being CP 1 of 2016 along with all connected applications. However, the winding up petition and the connected applications thereto should not be proceeded with till NCLT comes to the conclusion as to whether the resolution plan in respect of the said company is either approved or rejected - Application disposed off. - CA No.92 of 2019 (CA No.24 of 2019) CP 1 of 2016 - - - Dated:- 12-12-2019 - THE HON BLE JUSTICE ARINDAM MUKHEREJEE Mr. Yash Vardhan Deora Advocate .For the applicant Mr. Saunak Mitra, Mr. Aritra Basu Advocates for Devi Trading Creditors supporting Devi Trading.Mr. Ratnanko Banerjee, Sr. Adv. Mr. Reetobroto Mitra, Mr. Sankesan Sarkar, Mr. A. Kanodia Advocates . for Reliance Commercial Finance Ltd. Reliance Home Finance Ltd. Mr. Jishnu Saha, Sr. Adv. Mr. Aniruddha Mitra Advocates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company was also restrained from dealing with its assets. 4) After appointment of the Provisional Liquidator, the hearing of the main winding up petition could not proceed much as several applications were made from time to time by persons who intended to purchase flats from the said Company. Some of them after having paid the entire consideration money were put into possession of such flats but conveyance in their favour yet to be executed. Some were mere agreement holders and alleged to have paid the entire consideration money pursuant to which allotment letter have been issued but were not put into actual physical possession. In such applications, the intending purchasers have either prayed for being put into possession and for execution of the conveyance or only for execution of conveyance allowing their respective cases. There is also an application seeking leave to proceed with the suit filed before the Alipore Court after appointment of provisional liquidator. 5) At this stage, Devi Trading Holding Private Limited (hereafter referred to as Devi Trading) a financial creditor of the said Company obtained an order on 13th March, 2019 from the National Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the field. It is further submitted that IBC is a latter enactment in consideration to the Act of 2013 which in turn has repealed the Act of 1956 and as such the provisions of IBC will prevail over the provisions of the Act of 2013 as also the Act of 1956. That apart and in any event there is no embargo in filing an application under section 7 of the IBC even during the pendency of a winding up proceeding until the Company is wound up. In the instant case the Company has not been wound up, only the Provisional Liquidator has been appointed, thus, the application filed by Devi Trading before NCLT under the provisions of section 7 of IBC is maintainable and the order passed on 13th March, 2019 is a valid order and should be complied with. The application of the IRP should be allowed. Moreover, it is submitted that the application under the provisions of section 7 of IBC before the NCLT is an independent application and has to be brought to a logical conclusion. Till such time, a logical conclusion is arrived at before the NCLT, all proceedings in respect of the said petition and/or connected thereto should remained stayed. In the alternative, the said petition along with all connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to a logical conclusion following the provisions of IBC. The winding up proceedings pending before this Court should either remain stayed until NCLT disposes of the application or in the alternative, the said petition and other connected applications be transferred to the NCLT for being heard along with the application made by Devi Trading. To support the submission as to transfer of the winding up petitions with all connected applications from this Court to NCLT, the said creditors relied upon a Division Bench judgment of this Court passed in the case of Impex Ferro Tech Limited Vs. Auroma Coke Ltd. (APO No.273 of 2018) dated 17.12.2018. The relevant portion so relied upon is set out hereunder :- Once the proceedings under the IBC have been admitted, the company Court should yield to the more modern mechanism under the IBC in view of the obvious legislative intent apparent. It was because the liquidation proceedings envisaged by the 1956 Act were found to be less than ideal, that an entirely different scheme has been put in place by the IBC in 2016. Thus, once proceedings pertaining to a company have been admitted by the IBC and the merits of such proceedings are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to as saved petition ) and were not required to be transferred to NCLT following the provisions of Rule 3 of the 2016 Transfer Rules since the winding up petition was filed much prior to 7th December, 2016 and directions for filing of affidavits were also given prior to that date. Reliance is then placed on, the second proviso to section 465(1) of the Act of 2013 and submitted that the provisions of the Act of 1956 shall continue to apply to the proceedings which have not been transferred from this Court to NCLT. It is further submitted that on a conjoint reading of section 465 and 434(1) (c) of the Act of 2013, it is clear that applicable provisions in respect of the instant winding up proceeding is in the Act of 1956. It is further submitted that this Court, therefore, retained jurisdiction over the winding up proceedings and have passed orders therein including appointment of Provisional Liquidator in terms of the provisions of the Act of 1956. The provisions of section 447 of the Act of 1956 is then relied upon and the effect of winding up order is being shown to the Court. The provisions of section 481 of the Act of 1956 is also relied upon to submit that winding up order, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the petition though was filed on or about 14th March, 2018, had been admitted on 13th March, 2019, and, as such, the