2018 (10) TMI 1853 - AT - Companies Law

Interim Order - CIRP Process - resolution of the problems faced by the Company in a time-bound manner for maximisation of value of assets of the Company - Section 241 read with Section 242 of the Companies Act, 2013 - HELD THAT - The five largest creditors should be also impleaded as party Respondents to these appeals in the representative capacity of the Creditors. Learned counsel for the Appellant(s) will make necessary correction in the cause title and other pages of the appeals in course of the day. Defects, if pointed out by office, may be removed before the next date. Issue notice on Respondents, including newly impleaded Respondents by speed post. Requisite along with process fee, if not filed, be filed in course of the day. If the Appellant(s) provides the e-mail address of Respondents, let notice be also issued through e-mail. Dasti service is permitted particularly in the newly impleaded Respondents - Post these appeals for admission on 13th November, 2018 on the top of the list.

Summary

Issues Involved:
1. Whether the Tribunal can pass appropriate orders for resolution of problems faced by a company under Sections 241 and 242 of the Companies Act, 2013.
2. Whether the Tribunal can pass an interim order similar to Section 14 of the Insolvency and Bankruptcy Code, 2016 under the Companies Act, 2013.

Issue 1:
The National Company Law Tribunal (NCLT) refused to pass an interim order for the initiation of Corporate Insolvency Resolution Process against a company until the Central Government issues a notification. The Tribunal acknowledged the challenges faced by the company and its group companies. The key questions for consideration were whether the Tribunal can issue orders under Sections 241 and 242 of the Companies Act, 2013 to resolve the company's issues and maximize asset value. The Tribunal also deliberated on promoting entrepreneurship, ensuring credit availability, and balancing stakeholder interests. The discussion also included the possibility of liquidation in case of resolution failure.

Issue 2:
The debate centered on whether the Tribunal, under the Companies Act, 2013, has the authority to issue an interim order akin to Section 14 of the Insolvency and Bankruptcy Code, 2016. The Appellant, representing the Union of India, argued that the Tribunal's powers under the Companies Act, 2013 are broader than those under the Insolvency and Bankruptcy Code, 2016. Consequently, the Tribunal decided to implead the five largest creditors as party respondents in a representative capacity to ensure their involvement in the proceedings. The Tribunal directed corrections to be made in the cause title and other relevant sections of the appeals.

Interim Orders:
The Tribunal issued interim orders to stay various actions concerning the company and its group entities. These actions included instituting or continuing legal proceedings against the company, enforcing security interests over their assets, accelerating loan repayments, and exercising set-off rights by banks and financial institutions. The interim orders aimed to safeguard the company's interests, prevent further financial strain, and maintain the status quo until further directives. The orders did not extend to petitions under Article 226 of the Constitution before High Courts or the Supreme Court.

In conclusion, the Tribunal's judgment addressed critical issues related to the company's financial distress, the Tribunal's powers under the Companies Act, 2013, and the necessity for interim measures to protect the company's interests and stakeholder rights.