Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + HC Insolvency and Bankruptcy - 2018 (1) TMI HC This

  • Login
  • Cases Cited
  • Referred In
  • Summary

Forgot password       New User/ Regiser

⇒ Register to get Live Demo



 

2018 (1) TMI 433 - HC - Insolvency and Bankruptcy


Issues Involved:
1. Jurisdiction of the Company Court to stay proceedings before NCLT.
2. Applicability of the Insolvency and Bankruptcy Code (IBC) over the Companies Act, 1956.
3. Effect of the Sick Industrial Companies (Special Provisions) Repeal Act.
4. Powers of the Company Court versus NCLT.
5. Legislative intent behind the IBC.
6. Bar on Civil Courts' jurisdiction under the IBC.
7. The power of the Company Court to recall its orders.

Detailed Analysis:

1. Jurisdiction of the Company Court to Stay Proceedings Before NCLT:
The primary issue is whether the Company Court has jurisdiction to stay proceedings initiated by a corporate debtor before the NCLT under Section 10 of the IBC. The court held that the jurisdiction of the Company Court to stay such proceedings is expressly barred by Section 63 of the IBC, which states that no civil court shall have jurisdiction over matters where NCLT has jurisdiction. Additionally, Section 64(2) of the IBC prohibits any court from granting an injunction against actions taken or to be taken by NCLT.

2. Applicability of the IBC Over the Companies Act, 1956:
The court emphasized that the IBC, being a later and special statute, prevails over the Companies Act, 1956. Section 238 of the IBC contains an overriding provision, ensuring that the IBC's provisions prevail in case of any inconsistency with other laws. The court cited the Supreme Court's decision in Allahabad Bank v. Canara Bank, which supports the primacy of special statutes over general ones.

3. Effect of the Sick Industrial Companies (Special Provisions) Repeal Act:
The court noted that with the repeal of SICA and the enactment of the IBC, companies whose references were pending before BIFR could file applications under Section 10 of the IBC within 180 days. The respondent-applicant had filed such an application within the prescribed period, thus complying with the legal requirements.

4. Powers of the Company Court Versus NCLT:
The court clarified that while the Company Court retains jurisdiction over winding-up petitions filed under the Companies Act, 1956, this does not preclude the NCLT from exercising its jurisdiction under the IBC. The court referred to the legislative intent, which does not indicate that winding-up proceedings retained by the High Court would have primacy over NCLT proceedings.

5. Legislative Intent Behind the IBC:
The court discussed the legislative intent behind the IBC, which aims to provide a time-bound insolvency resolution process to maximize asset value and balance the interests of all stakeholders. The IBC introduces a paradigm shift by placing the control of the company in the hands of an Interim Resolution Professional (IRP) and a Creditors Committee, rather than the company's management.

6. Bar on Civil Courts' Jurisdiction Under the IBC:
The court reiterated that Sections 63, 64(2), and 231 of the IBC bar the jurisdiction of civil courts in matters where NCLT has jurisdiction. The court cited the Supreme Court's decisions in Ghanshyam Sarda v. Shiv Shankar Trading Company and Mardia Chemicals Ltd., which support the exclusion of civil court jurisdiction in cases where specialized tribunals are empowered.

7. The Power of the Company Court to Recall Its Orders:
The court acknowledged that under Rule 6 of the Companies (Court) Rules, 1959, read with Section 141 of the Code of Civil Procedure, the Company Court has the inherent power to recall its orders if they were passed without jurisdiction. The impugned order dated 19th July 2017 was recalled as it was beyond the jurisdiction of the Company Court.

Conclusion:
The application by the respondent-applicant was allowed, and the impugned order dated 19th July 2017 was recalled/vacated. The court held that the Company Court does not have jurisdiction to stay proceedings before the NCLT and emphasized the primacy of the IBC over the Companies Act, 1956, in matters of insolvency resolution.

 

 

 

 

Quick Updates:Latest Updates