2017 (2) TMI 1049 - SC - Indian Laws

Scope for registration of the Reference sought for by the respondent No. 1 company under the provisions of the SICA - Power and jurisdiction of the Registrar and Secretary to refuse registration of the application for reference made by the respondent company - Held that - When the Regulations framed under the statute vests in the Registrar or the Secretary of the Board the power to scrutinize an application prior to registration thereof and thereafter to register and place the same before the Bench, we do not see how such power of scrutiny can be understood to be vesting in any of the said authorities the power to adjudicate the question as to whether a company is an industrial company within the meaning of Section 3(e) read with 3(f) and 3(n) of the SICA. A claim to come within the ambit of the aforesaid provisions of the SICA i.e. to be an industrial company, more often than not, would be a contentious issue. In the present case, it certainly was. The specific stand of the respondent No. 1 company in this regard need not detain the Court save and except to state that by a detailed description of the manufacturing process the respondent No. 1 company had sought to contend that it is an industrial company. Surely, the rejection of the above stand could have been made only by a process of adjudication which power and jurisdiction clearly and undoubtedly is vested by the SICA and the Regulations framed thereunder in a Bench of the Board and not in authorities like the Registrar and the Secretary. The High Court, in view of what has been discussed above, was correct in coming to the conclusion that the refusal of registration of the reference sought by the respondent Company by the Registrar, Secretary/Chairman of the Board was non-est in law. The reference must, therefore, understood to be pending before the Board on the relevant date attracting the provisions of Section 252 of the Insolvency and Bankruptcy Code. Whether the reference before the Board stood foreclosed by the order of winding up of the respondent Company and the appointment of liquidator was answered in the negative by HC relying on Real Value Appliances Ltd. (1998 (5) TMI 334 - SUPREME COURT OF INDIA ). The core principles laid down in the said decisions of the Court, namely, that immediately on registration of a reference under Section 15 of the erstwhile SICA, the enquiry under Section 16 is deemed to have commenced and that the winding up proceedings against a company stood terminated only after orders under Section 481 of the Companies Act, 1956, are passed, will have to be noticed to adjudge the correctness of the said view of the High Court. In any event, the aforesaid question becomes redundant in view of our conclusion that the reference sought by the respondent Company must be deemed to have been pending on the date of commencement of the Insolvency and Bankruptcy Code, particularly, Section 252 thereof (effective 1.11.2016). We, therefore, dispose of the appeal by holding that it would still be open to the respondent Company to seek its remedies under the provisions of Section 252 of the Code read with what is laid down in Sections 13, 14, 20 and 25. We make it clear that we should not be understood to have expressed any opinion on the scope and meaning of the said or any other provisions of the Code and the adjudicating authority i.e. National Company Law Tribunal would be free and, in fact, required to decide on the said questions in such manner as may be considered appropriate.

Summary

Issues Involved:
1. Jurisdiction and power of the Registrar, Secretary, and Chairman of the Board to refuse registration of a reference.
2. Impact of the winding-up order on the registration of the reference under SICA.
3. Application of Section 22 of SICA in the context of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

Jurisdiction and Power to Refuse Registration:
The main question was whether the Registrar, Secretary, and Chairman of the Board had the jurisdiction to refuse the registration of a reference filed under Section 15 of the SICA. The Supreme Court noted that the SICA and the Regulations framed thereunder did not confer any adjudicatory power on these authorities to determine whether a company is an industrial company within the meaning of Section 3(e) and 3(f) of the SICA. The Court emphasized that such a determination involves adjudication, which is a judicial function vested solely in a Bench of the Board. The Court cited the case of Jamal Uddin Ahmad Vs. Abu Saleh Najmuddin and Another to underline that judicial functions cannot be delegated to administrative authorities. Therefore, the refusal of registration by the Registrar, Secretary, and Chairman was deemed non-est in law, meaning it had no legal standing.

Impact of the Winding-Up Order:
The second issue was whether the winding-up order passed by the Company Court and affirmed by the Division Bench of the Bombay High Court foreclosed the proceedings under SICA. The Delhi High Court, relying on the Supreme Court decisions in Real Value Appliances Ltd. Vs. Canara Bank and Others and Rishabh Agro Industries Ltd. Vs. P.N.B. Capital Services Ltd., concluded that the winding-up order did not preclude the registration of a reference under Section 15 of SICA and the subsequent inquiry under Section 16. The Supreme Court agreed with this view, stating that the reference must be understood to be pending before the Board on the relevant date, thus attracting the provisions of Section 252 of the Insolvency and Bankruptcy Code, 2016.

Application of Section 22 of SICA:
The Supreme Court noted that the question of whether Section 22 of SICA barred further steps in the winding-up proceeding before the High Court no longer survived due to the repeal of SICA. However, the Court acknowledged that the issue still required an answer from the standpoint of the provisions of the Insolvency and Bankruptcy Code, 2016, which came into force on 1.12.2016. The Court observed that the reference sought by the respondent company must be deemed to have been pending on the date of commencement of the Insolvency and Bankruptcy Code, thus allowing the company to seek remedies under Section 252 of the Code.

Conclusion:
The Supreme Court disposed of the appeal by holding that the respondent company could still seek its remedies under the provisions of Section 252 of the Insolvency and Bankruptcy Code, 2016. The Court clarified that it had not expressed any opinion on the scope and meaning of the said provisions, leaving it to the National Company Law Tribunal to decide on these questions as deemed appropriate. The appeal was consequently disposed of accordingly.