2018 (6) TMI 492 - AT - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - whether an application under Section 7 of the I&B Code is maintainable when winding up proceeding against the Corporate Debtor has already been initiated? - Held that - In the present case, admittedly the High Court of Bombay has already been ordered for winding up respondent- Corporate Debtor , which is the second stage of the proceeding. For the said reason, we hold that initiation of Corporate Insolvency Resolution Process which is the first stage of resolution process against the same Corporate Debtor does not arise. In view of the aforesaid finding, we are not inclined to interfere with the impugned order. In absence of any merit, the appeal is dismissed.

Summary

Issues:
- Maintainability of an application under Section 7 of the Insolvency and Bankruptcy Code when winding up proceedings have already been initiated against the Corporate Debtor.

Analysis:
The Appellate Tribunal considered the appeal filed by 'Indiabulls Housing Finance Ltd.' against the dismissal of their application under Section 7 of the Insolvency and Bankruptcy Code by the National Company Law Tribunal. The main issue was whether such an application is maintainable when winding up proceedings have already been initiated against the Corporate Debtor. The Tribunal referred to a previous judgment in the case of 'Innoventive Industries Limited vs. Kumar Motors Private Limited' where it was held that if a winding up proceeding has already been initiated against a Corporate Debtor, no application under Section 10 can be filed. This is in line with Section 11(d) of the I&B Code, which states that a corporate debtor in respect of whom a liquidation order has been made is not entitled to make an application for corporate insolvency resolution process.

In the present case, the High Court of Bombay had already ordered the winding up of the respondent Corporate Debtor, which is considered the second stage of the proceeding. The Tribunal held that the initiation of the Corporate Insolvency Resolution Process, which is the first stage of the resolution process, does not arise when winding up proceedings have already been ordered. Therefore, the Tribunal dismissed the appeal, stating that in the absence of merit, there shall be no order as to costs. This decision aligns with the principle that once the liquidation proceedings have been initiated against a Corporate Debtor, the application for Corporate Insolvency Resolution Process is not maintainable.

The Tribunal also referred to another judgment in the case of 'Forech India Pvt. Ltd. vs. Edelweiss Assets Reconstruction Company Ltd.', where it was mentioned that if a Corporate Insolvency Resolution has started or if liquidation proceedings have been initiated against the Corporate Debtor, there is no need to entertain another application under Section 7 or Section 9. The Financial Creditor and Operational Creditor can make their claims before the Insolvency Resolution Professional or Official Liquidator in such cases. The Tribunal highlighted that the question of reverting back to the first stage of Corporate Insolvency Resolution Process does not arise once the second stage of liquidation proceedings has been initiated against the Corporate Debtor.

In conclusion, the Tribunal's decision in this case reaffirmed the principle that when winding up proceedings have already been initiated against a Corporate Debtor, the application for Corporate Insolvency Resolution Process is not maintainable. This ensures consistency with the provisions of the Insolvency and Bankruptcy Code and previous judicial interpretations on the matter.