proceedings commenced from such day. In view of the provisions of Section 12, such corporate insolvency resolution process was required to be completed within a period of 180 days from the date of admission of the application by which the process was initiated. The said 180 days have expired in September, 2019, but no committee of creditors had been formed till such date. As to the winding up of the company to be proceeded under the Act of 1956 or under IBC, the said creditors relied upon the judgments rendered in the case of Rajni Anand vs. Cosmic Structures Ltd. (2018 SCC On Line Del 12107); Arise India Limited vs. TCI Freight (2018 SCC OnLine NCLAT 223) and [2019] 213 Comp Cas 61 (Bom) (Jotun India P. Ltd. vs. PSL Ltd.). It appears from the judgment of Arise India Limited (supra) that the NCLAT finding that the provisional liquidator having been appointed by the Company Court rejected the initiation of proceedings under IBC. Relying upon such judgments, the said creditors submitted that assuming without admitting the winding up proceeding pending before this C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be stayed till the winding up proceedings pending before this Court is finally decided. In order to elucidate the points urged. The Company refers to clause (ii) of the proviso to section 434(1)(c) and submits that the instant winding up proceedings is one, which falls in the category of cases to be retained in this Court and, therefore, shall be decided in accordance with the provisions of the Act of 1956 and the 1959 Rules. In view of the provisions of the Act of 1956 having been made applicable to the winding up petition like the instant case a winding up petition on being admitted assumes a representative character. All creditors of the said Company are thereafter required to join such proceedings unless express leave has been obtained under the provisions of section 446 of the Act of 1956. Having not done so, Devi Trading could not have proceeded with its application before the NCLT to obtain the order dated 13th March, 2019 particularly when the application was filed long back and moved after about one year from the date of filing. It was also known that the Provisional Liquidator has been appointed which in fact had been specifically brought to the notice of the NCLT by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmittee of the creditors are required to proceed in accordance with law. IRP was also directed to ensure that the company (corporate debtor) remains a going concern. Further orders were passed by the NCLT directing the Provisional Liquidator appointed by this Court to hand over all accounts, books of accounts and release all assets in favour of IRP on the basis of its order and the matter was directed to appear on 24th October, 2019. On 24th October, 2019, a further order was passed directing the Provisional Liquidator appointed by this Court to be personally present before the NCLT on 13th December, 2019. The said creditors also submitted that from the judgment of Jaipur Metal (supra), it is clear that the orders of NCLT cannot be interfered with by this Court while exercising Company jurisdiction. It is also submitted that on a conjoint reading of Jaipur Metal (supra) and Forech (supra), this Court cannot proceed with the winding up petition any further until insolvency proceedings is brought to a logical conclusion before the NCLT. Moreover, a moratorium under Section 14 of IBC has been passed and as such no further steps in the winding up proceedings can be taken by this Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrected by a corrigendum dated 1st January, 2014. Different sections of the said Act have, however, been made operational, subsequently, on various dates. This Court in exercise of its company jurisdiction, however, continued to hear winding up petitions as Sections 270 and 271 of the Act of 2013 dealing with winding up of a company by the Tribunal (i.e. Company Law Board in short CLB) came into operation with effect from 15th November, 2016. iv. The transfer of winding up proceedings from the High Court to the NCLT is provided under Section 434 (1)(c) of the Act of 2013. The said Section originally provided that the winding up of companies pending in the High Court immediately before such date shall stand transferred to the Tribunal (NCLT) and NCLT may proceed to deal with such proceedings from the stage before their transfer. The Section was substituted with effect from 15th November, 2016. In the substituted Section 434(1)(c), a proviso was introduced which says that only such proceedings relating to winding up of companies shall be transferred to NCLT that are at a stage as may be prescribed by the Central Government. The substituted Section 434 (1)(c) further prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nafter referred to as the 2016 Rules) was brought into operation with effect from 7th December, 2016. The provisions of Rules 5 and 6 of the 2016 Rules are relevant for our purpose. The said rules as it stood at the time of enactment is set out hereinbelow :- 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 with Part II of the Code: Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with Rule 7, required for admission of the petition under Sections 7, 8 or 9 of the Code, as the case may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the 15th day of July, 2017, be eligible to file fresh applications under Sections 7 or 8 or 9 of the Code, 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 . 15) At the hearing of the said application several provisions of the Act of 1956, 1959 Rules, the Act of 2013, 2016 Transfer Rules and the IBC have been referred. The provisions so referred to are set out hereunder for convenience:- Sections 433, 446, 447 and 481 of the Companies Act of 1956:- [433. Circumstances in which company may be wound up by Tribunal. A company may be wound up by the Tribunal, - (a) if the company has, by special resolution, resolved that the company be wound up by the Tribunal; (b) if de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company; whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960 (65 of 1960)]. 