2019 (6) TMI 771 - AT - Insolvency and Bankruptcy

Validity of application filed under Section 10 of the Insolvency and Bankruptcy Code, 2016 - it was alleged that application in Form 6 under Section 10 of the I B Code was filed without the decision of the shareholders - HELD THAT - In the present case under Article 127 (xii) the Board of Directors have been empowered to pass any order for winding up and/or presenting a petition for winding up of the Company. The prior approval of the shareholders in the AGM has been substituted by the amendment made on 6th June, 2018, which is not applicable in the present case as it was admitted earlier in May, 2018. This apart, we find that subsequently the matter was placed before the AGM in August, 2018 which also approved the decision for filing the application under Section 10 of the I B Code. In absence of any merit, the appeal is dismissed.

Summary

Issues:
1. Validity of application under Section 10 of the Insolvency and Bankruptcy Code, 2016 filed without impleading any lender as a party.
2. Lack of decision by shareholders in Annual General Meeting (AGM) or Extra-ordinary General Meeting (EoGM) for filing the insolvency application.
3. Interpretation of Articles of Association regarding decision-making authority for winding up.

Issue 1:
The judgment addressed the validity of an application under Section 10 of the Insolvency and Bankruptcy Code, 2016, filed by 'Ricoh India Limited' without involving any lender as a party. The Adjudicating Authority admitted the application ex parte, leading to an appeal by a shareholder challenging the decision. The Appellant argued that the application was filed without the decision of the shareholders, as neither an AGM nor an EoGM was conducted to decide on declaring the 'corporate applicant' insolvent.

Issue 2:
The judgment analyzed the absence of a decision by shareholders in an AGM or EoGM for filing the insolvency application. The Appellant contended that only the Board of Directors decided to file the application, which was not sufficient. Reference was made to a previous decision by the Appellate Tribunal, emphasizing the necessity of shareholder approval as per the Articles of Association for such applications to be maintainable.

Issue 3:
Regarding the interpretation of the Articles of Association, the judgment compared the provisions of 'Ricoh India Ltd.' with a previous case, 'Gaja Trustee Company Private Limited.' In the 'Gaja Trustee' case, an 'affirmative vote' of shareholders was required for liquidation decisions. However, in the present case, Article 127 empowered the Board of Directors to make decisions for winding up without a specific provision for an 'affirmative vote' in the AGM. The judgment concluded that the shareholder decision requirement was not applicable in this scenario.

The judgment highlighted the importance of shareholder approval in insolvency applications, as per the relevant Articles of Association. It differentiated between cases where specific shareholder decisions were mandated and cases where the Board of Directors had the authority to make such decisions independently. The judgment also considered the timing of regulatory amendments in relation to the application filing date, emphasizing the need for adherence to the legal requirements in effect at the time of application submission. Ultimately, the appeal was dismissed due to the lack of merit in challenging the original decision, and no costs were awarded.