2017 (7) TMI 1276 - AT - Insolvency and Bankruptcy

Corporate insolvency process - case was transferred from the Bombay High Court to Learned Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai - HELD THAT - As the earlier Rule 5 now stand substituted by the amended Rule 5 vide Notification dated 29th June, 2017, we are of the opinion that the Tribunal should re-consider the matter in terms of the substituted Rule 5, in view of the fact that earlier Rule 5 was doubted by the Appellate Tribunal and the Central Government accepting the same, issued substituted Rule 5 vide Notification dated 29th June, 2017. We are also of the prima facie view that the petition under Section 433(e) of the Companies Act, 1956 on transfer under subsections (1) and (2) of Section 434 of the Companies Act, 2013 cannot be treated to be an application under Sections 7, 9 or 10 of the I&B Code, as sub-section (1) of Section 239 of the I&B Code relates to framing of rules by the Central Government with regard to the I&B Code to the extent empowered therein and the Central Government has not been empowered to transfer the cases under the said provision except under Section 434 of the Companies Act, 2013. For the reasons aforesaid, we set aside the impugned orders dated 24th February, 2017 and 4th April, 2017 passed by the Learned Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai. As it is informed that the parties have settled the claim amicably, we have not remitted the case to Adjudicating Authority to admit the application, after hearing the parties. If any amount is due to Interim Resolution Professional, the appellants will pay the cost as may be determined by the Tribunal. The appeal stands disposed of with the aforesaid observations and directions

Summary

Issues:
1. Transfer of pending proceedings under Section 433 of the Companies Act, 1956 to the National Company Law Tribunal.
2. Validity of the Notification dated 7th December, 2016 issued by the Central Government.
3. Power of the Central Government to frame Rules under Section 239 of the Insolvency and Bankruptcy Code.
4. Treatment of petition under Section 433(e) of the Companies Act, 1956 as an application under the Insolvency and Bankruptcy Code.

Analysis:
1. The case involved the transfer of pending proceedings under Section 433 of the Companies Act, 1956 to the National Company Law Tribunal as per the Companies (Transfer of Pending Proceedings) Rules, 2016. The Learned Adjudicating Authority treated the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 as admitted and ordered a moratorium.

2. The Appellate Tribunal, in a separate case, doubted the validity of the Notification dated 7th December, 2016, issued by the Central Government. Subsequently, a new Notification dated 29th June, 2017, was issued, amending Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016. The Appellate Tribunal noted the substitution of Rule 5 and directed the Tribunal to reconsider the matter in light of the amended rule.

3. The Appellate Tribunal expressed a prima facie view on the power of the Central Government to frame Rules under Section 239 of the Insolvency and Bankruptcy Code. It highlighted that the transfer of cases under Section 433 of the Companies Act, 1956 should be done under Section 434 of the Companies Act, 2013, and not as applications under Sections 7, 9, or 10 of the Insolvency and Bankruptcy Code.

4. Consequently, the impugned orders dated 24th February, 2017, and 4th April, 2017, passed by the Learned Adjudicating Authority were set aside by the Appellate Tribunal. The case was disposed of with observations on settling the claim amicably and directions for payment of costs, if any, to the Interim Resolution Professional. No costs were awarded based on the circumstances of the case.