Home Case Index All Cases Companies Law Companies Law + HC Companies Law - 2018 (6) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (6) TMI 1167 - HC - Companies LawOverriding of Insolvency and Bankruptcy Code, 2016 - whether the present proceedings can continue or whether the NCLT order appointing the IRP could be allowed to act in terms of IBC, 2016 while the present proceedings in relation to the Company are pending before this Court? - Held that - This Court finds that the Company Petition has been registered on the basis of the recommendations made by the BIFR under Section 20. Thus, the avenues for trying to revive the Company were all tapped by the BIFR before it referred the case to this Court for recommending for winding it up. This Court has also attempted earlier to revive the Company and even the State Government invited proposals from various stake holders with the purpose to revive the Company. However, all attempts virtually failed. The process as laid down under the IBC provides firstly of appointing of an IRP, who is required to conduct all information relating to assets, finances and operations of the corporate debtors. As this Court has already appointed a Provisional Liquidator, the duties as provided under Section 18 of IBC 2016, are similar to that of the OL, the power available to the OL under the Act of 1956 would take into its notice all the provisions contained under IBC 2016 which the interim resolution professional or the resolution professional would be conducting. The legislature clearly intended to transfer the proceedings where no action has been taken by the concerned Court whereas in the present case, the proceedings have been going on since 2002 and the present case is not of such a nature where it can be said that notices have not been issued or the steps under the Act of 1956 have not been undertaken with regard to winding up. Thus, there was no occasion for the applicant ALCHEMIST to have approached the NCLT for invoking the provision of the Rules of 2016. Every winding up petition under clause (e) of Section 433 which is pending before the High Court and which is not served by the petitioner on the respondent company shall stand transferred to NCLT under Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016. If such pending petition is served by the petitioner on the respondent, the petition will continue to be dealt with by this court and the applicable provisions will be the provisions of 1956 Act. Since NCLT is not a forum superior to the High Court, it s orders cannot be construed as injuncting this Court from proceeding with a winding up proceeding in which it has clear jurisdiction to hear and decide. That is the effect of Section 41(b) of the Specific Relief Act, 1963, particularly when the IBC itself permits such continuation under the notifications issued under Sections 239 and 255 of the IBC. The principle of Comity of Courts cannot be invoked to restrain the High Court from proceeding with a winding up petition which Parliament intended the High Court alone to decide as per the notifications issued under Sections 239 and 255 of the IBC. Since this winding up petition did not get transferred to the NCLT by virtue of the notifications dated 7.12.2016 and 29.6.2017 issued under the very IBC, the NCLT cannot have any jurisdiction in regard to the petitioner or to the winding up petition and it s order cannot be interpreted to restrain this Court. Another aspect in the present case is in relation to the clubbed cases filed by the workmen under Article 226 of the Constitution of India which are to be heard commonly with this Company Petition. Since such petitions cannot be transferred or even examined by the NCLT, the present application moved by the applicant Alchemist was against the provisions of the Companies Act and the Rules as well as have to be treated as non-est. This Court while examining the present Company Petition is also examining three Company Appeals whereby the order passed by the NCLT in favour of the applicant is under challenge. The NCLT has held the ALCHEMIST to be possessing 51% shares which is a subject matter of examination before this Court. Thus, the order of NCLT, while invoking the provisions under IBC 2016 is without jurisdiction and the entire proceedings of appointment of IRP is held to be non-est and liable to be ignored as per law laid down by the Apex Court in the case of Union of India and another Vs. Association of Unified Telecom Service Providers of India and others 2011 (10) TMI 580 - SUPREME COURT Tribunal had no jurisdiction to decide on the validity of the terms and conditions of the license including the definition of Adjusted Gross Revenue incorporated in the license agreement. Hence, the order dated 07.07.2006 of the Tribunal in so far as it decides that revenue realized by the licensee from activities beyond the license will be excluded from Adjusted Gross Revenue dehors the definition of Adjusted Gross Revenue in the license agreement is without jurisdiction and is a nullity and the principle of res judicata will not apply. Accordingly, the State Government is directed not to allow the IRP to function or take over any asset of the Company and ignore the order passed by the NCLT dated 13/04/2018. The Managing Director of Jaipur Metals, who has been appointed by the State to provisionally hold the charge of the Company, has failed to bring to the notice of the NCLT the facts, as noted above. It is also noted that the concerned Managing Director did not inform the State Government about the proceedings and the likelihood of the complications which would arise on account of the same and thus, prima-facie there has been failure on his part to discharge his duties. The State Government is therefore, directed to immediately transfer the said officer and handover the charge to some other responsible officer and also initiate appropriate proceedings against the concerned Managing Director.