447. Effect of winding up order. An order for winding up a company shall operate in favour of all the creditors and of all the contributories of the company as if it had been made out on the joint petition of a creditor and of a contributory. 481. Dissolution of company. (1) When the affairs of a company have been completely wound-up [or when the [Tribunal] is of the opinion that the liquidator cannot proceed with the winding up of a company for want of funds and assets or for any other reason whatsoever and it is just and reasonable in the circumstances of the case that an order of dissolution of the company should be made], the [Tribunal] shall make an order that the company be dissolved from the date of the order, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons intending to appear at the hearing of petition. Every person, who intends to appear at the hearing of a petition, whether to support or oppose the petition, shall serve on the petitioner or his advocate, notice of his intention at the address given in the advertisement. The notice shall contain the address of such person, and be signed by him or his advocate, and save as otherwise provided by these rules shall be served (or if sent by post, shall be posted in such time as to reach the addressee) not later than two days previous to the day of hearing, and in the case of a petition for winding-up not later than five days previous to the day of hearing. Such notice shall be in Form No.9, with such variations as the circumstances may require, and where such person intends to oppose the petition, the grounds of his opposition, or a copy of his affidavit, if any, shall be furnished along with the notice. Any person who has failed to comply with this rule shall not except with the leave of the Judge, be allowed to appear at the hearing of the petition . Sections 434 and 465 of the Companies Act of 2013 (in short the Act of 2013):- [434. Transfer of cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has not been dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.] (2) The Central Government may make rules consistent with the provisions of the 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.] 465. Repeal of certain enactments and savings. (1) The Companies Act, 1956 (1 of 1956) and the Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961) (hereafter in this section referred to as the repealed enactments) shall stand repealed: Provided that the provisions of Part IX-A of the Companies Act, 1956 (1 of 1956) shall be applicable mutatis mutandis to a Producer Company in a manner as if the Companies Act, 1956 has not been repealed until a special Act is enacted for Producer Companies: Provided further that until a date of notified by the Central Government under sub-section (1) of section 434 for transfer of all matters, proceedings or cases to the Tribunal, the provisions of the Companies Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of IBC applicable to the instant winding up petition when the same has been filed on 4th January, 2016 i.e. much prior to IBC coming into operation? vi) Whether the order dated 13th March, 2019 could have been obtained from NCLT without first obtaining leave of this Court under the provisions of section 446 of the Act of 1956? vii) Is the order of NCLT dated 13th March, 2019 in the absence of leave under section 446 of the Act, 1956 or is otherwise an order without jurisdiction and a nullity? 17) On jurisdiction of this Court and applicable provisions of law as in issue (i) the answer is as follows:- a) The winding up petition was filed on or about 4th January, 2016 and was served between 14 January, 2016 and 24 February, 2016. This service is in terms of Rule 26 of the Act of 1959 and was made prior to 28th May, 2016 when IBC came into operation. The service of the said petition was also effected much before 7th December, 2016 when the 2016 Transfer Rules came into operation. Direction for filing of affidavits was issued and affidavits were exchanged prior to 7th December, 2016. The said petition, therefore, fell in the catego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive intent is also very clear from the Act of 2013 and the Transfer Rules of 2016 by allowing the High Court to retain jurisdiction over the saved petitions. As to the transfer of a creditor s winding up petitions from the High Court to the Tribunal, on the Tribunal being approached under IBC is concerned, the issue has been discussed in a Division Bench judgment of this Court reported in 2019(1) WBLR (Cal) 192 [New Central Jute Mills Shramik Sangh Anr. Vs. Shalimar Industries Ltd. Ors.]. In the said judgment it has been categorically held that there is no question of this Court losing jurisdiction as to the saved petitions. In Impex Ferro Tech Limited (supra) though it has been commented that one should yield to the new mechanism meaning thereby IBC proceedings should be given preference and NCLT is better equipped in view of the new mechanism but at the end transfer of the saved petition has been refused by upholding the order of the Learned Single Judge. d) The creditor s winding up petition always stood on a different platform than one initiated at the recommendation of BIFR. BIFR after considering a reference to it under the provisions of SICA from all concerns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of NCLAT also appears to vacillate with regard to situations where Provisional Liquidator has been appointed by the High Court in a creditor s winding up being a saved petition visa-vis IBC proceedings initiated by a