2017 (8) TMI 1649 - DSC - Companies Law

Attachment of all assets of Roofit Industries Ltd. - section 252/10 of the Insolvency and Bankruptcy Code 2016 and Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority), Rules 2016 - HELD THAT - Section 14 of the MPID Act, provides that the provisions of said Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any custom or usage or instrument having effect by virtue of any such law. Similar provision is contained in sec.238 of the I.B.C. which also states that provisions contained in said Code shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. This Court cannot pass further orders under the MPID Act, in respect of the attached properties belonging to Roofit Industries. Application allowed.

Summary

Issues Involved:
1. Jurisdiction and authority of the Interim Resolution Professional (IRP) versus the Competent Authority under the MPID Act.
2. Validity and priority of the Insolvency and Bankruptcy Code (IBC) over the MPID Act.
3. Claims and objections raised by various stakeholders including depositors, investors, and other entities.
4. Implementation of the National Company Law Tribunal (NCLT) order and its implications.
5. Handling and transfer of attached properties and assets.

Detailed Analysis:

Jurisdiction and Authority of the IRP versus the Competent Authority under the MPID Act:
The applicant, appointed as an Interim Resolution Professional (IRP) by the NCLT, sought the transfer of all assets of Roofit Industries Ltd. attached by the Competent Authority under the MPID Act. The applicant argued that the management of the corporate debtor now vests with the IRP, and the duties include taking control and monitoring assets of the corporate debtor. The Competent Authority and other respondents opposed this, stating that the MPID Act gives exclusive jurisdiction to the designated court over attached properties and that the NCLT order does not apply to proceedings under the MPID Act.

Validity and Priority of the IBC over the MPID Act:
The applicant contended that the IBC has an overriding effect over all other acts, including the MPID Act, as per Section 238 of the IBC. However, the respondents argued that Section 14 of the MPID Act, which also has an overriding effect, prevails in this context. The court referred to the Bombay High Court judgment in M/s. City Limouzines (India) Ltd., which held that the MPID Act does not supersede the powers of the official liquidator under the Companies Act, and that the assets of companies in winding up would vest in the official liquidator.

Claims and Objections Raised by Various Stakeholders:
Several objections were raised by different stakeholders:
- Investors and Depositors: Argued that the MPID Act is a welfare legislation and should prevail over the IBC. They expressed concerns about the fate of investors of Sunearth Ceramics if the application is allowed.
- Economic Offences Wing (EOW): Opposed the application, highlighting the ongoing criminal prosecution against the directors of Roofit Industries and the attachment of properties due to fraudulent activities.
- Auto Investment Pvt. Ltd. and Velhari Trading Company: Objected on the grounds that the properties in question were already released by the Bombay High Court and do not belong to Roofit Industries.
- HDFC Bank Ltd.: Claimed that the attached property was mortgaged to them and not related to Roofit Industries.
- Lilavati Kirtilal Mehta Medical Trust: Asserted that the attached properties were wrongly identified as belonging to Roofit Industries.

Implementation of the NCLT Order and Its Implications:
The court acknowledged the NCLT order, which appointed the applicant as IRP and required the completion of the corporate insolvency resolution process within 180 days. The applicant had already invited claims from creditors and requested the Competent Authority to file claims on behalf of deposit holders. The court noted that the NCLT order imposes a duty on the IRP to take control of the corporate debtor's assets.

Handling and Transfer of Attached Properties and Assets:
The court, referring to the Bombay High Court judgment, concluded that it could not pass further orders under the MPID Act regarding the attached properties of Roofit Industries. The court allowed the application, directing the Competent Authority and EOW to hand over the custody and charge of specific immovable properties and assets to the applicant within two weeks. The Competent Authority was also directed to represent all depositors/investors before the applicant and file claims on their behalf.

Conclusion:
The court allowed the application, directing the transfer of specified properties and assets to the IRP in accordance with the NCLT order. The Competent Authority was instructed to represent the interests of depositors and file necessary claims, ensuring the protection of their interests during the corporate insolvency resolution process.