9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (12) TMI 1744 - HC - Companies LawRejection of prayer to transfer the creditor s winding-up proceedings to the adjudicating authority - admissibility of creditor s petition by disregarding the defence sought to be set up by the company - whether the mere filing of a petition by a financial creditor under Section 7 of the IBC in respect of a company should prompt the company Court in seisin of a creditor s petition against the same company to transfer such pending proceedings to the adjudicating authority under the IBC? HELD THAT - There are several situations which can arise. Either party meaning the creditor or the company may apply in such a situation or, in the post-admission stage, any other creditor may apply and assert that since the matter has partaken a representative character, any other creditor of the company would be deemed to be a party within the meaning of that word first used in the second proviso to Section 434(1)(c) of the Act of 2013. It could also be that at a pre-admission stage both the company and the creditor jointly apply or one of them applies and the other consents. Even in such a scenario, the Court has to apply its mind to see whether any other is sought to be prejudiced by such consent. It is possible that the very admission of a financial creditor s petition by the adjudicating authority under the IBC simultaneously triggers off of a moratorium of all other proceedings pertaining to the same company including the pending proceedings before the company Court. But the company Court should be sure that the proceedings before the tribunal or adjudicating authority are firmly in place before transferring the proceedings pending before it when the transfer is resisted by the creditor who has brought the petition before the company Court. It is possible that by virtue of the related provisions of the IBC, an order of admission would imply the immediate appointment of interim resolution professionals and the consequential suspension of authority of other adjudicating fora in respect of matters pertaining to the concerned company; but so be it. 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 to be gone into for the purpose of the preparation of a resolution plan, the proceedings pending before the company Court should ordinarily be transferred to the tribunal or adjudicating authority. It is true that such transfer, according to the appellant herein, makes no difference since the company Court would already have lost its jurisdiction, by virtue of the moratorium envisaged in the IBC, to adjudicate on the creditor s claim; but the company Court would be well within its rights to decline a transfer till the proceedings before the adjudicating authority under the IBC stand admitted. There is no ground to disagree with the order impugned dated August 9, 2018 by which the company s petition for transfer of the respondent s winding-up proceedings to the National Company Law Tribunal has been declined by the company Court here - neither appeal holds and the orders impugned dated August 9, 2018 and August 10, 2018 are affirmed - Appeal dismissed.
Issues Involved:
1. Transfer of creditor’s winding-up proceedings to the adjudicating authority under the Insolvency and Bankruptcy Code, 2016. 2. Admission of the creditor’s petition by disregarding the company's defence. Issue-wise Detailed Analysis: 1. Transfer of creditor’s winding-up proceedings to the adjudicating authority under the Insolvency and Bankruptcy Code, 2016: The appellant company sought to transfer the winding-up proceedings to the adjudicating authority under the Insolvency and Bankruptcy Code (IBC), 2016, citing the relevant provisions of the Companies Act, 1956, Companies Act, 2013, and amendments under the IBC. The appellant argued that the company Court has limited discretion to refuse such transfer, especially when proceedings under the IBC have been initiated by another creditor. They emphasized the legislative intent to replace liquidation proceedings under the Companies Act, 1956, with the resolution process under the IBC. The respondent creditor opposed the transfer, arguing that until a petition under the IBC is admitted by the adjudicating authority, the company Court should retain jurisdiction. The creditor contended that transferring the case prematurely could prejudice their position if the IBC petition is not admitted. The creditor also highlighted their right to choose the forum under the existing legal provisions. The Court held that the company Court must ensure that proceedings under the IBC are firmly in place before transferring a pending petition, especially if the transfer is resisted by the creditor. The Court observed that the company Court should not transfer the proceedings until the IBC petition is admitted, as the creditor's petition was validly brought before the sovereign forum of the Court. The Court noted that the legislative intent of the IBC is to provide a more modern mechanism for corporate insolvency resolution, but the transfer should be considered on a case-by-case basis, taking into account the balance of convenience and potential prejudice to the parties involved. 2. Admission of the creditor’s petition by disregarding the company's defence: The second issue pertained to the admission of the creditor’s petition by the company Court, which disregarded the company's defence. The creditor's claim was based on the price of goods sold and delivered, with a statutory notice issued on March 15, 2016, to which the company did not respond. The company's defence included reservations about the quality of goods and an en masse resignation of employees, which purportedly prevented a timely response to the statutory notice. The company Court disbelieved the company's excuses for not responding to the statutory notice, noting the lack of material evidence to support the claim of en masse resignation. The Court held that the company's failure to reply to the statutory notice indicated an abandonment of any previous reservations about the quality of goods. Consequently, the company Court found no legitimate defence and deemed that there was no issue requiring a trial or security. The Court affirmed the company Court's decision, holding that the order of admission was justifiable given the lack of a credible defence from the company. The Court dismissed the appeals, affirming the orders dated August 9, 2018, and August 10, 2018, and concluded that the creditor's petition was appropriately admitted. Conclusion: The appeals were dismissed, and the orders of the company Court were affirmed. The Court emphasized the need for a case-by-case analysis for transferring proceedings to the IBC adjudicating authority and upheld the admission of the creditor's petition due to the lack of a legitimate defence from the company. There was no order as to costs.
|