creditor. In Arise India (supra) NCLAT did not entertain the appeal on finding that the Provisional Liquidator has been appointed but in the instant case, NCLAT directed the company insolvency process to continue as will appear from the order dated 29th August, 2019. g) Canara Bank (supra) is an authority for the proposition that the special law dealing with a particular subject will prevail over the general law also touching such subjects. Consideration therein was with regard to the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (in short RDB Act) and the Companies Act, 1956 where RDB Act was considered to be a special law whereas Companies Act, 1956 as the general law. It was also held that between two Special Laws the latter will normally prevail over the former if there is a provision in the latter Special Act which gives it an over-riding effect. RDB Act in section 34 provides such over-riding effect and as such the said Act will pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on acting under Section 29 of the SFC Act seeks to sell or otherwise transfer the assets of a debtor company-in-liquidation, the said power could be exercised by it only after obtaining the appropriate permission from the Company Court and acting in terms of the directions issued by that court as regards associating the Official Liquidator with the sale, the fixing of the upset price or the reserve price, confirmation of the sale, holding of the sale proceeds and the distribution thereof among the creditors in terms of Section 529-A and Section 529 of the Companies Act. (iv) In a case where proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or the SFC Act are not set in motion, the creditor concerned is to approach the Company Court for appropriate directions regarding the realisation of its securities consistent with the relevant provisions of the Companies Act regarding distribution of the assets of the company-inliquidation . i) The IBC in section 238 has a similar over-riding effect like that in section 34 of the RDB Act but such provision will not affect the instant case in view of the specific retention power given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed by the resolution professional but the main goal under the Act of 1956 and IBC appears to be same. The Act of 1956, however, in case of a Company being wound up at the instance of a creditor does not have any specific provision for revival though Courts have worked out certain modes like approving a scheme for paying the debts as per priority including payment of creditors. The IBC on the other hand as discussed hereinabove has a specific provision for revival of the Company through a resolution plan which has to be statutorily followed before the Company is liquidated. Thus, the revival part which is a time framed one under the IBC should be left to the NCLT and the liquidation part should be done by the Company Court. If the matter is viewed from another angle one may find that the jurisdiction in respect of the saved petition can be usurped by the NCLT at the instance of a financial creditor, even after a creditor s winding up petition is admitted by the Company Court and assumes a representative capacity pursuant to the advertisement by filing an application under section 7 without joining the winding up proceedings which all creditors of the said Company are required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uidator may be allowed to carry out the resolution plan that may be approved by the NCLT. In the event, the resolution plan to be prepared and submitted before the NCLT is not approved or an appeal from such non-approval is dismissed and such order rejecting the resolution plan achieves finality, the winding up of the said company be proceeded with by the Company Judge of this Court when the Provisional Liquidator will act in terms of the subsequent orders that may be passed by the Company Judge. In view of the fact that the Company Judge retains the jurisdiction, the question of transfer of the said petition or of the applications connected thereto in the facts and circumstances of the case does not arise. In any event, the applications filed by the intending purchasers of the flats / units developed by the said company cannot be decided by the NCLT, it requires declaratory orders to be passed with regard to civil rights of the parties as also direction for execution of conveyance and making over possession. The NCLT does not possess the jurisdiction under IBC for passing of such orders. The IRP, however, will be free to approach the Provisional Liquidator and take inspection and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 13th March, 2019 at the instance of a creditor (Devi Trading) when the fact that the Provisional Liquidator had been appointed in a saved petition by the Company Judge was brought to its notice particularly when the application appears to have been moved about an year after filing. The NCLT should have also considered the effect of a winding up petition being advertised after having been admitted which assumes a representative character when all creditor like Devi Trading become obliged to join in the winding up proceedings pending before this Court to either support or oppose the winding up order. Since I am not the Appellate Authority as to the order dated 13th March, 2019, passed by NCLT, I refrain to comment any further with regard to the said order while adjudicating the application being CA 92 of 2019. 21) Before parting, I should say that NCLT while exercising its jurisdiction under IBC ought to have been more cautious while passing orders directing the Provisional Liquidator to hand over the books, documents and assets of the company knowing that the Provisional Liquidator was appointed by the Company Judge of this Court in a saved petition and furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
