2019 (3) TMI 657 - AT - Insolvency and Bankruptcy

Initiation of the Corporate Insolvency Resolution Process - alleged existence of default in repayment of loan advanced to the Corporate Debtor - I B Code - maintainability of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Held that - The facts as narrated and the order passed by the Hon ble High Court clearly shows that till date the Hon ble High Court of Calcutta has not passed any order of winding up/liquidation of the Corporate Debtor . The Adjudicating Authority has failed to notice the aforesaid relevant orders passed by the Hon ble High Court of Calcutta. In the present case, as there is no specific order of winding up/liquidation has been passed by the Hon ble High Court of Calcutta and whatever the order of admission or winding up earlier issued has been recalled by the Division Bench, it can be held that the application under Section 7 preferred by the State Bank of India is maintainable. Matter remanded to the Adjudicating Authority, Kolkata Bench, Kolkata with direction to admit the application under Section 7.

Summary

Issues Involved:
1. Maintainability of Section 7 Application under Insolvency and Bankruptcy Code, 2016 (I&B Code)
2. Impact of Pending Winding Up Proceedings on Section 7 Application
3. Adjudicating Authority’s Failure to Consider Relevant High Court Orders
4. Necessity of Fresh Advertisement for Winding Up Proceedings
5. Interpretation of Winding Up and Liquidation under Companies Act and I&B Code

Detailed Analysis:

1. Maintainability of Section 7 Application under Insolvency and Bankruptcy Code, 2016 (I&B Code)
The State Bank of India (SBI), as a financial creditor, filed an application under Section 7 of the I&B Code to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, alleging default in loan repayment. The application was initially challenged by the Corporate Debtor, leading to various legal proceedings, including interim orders from the High Court and the Supreme Court. The Adjudicating Authority (NCLT) ultimately held that the application under Section 7 was not maintainable due to pending winding up petitions.

2. Impact of Pending Winding Up Proceedings on Section 7 Application
The Corporate Debtor argued that multiple winding up petitions were pending, thereby rendering the Section 7 application non-maintainable. The NCLT, Kolkata Bench, upheld this view, stating that the ongoing winding up proceedings before the High Court precluded the maintainability of the Section 7 application. However, the Appellate Tribunal noted that no final winding up order had been passed by the High Court, and the earlier winding up orders had been recalled. Therefore, the Tribunal held that the Section 7 application by SBI was maintainable.

3. Adjudicating Authority’s Failure to Consider Relevant High Court Orders
The Appellate Tribunal criticized the Adjudicating Authority for failing to consider the relevant orders passed by the High Court of Calcutta. Specifically, the High Court had not issued a final winding up order, and any previous orders had been set aside. The Tribunal emphasized that the absence of a final winding up order meant that the Section 7 application was still valid and should be admitted.

4. Necessity of Fresh Advertisement for Winding Up Proceedings
The High Court of Calcutta had directed fresh advertisements for the winding up application, allowing other creditors to participate in the proceedings. The Tribunal noted that this procedural requirement was essential to ensure that all stakeholders had an opportunity to be heard. However, the Tribunal stressed that the winding up proceedings were still not concluded, and no final order had been issued, which influenced their decision on the maintainability of the Section 7 application.

5. Interpretation of Winding Up and Liquidation under Companies Act and I&B Code
The Tribunal referred to the case of "Unigreen Global Private Limited v. Punjab National Bank & Ors." to clarify the distinction between winding up and liquidation. It was noted that the term "winding up" under the Companies Act is synonymous with "liquidation" under the I&B Code. However, since no liquidation order had been passed against the Corporate Debtor, the Section 7 application remained valid. The Tribunal concluded that the legislative intent was clear in allowing insolvency proceedings to proceed unless a final winding up order had been issued.

Conclusion:
The Appellate Tribunal set aside the impugned order dated 10th October 2018 by the NCLT, Kolkata Bench, and directed the Adjudicating Authority to admit the Section 7 application filed by SBI. The Tribunal emphasized that no further hearing was required, as all parties had already been heard, and the case was deemed fit for admission. The appeal was allowed, and the matter was remitted to the Adjudicating Authority for further proceedings.