2017 (9) TMI 1078 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - provisions of Insolvency & Bankruptcy Code, 2016 - pendency of the winding up petitions - Held that - Taking into consideration all and more particularly the differing views taken by coordinate benches of this Tribunal, this Special Bench is of the considered view that the matter should be placed before the Hon ble President of NCLT for the purpose of being transferred to a Larger Bench or as the Hon ble President may deem fit in accordance with the second proviso to sub-section (2) of Section 419 of the Companies Act, 2013 and the question to be referred to such Bench as the Hon ble President, NCLT may deem fit and proper is as follows - 1. Whether the process under the Insolvency and Bankruptcy Code, 2016 can be triggered in the face of the pendency of the winding up petitions before the respective High Courts or it is to be considered as an independent process? 2. In case the process is considered to be not independent, whether the petition filed under the Code is required to be transferred to the concerned High Court which is having seisin over the winding up proceedings or await the outcome of the winding up proceedings by adjourning it sine die? 3. Whether the Code gives any room for discretion to be exercised for adjourning it sine die in view of the statutory mandate given under Sections 7, 9 and 10 of the Code for expeditious disposal of cases by either admitting or rejecting it within the fixed time frame? 4. In case if the petition is adjourned sine die and if the winding up petition is dismissed or set aside in appeal subsequently, whether there is scope in such an eventuality for power of revival within the frame work of the Code conferred on this Tribunal? The Registrar, NCLT, New Delhi is directed to place the above reference made by this Special Bench, NCLT, New Delhi by virtue of second proviso to sub-section (2) of Section 419 of the Companies Act, 2013 as expeditiously as possible before the Hon ble President

Issues Involved:
1. Whether the process under the Insolvency and Bankruptcy Code, 2016 can be triggered in the face of the pendency of the winding up petitions.
2. Whether the petition filed under the Code is required to be transferred to the concerned High Court or await the outcome of the winding up proceedings.
3. Whether the Code allows for adjourning the petition sine die considering the statutory mandate for expeditious disposal.
4. Whether there is scope for revival of the petition if the winding up petition is dismissed or set aside in appeal.

Detailed Analysis:

Issue 1: Triggering Insolvency Process Amidst Pending Winding Up Petitions
- The Financial Creditor, Union Bank of India, initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor under the Insolvency & Bankruptcy Code, 2016. However, the Corporate Debtor contested the maintainability of this process due to pending winding up petitions before the High Court of Delhi.
- The Tribunal noted different views from various NCLT benches. The NCLT Chennai and Ahmedabad benches held that the pendency of winding up petitions does not bar the initiation of CIRP as long as no winding up order or appointment of an Official Liquidator has been made.
- Conversely, the Principal Bench, NCLT, New Delhi, in cases like Nauvata Engineering (P.) Ltd. v. Punj Lloyds Ltd., opined that initiating insolvency proceedings amidst pending winding up petitions could lead to conflicts between the Official Liquidator and the Insolvency Resolution Professional, thus preferring to defer to the High Court.

Issue 2: Transfer of Petition to High Court or Await Outcome
- The Tribunal considered whether petitions under the Code should be transferred to the High Court or await the outcome of the winding up proceedings. The Principal Bench, NCLT, New Delhi, in cases like Nikhil Mehta & Sons (HUF) v. AMR Infrastructure Ltd., indicated that where winding up petitions are pending and an Official Liquidator is appointed, the matter should be referred back to the High Court.
- The Tribunal also referred to the categorization of cases under Section 434 of the Companies Act, 2013, and relevant notifications, which differentiate the jurisdiction of the High Court and NCLT based on the status of notice service and admission of winding up petitions.

Issue 3: Adjourning Petition Sine Die
- The Tribunal deliberated on whether the Code permits adjourning the petition sine die in light of the statutory mandate for expeditious disposal within a fixed timeframe. The NCLT, New Delhi, in cases like Nowfloats Technologies Pvt. Ltd Vs Getit Infoservices Pvt. Ltd., held that proceedings cannot be sustained without obtaining leave from the High Court if an Official Liquidator is appointed.
- The Tribunal highlighted the conflict in jurisdiction and the need for clarity on whether the Tribunal can exercise discretion to adjourn petitions sine die.

Issue 4: Scope for Revival of Petition
- The Tribunal examined the possibility of reviving the petition within the framework of the Code if the winding up petition is dismissed or set aside in appeal. The Tribunal acknowledged the need for a clear mechanism to address such eventualities to ensure the statutory mandate of the Code is upheld.

Conclusion:
- Given the differing views among NCLT benches and the complexities involved, the Tribunal decided to refer the matter to the Hon'ble President of NCLT for consideration by a Larger Bench or as deemed fit. The questions referred for consideration include:
1. Whether the insolvency process under the Code can be initiated amidst pending winding up petitions.
2. Whether the petition should be transferred to the High Court or await the outcome of the winding up proceedings.
3. Whether the Code allows for adjourning the petition sine die.
4. Whether there is scope for revival of the petition if the winding up petition is dismissed or set aside in appeal.

The Registrar, NCLT, New Delhi, is directed to expedite the placement of this reference before the Hon'ble President.

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