2017 (8) TMI 623 - Tri - Insolvency and Bankruptcy

Insolvency Resolution Process - Insolvency and Bankruptcy Code, 2016 - Held that - Neither Section 7 of the Code nor the relevant Rule 4 of the Adjudication Rules do not contemplate any notice to other Financial Creditors. Section 7 of the Code and Rule 4 of the Adjudication Rules contemplate only notice to the Corporate Debtor. The learned Counsel for the Corporate Debtor appeared before this Adjudicating Authority and he was heard. Moreover, even the Applicant herein wants winding up of Alok Industries Ltd. The provisions of Insolvency Code initially contemplates Insolvency Resolution Process and in case of failure of Resolution Process, then the Company would go for liquidation. Therefore, no prejudice is going to be caused to the present Applicant even if CP No.(IB) 48/2017 is admitted. In case of admission of CP No. (IB) 48/2017, the present Applicant can as well represent his claim before the Interim insolvency Resolution professional and he will become one of the Members of Creditors Committee. Therefore, no prejudice is going to be caused to the debt due to the present applicant or for that matter any other Creditor even in case Insolvency Resolution Process is initiated under Section 7 of the Code. In case CP No.(IB) 48/2017 is not admitted, the present Applicant can pursue his remedies in the winding up proceedings pending before the Hon ble High Court of Bombay. Therefore, there is no need to permit the present Applicant to intervene in the proceedings in CP No.(IB) 48/2017, that too on the date on which the matter is listed for pronouncement of orders in CP No.(IB) 48/2017.

Issues:
1. Intervention in insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.
2. Conflict of orders between different forums.
3. Entitlement of creditors to trigger insolvency resolution process.
4. Bar on initiating corporate insolvency process due to pending winding up proceedings.
5. Jurisdiction and precedence of the National Company Law Tribunal over other laws.
6. Propriety in postponing orders in insolvency resolution process.
7. Rights of financial creditors in insolvency resolution process.

Analysis:
1. The judgment dealt with an application for intervention in the insolvency resolution process under the Insolvency and Bankruptcy Code, 2016, filed by a bank against a company. The applicant sought permission to intervene, dismiss, or stay the proceedings initiated by another bank. The key issue was the intervention of a creditor in the insolvency process.
2. The judgment discussed the potential conflict of orders between different forums due to winding up proceedings and insolvency resolution processes being pursued simultaneously. The applicant argued that conflicting orders could arise, emphasizing the need for clarity and consistency in judicial decisions.
3. The judgment clarified the entitlement of creditors, specifically financial creditors, to trigger the insolvency resolution process under the Code. It highlighted that there were no explicit provisions barring such creditors from initiating the process unless falling under specific clauses listed in the Code.
4. The judgment addressed the misconception regarding the bar on initiating corporate insolvency processes during pending winding up proceedings. It emphasized that the pendency of winding up proceedings alone did not prevent the initiation or continuation of insolvency resolution processes unless a winding up order had been passed.
5. The judgment discussed the jurisdiction and precedence of the National Company Law Tribunal over other laws, particularly the Companies Act, 1956. It highlighted that the provisions of the Insolvency and Bankruptcy Code would prevail over other laws in case of inconsistency, emphasizing the Tribunal's authority in insolvency matters.
6. The judgment considered the propriety of postponing orders in the insolvency resolution process pending decisions from other courts. It concluded that in the absence of specific orders from relevant courts, it was neither just nor expedient to delay the pronouncement of orders by the Tribunal.
7. The judgment addressed the rights of financial creditors in the insolvency resolution process, emphasizing that the Code and relevant rules primarily focused on notice to the corporate debtor rather than other creditors. It highlighted that financial creditors could participate in the process and represent their claims through designated procedures, ensuring no prejudice to their rights.

Overall, the judgment provided a detailed analysis of various legal aspects related to the intervention, conflict of orders, creditor entitlement, jurisdiction, propriety in decision-making, and creditor rights in the insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.

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