Issues Involved:
1. Jurisdiction of NCLT vs. High Court in insolvency proceedings. 2. Applicability of the Insolvency and Bankruptcy Code (IBC), 2016. 3. Continuation of winding-up proceedings under the Companies Act, 1956. 4. Role and appointment of Interim Resolution Professional (IRP). 5. Provisions of the Companies (Transfer of Pending Proceedings) Rules, 2016. 6. Rights and claims of workmen. 7. Actions and responsibilities of the State Government and its officers. Detailed Analysis: 1. Jurisdiction of NCLT vs. High Court in Insolvency Proceedings: The primary issue was whether the proceedings before the High Court could continue or if the NCLT order appointing the IRP under the IBC, 2016 should take precedence. The court observed that the NCLT intervened without issuing notice to the State Government or giving the workmen an opportunity to be heard. The High Court stayed the NCLT's order, emphasizing that the IBC, 2016 does not override ongoing proceedings in the High Court. 2. Applicability of the Insolvency and Bankruptcy Code (IBC), 2016: The court noted that the IBC, 2016 provides a mechanism for considering claims of all employees and creditors. However, it concluded that the IBC's provisions do not apply to the current winding-up proceedings initiated under the Companies Act, 1956, especially since the case was not based on the company's inability to pay debts (Section 433(e)) but rather under clauses (a) and (f) of Section 433. 3. Continuation of Winding-up Proceedings under the Companies Act, 1956: The court highlighted that the winding-up proceedings were initiated based on BIFR's recommendation under Section 20 of the erstwhile SICA Act. The proceedings were ongoing since 2002, and notices had already been served under Rule 26 of the Companies (Court) Rules, 1959. Therefore, the case was not transferable under Rule 6 of the Companies (Transfer of Pending Proceedings) Rules, 2016. 4. Role and Appointment of Interim Resolution Professional (IRP): The court found that the appointment of the IRP by the NCLT was without jurisdiction. It emphasized that the duties of the IRP under the IBC are similar to those of the Official Liquidator (OL) already appointed by the High Court. The court directed the State Government not to allow the IRP to take over any asset of the company. 5. Provisions of the Companies (Transfer of Pending Proceedings) Rules, 2016: The court analyzed Rules 1, 5, and 6 of the Companies (Transfer of Pending Proceedings) Rules, 2016. It concluded that Rule 5, which deals with the transfer of winding-up proceedings based on the inability to pay debts, was not applicable. Instead, Rule 6 applied, which ensures that petitions under clauses (a) and (f) of Section 433 remain with the High Court. 6. Rights and Claims of Workmen: The court acknowledged the claims of the workmen for their dues and the revival of the company. It directed the Official Liquidator to conduct a thorough evaluation of the goods lying in the factory premises and submit a report to facilitate the payment of the workers' dues. 7. Actions and Responsibilities of the State Government and its Officers: The court criticized the Managing Director of Jaipur Metals for failing to inform the NCLT about the ongoing proceedings in the High Court and the complications arising from parallel proceedings. The court directed the State Government to transfer the concerned officer and initiate appropriate proceedings against him. Conclusion: The High Court held that the NCLT's order was without jurisdiction and directed the State Government to ignore the NCLT's order appointing the IRP. The court emphasized the need to avoid multiplicity of proceedings and upheld the continuation of the winding-up proceedings under the Companies Act, 1956. The case was listed for further orders and disposal on 05/07/2018.
|