2017 (9) TMI 1663 - HC - Insolvency and Bankruptcy

Winding up petition adjourned - order in BIFR Case was pending before AAIFR constituted under SICA - Held that - It is settled law that Parliament is competent to enact a law transferring the jurisdiction exercised by High Courts in regard to any specified subject (other than those which are vested by express provisions of the Constitution) to any Court/Tribunal. IBC is one such law and the NCLT is such a forum as held in UNION OF INDIA VERSUS R. GANDHI PRESIDENT MADRAS BAR ASSOCIATION 2010 (5) TMI 393 - SUPREME COURT OF INDIA IBC insolvency and bankruptcy code itself confers jurisdiction on the High Court by virtue of notifications issued under Section 239 and Section 255 in regard to pending winding up proceedings where notices were already served on the respondent-company prior to 15.12.2016 it cannot be said that by virtue of Section 238 the High Court s jurisdiction gets taken away. What is made possible by IBC and permitted by Sections 239 and 255 cannot be said to be inconsistent under Section 238. Coming to the Moratorium order announced by the NCLT invoking Section 14(1)(a) the words any Court of law used therein cannot be interpreted as including this High Court and such a moratorium order cannot injuct this Court from continuing a winding up proceeding pending on it s file where notices were already served on the respondent-Company prior to 15.12.2016 and which is saved by the notifications issued by the Central Government under Section 239 and Section 255 of the IBC. Whether the Constitution of present proceedings before this Court in the winding up petition filed by petitioner herein can be so injuncted by the NCLT which is a tribunal not superior to this Court? - 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. The objection raised by the respondent company that the order of the NCLT bars this Court from continuing with this winding up petition against the respondent company cannot be accepted and it is accordingly rejected

Issues Involved:

1. Jurisdiction of the High Court in winding up proceedings post-IBC enactment.
2. Applicability of the Moratorium order by NCLT on the High Court.
3. Interpretation of Section 238 of IBC in relation to the Companies Act, 2013.
4. Principle of comity of courts and its applicability.

Detailed Analysis:

A. Jurisdiction of the High Court in winding up proceedings post-IBC enactment:

1. The petitioner filed a company petition under Section 433(e) & (f) of the Companies Act, 1956 to wind up the respondent company. The petition was initially adjourned sine die due to pending appeals under SICA. However, with the repeal of SICA by the Insolvency and Bankruptcy Code, 2016 (IBC), the Court recalled its previous order and directed that there was no impediment to proceeding with the petition.

2. The Court noted that Section 255 of IBC amended the Companies Act, 2013, adding a proviso to Section 434(1)(c) stating that only such winding up proceedings pending before the High Court as on 15.12.2016, where notices had not been served, would be transferred to the NCLT. Since notices in the present case were served before that date, the High Court retained jurisdiction.

3. The Court emphasized that IBC itself confers jurisdiction on the High Court for pending winding up proceedings where notices were served before 15.12.2016, thus Section 238 of IBC, which overrides other laws, does not negate this jurisdiction.

B. Applicability of the Moratorium order by NCLT on the High Court:

1. The respondent contended that the Moratorium imposed by NCLT under Section 14(1)(a) of IBC prohibits continuation of the winding up proceedings in the High Court. However, the Court held that the term "any Court of law" in Section 14(1)(a) does not include the High Court.

2. The High Court, being a Superior Court of Record, is protected by Section 41(b) of the Specific Relief Act, 1963, which bars an injunction against proceedings in a forum not subordinate to the one issuing the injunction. Hence, the NCLT, a statutory tribunal, cannot injunct the High Court.

3. The Court referenced the Supreme Court's decision in Cotton Corporation of India v. United Industrial Bank, which held that a superior court cannot be restrained by an injunction from a lower court or tribunal.

C. Interpretation of Section 238 of IBC in relation to the Companies Act, 2013:

1. The respondent argued that Section 238 of IBC, which overrides other inconsistent laws, should prevent the High Court from proceeding with the winding up petition. However, the Court clarified that Section 238 does not apply to proceedings permissible under notifications issued under Section 239(1) of IBC.

2. The Court reiterated that the IBC's provisions, particularly Sections 239 and 255, allow the High Court to continue with winding up petitions where notices were served before 15.12.2016, thus there is no inconsistency for Section 238 to address.

D. Principle of comity of courts and its applicability:

1. The respondent cited the principle of comity of courts, suggesting that the High Court should defer to the NCLT's Moratorium order. The Court explained that this principle, which promotes mutual respect between courts, does not apply when the lower tribunal (NCLT) lacks jurisdiction over the matter.

2. The Court referred to the Supreme Court's explanation in World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd., stating that comity is a principle of self-restraint and does not mandate deference when the tribunal's jurisdiction is in question.

3. The Court concluded that the principle of comity of courts does not restrain the High Court from proceeding with a winding up petition that Parliament intended the High Court to decide, as per the notifications under Sections 239 and 255 of IBC.

Conclusion:

The High Court held that it retains jurisdiction to proceed with the winding up petition against the respondent company despite the Moratorium order by NCLT. The objection raised by the respondent was rejected, and the matter was listed for further hearing.

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