2017 (9) TMI 391 - Tri - Companies Law

Winding up proceedings - Interim Insolvency Resolution process - Held that - The matter has been quite well settled by the Hon ble Appellate Tribunal in JK Jute Mills Co. Ltd. v. Surendra Trading Company 2017 (6) TMI 254 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, ALLAHABAD wherein it was held that the seven days period for the rectification of the defects as stipulated under the proviso to the relevant provisions of sections 7, 8, or 9 is required to be complied with by the Corporate Debtor, whose application otherwise being incomplete is fit to be rejected. It was thus held that the proviso to the aforesaid section made to remove the defects within seven days are mandatory and on failure to do so the application is fit to be rejected. However, the learned counsel for the petitioner submits that the Interim Insolvency Resolution Professional could not be named because of non-availability of the Chief Executive Officer of the petitioner Society for sometimes, but that cannot be the reason to grant extension in respect of the period of seven days, the same being mandatory in nature.In views of the above, the instant petition is rejecting.

Summary

Issues:
1. Transfer of pending proceedings for winding up of a company under Section 433(e) of the Companies Act, 1956 to the National Company Law Tribunal.
2. Compliance with Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016.
3. Filing of application as a Financial Creditor under the Insolvency & Bankruptcy Code, 2016.
4. Rectification of defects in the application and compliance with requirements under the Code.
5. Interpretation of the mandatory nature of the seven days period for rectification of defects in the application.

Transfer of Pending Proceedings:
The petitioner, a Cooperative Bank, filed a petition before the High Court for winding up of the respondent company under Section 433(e) of the Companies Act, 1956. The petition was transferred to the National Company Law Tribunal as per Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016, which specifies the transfer of winding up petitions to the Tribunal for cases where the petition has not been served on the respondent. The petitioner complied with the transfer process, including providing necessary information for admission of the petition under the Insolvency & Bankruptcy Code.

Compliance with Rule 5:
The petitioner filed an application as a Financial Creditor under the Insolvency & Bankruptcy Code, 2016, stating that the respondent issued debentures amounting to about ?2 crores, which were not issued as per the application. The petitioner was directed to rectify defects in the application, including filing missing documents related to debentures and communication with the Interim Resolution Professional. The petitioner submitted the required documents and affidavits within the specified timeline.

Filing as Financial Creditor:
The petitioner, being a Financial Creditor, had to comply with the requirements of the Insolvency & Bankruptcy Code, including furnishing records of default, proposing a resolution professional, and providing any other specified information. The petitioner was given time to rectify deficiencies in the application, as mandated by the Code, to ensure completeness and compliance with the statutory provisions.

Rectification of Defects:
The petitioner was granted seven days to rectify defects in the application, as per the provisions of the Insolvency & Bankruptcy Code. Failure to rectify defects within the stipulated period could lead to rejection of the application. The timeline for rectification of defects was considered mandatory, as established in previous legal precedents, emphasizing the importance of timely compliance with statutory requirements.

Interpretation of Mandatory Timelines:
The Tribunal referred to a previous judgment highlighting the mandatory nature of the seven days period for rectification of defects in the application. Even reasons such as the unavailability of the Chief Executive Officer of the petitioner Society were not deemed sufficient to grant an extension beyond the mandated timeline. Consequently, the petition was rejected due to non-compliance with the statutory requirements within the specified timeframe.

This detailed analysis covers the issues of transfer of proceedings, compliance with rules, filing as a Financial Creditor, rectification of defects, and the interpretation of mandatory timelines in the context of the legal judgment delivered by the National Company Law Tribunal.