2018 (7) TMI 1741 - HC - Insolvency and Bankruptcy

Winding up petition - Company Court jurisdiction while dealing with the winding up petitions to stay the proceedings before the NCLT in respect of revival or resolution issue - Held that - The general legal principles of interpretation of statute state that the general law should yield to the special law. In the context of the present statute i.e. IBC 2016, we are of the view that the Companies Act 1956 could be treated as general law and IBC, 2016 to be a special statute to the extent of the provisions relating to revival or resolution of the company as per provision under Chapter II of the IBC. Even if the Companies Act and the IBC 2016 are considered as special statutes operating in their respective field, we are of the view that the IBC 2016 being later enactment and in view of the statement and objects and the purpose for which it was enacted, the provisions relating to revival/resolution of the company incorporated under Chapter II will have to be given primacy over the provisions of the winding up proceeding pending before the Company Courts which are referred as saved petitions. We are of the considered opinion that the Company Court while dealing with the winding up petitions (saved petitions) shall have no jurisdiction to stay the proceedings before the NCLT in respect of revival or resolution issue. We may further state that in case the forum under the IBC, 2016 i.e. NCLT fails to revive or successfully implement the resolution plan, then the Company Judge seized with the winding up petitions (saved petitions) would deal with the petition in accordance with law. We are of the view that allowing both the forums i.e. Company Court and the NCLT to go ahead with the liquidation proceedings/winding up proceedings simultaneously would not serve any purpose. There is likelihood of creation of confusion and complexity. To harmonize this likely situation, we observe that the Company Judge, in saved petitions, would exercise jurisdiction in case revival efforts by NCLT fails. We find that the learned Single Judge approached the issue in its proper perspective and harmoniously considered various provisions of the relevant enactments keeping in view the object behind the special statutes. We do not find any error or perversity in the view adopted by the learned Single Judge.

Issues Involved:
1. Jurisdiction of Company Court vs. NCLT under IBC, 2016.
2. Applicability of IBC, 2016 to "saved petitions" under Companies Act, 1956.
3. Powers of Company Court to stay proceedings before NCLT.
4. Harmonious interpretation of IBC, 2016 and Companies Act, 1956.
5. Legislative intent and purpose of IBC, 2016.

Detailed Analysis:

1. Jurisdiction of Company Court vs. NCLT under IBC, 2016:
The judgment discusses the jurisdictional boundaries between the Company Court and the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC), 2016. It emphasizes that the NCLT has exclusive jurisdiction over matters related to corporate insolvency resolution and liquidation as per Sections 63 and 231 of the IBC, 2016. The court noted that the IBC, 2016 is a special statute aimed at reviving companies and resolving insolvency issues within a stipulated timeframe, and thus, it should take precedence over the Companies Act, 1956 in matters of insolvency and bankruptcy.

2. Applicability of IBC, 2016 to "saved petitions" under Companies Act, 1956:
The judgment clarifies that "saved petitions" (winding up petitions where notices were issued before the enactment of IBC, 2016) should not be treated differently from other petitions under the IBC, 2016. The court rejected the argument that the IBC, 2016 does not apply to saved petitions, stating that such a distinction would go against the legislative intent of the IBC, 2016, which aims to provide a unified and efficient framework for insolvency resolution.

3. Powers of Company Court to stay proceedings before NCLT:
The court ruled that the Company Court does not have the jurisdiction to stay proceedings before the NCLT in matters related to corporate insolvency resolution. It emphasized that the IBC, 2016 contains specific provisions (Sections 63 and 231) that bar civil courts from interfering in matters within the jurisdiction of the NCLT. The court highlighted that allowing both forums to proceed simultaneously could lead to confusion and complexity, and thus, the NCLT should be allowed to proceed with the resolution process without interference from the Company Court.

4. Harmonious interpretation of IBC, 2016 and Companies Act, 1956:
The judgment advocates for a harmonious interpretation of the IBC, 2016 and the Companies Act, 1956. It states that even if both statutes are considered special laws, the IBC, 2016, being the later enactment, should prevail in matters of corporate insolvency resolution. The court referred to the principle of harmonious construction, which requires that the general law (Companies Act, 1956) should yield to the special law (IBC, 2016) to the extent of any inconsistency between them.

5. Legislative intent and purpose of IBC, 2016:
The court extensively discussed the legislative intent behind the IBC, 2016, highlighting its objective to provide a time-bound resolution of insolvency and maximize the value of assets. The judgment cited the statement of objects and reasons of the IBC, 2016, and various observations from the Apex Court and the Bankruptcy Law Reforms Committee to emphasize that the primary purpose of the IBC, 2016 is to revive companies and ensure efficient resolution of insolvency issues. The court noted that the IBC, 2016 aims to shift control of defaulting companies from entrenched managements to creditors, thereby improving recovery rates and encouraging debt financing.

Conclusion:
The High Court dismissed the appeal, upholding the view that the Company Court does not have the jurisdiction to stay proceedings before the NCLT in matters related to corporate insolvency resolution. The court emphasized the legislative intent of the IBC, 2016 to provide a unified and efficient framework for insolvency resolution and stated that the provisions of the IBC, 2016 should prevail over the Companies Act, 1956 in such matters. The judgment reinforces the primacy of the IBC, 2016 in dealing with corporate insolvency and bankruptcy issues, ensuring a streamlined and effective resolution process.

← Previous Next →