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2019 (12) TMI 625 - HC - Companies LawWinding up petition - section 433(e) of the Companies Act, 1956 - Does this Court retain jurisdiction to hear the winding up petition being CP 1 of 2016 and the connected applications thereto? If so, what are the provisions of law applicable to adjudicate the said petition? - HELD THAT - The Company Judge of this Court retains the jurisdiction to try the aforesaid winding up petition falling in the category of saved petition, even if an insolvency proceeding is initiated against the same company before the NCLT under the provisions of IBC by another creditor, like Devi Trading. The applicable law for the said petition to try out by the Company Court will be the Act of 1956 and Rules of 1959. Should the Provisional Liquidator be released/discharged and directed to make over possession of the properties and assets, books of accounts of the said Company in his possession to the IRP appointed by NCLT? - Should further hearing of the winding up petition (C.P 1 of 2016) along with all connected applications be stayed? - Should the winding up petition along with all connected applications be transferred to NCLT to be further heard by it? Does NCLT have the jurisdiction to hear out the petitions filed by the intending purchasers? - HELD THAT - The applications filed by the intending purchasers of the flats / units developed by the said company cannot be decided by the NCLT, it requires declaratory orders to be passed with regard to civil rights of the parties as also direction for execution of conveyance and making over possession. The NCLT does not possess the jurisdiction under IBC for passing of such orders. The IRP, however, will be free to approach the Provisional Liquidator and take inspection and obtain copies of the documents and information as required by it for preparing the resolution plan to be submitted before the NCLT. The Provisional Liquidator under no circumstances shall make over the originals of the book and the possession of the assets of the said Company to the IRP. If the IRP has to inspect any asset of the said Company for the preparation of the Resolution Plan he should approach the Provisional Liquidator who will render necessary assistance and cooperation. Are the provisions of IBC applicable to the instant winding up petition when the same has been filed on 4th January, 2016 i.e. much prior to IBC coming into operation? - HELD THAT - In view of the provisions of a winding up petition which is a saved petition being transferred to NCLT for being heard before it like a petition under Section 9 of the IBC, it cannot be said that the provisions of IBC has not been made applicable to the saved petitions like the said petition, even if, the same has been filed prior to IBC coming into force. Whether the order dated 13th March, 2019 could have been obtained from NCLT without first obtaining leave of this Court under the provisions of section 446 of the Act of 1956? - Is the order of NCLT dated 13th March, 2019 in the absence of leave under section 446 of the Act, 1956 or is otherwise an order without jurisdiction and a nullity? - HELD THAT - The NCLT was well within its competence to entertain such application despite prior leave under the provisions of Section 446 of the Act of 1956 having not been obtained. The NCLT, however, should have been cautious before passing the order dated 13th March, 2019 at the instance of a creditor (Devi Trading) when the fact that the Provisional Liquidator had been appointed in a saved petition by the Company Judge was brought to its notice particularly when the application appears to have been moved about an year after filing. The NCLT should have also considered the effect of a winding up petition being advertised after having been admitted which assumes a representative character when all creditor like Devi Trading become obliged to join in the winding up proceedings pending before this Court to either support or oppose the winding up order. NCLT while exercising its jurisdiction under IBC ought to have been more cautious while passing orders directing the Provisional Liquidator to hand over the books, documents and assets of the company knowing that the Provisional Liquidator was appointed by the Company Judge of this Court in a saved petition and further on being informed that the Company Judge is considering an application of the IRP for discharge of the Provisional Liquidator. Propriety also demanded that NCLT should not have passed mandatory directions on the Provisional Liquidator to hand over the books, documents and assets to the IRP or directed personal presence of the Provisional Liquidator while hearing an application under Section 7 of the IBC when it knew that the Provisional Liquidator has been appointed by the Company Judge of this Court in a saved petition. This Court possesses the jurisdiction to hear out the winding up petition being CP 1 of 2016 along with all connected applications. However, the winding up petition and the connected applications thereto should not be proceeded with till NCLT comes to the conclusion as to whether the resolution plan in respect of the said company is either approved or rejected - Application disposed off.
Issues Involved:
1. Jurisdiction of the High Court to hear the winding-up petition. 2. Applicability of the Companies Act, 1956 and the Companies (Court) Rules, 1959. 3. Validity of the order passed by the National Company Law Tribunal (NCLT). 4. Role and discharge of the Provisional Liquidator. 5. Interaction between Insolvency and Bankruptcy Code (IBC) proceedings and winding-up proceedings. 6. Transfer of winding-up proceedings to NCLT. 7. Role of creditors and their applications in the winding-up process. Detailed Analysis: Jurisdiction of the High Court and Applicable Provisions of Law: The winding-up petition was filed on January 4, 2016, and served between January 14, 2016, and February 24, 2016, under Rule 26 of the Companies (Court) Rules, 1959. This was before the Insolvency and Bankruptcy Code (IBC) came into effect on May 28, 2016, and before the Companies (Transfer of Pending Proceedings) Rules, 2016, came into operation on December 7, 2016. Thus, the petition falls under the category of "saved petitions," which are not required to be transferred to the NCLT. The High Court retains jurisdiction over these petitions, and the applicable law remains the Companies Act, 1956, and the Companies (Court) Rules, 1959. Validity of the NCLT Order: The NCLT order dated March 13, 2019, was passed on an application filed by Devi Trading under Section 7 of the IBC on March 14, 2018, before the appointment of the Provisional Liquidator on September 7, 2018. Although the NCLT was within its rights to entertain the application, it should have been cautious, given the appointment of the Provisional Liquidator by the High Court. The NCLT’s order, while valid, should not interfere with the High Court’s jurisdiction over the saved petition. Role and Discharge of the Provisional Liquidator: The Provisional Liquidator, appointed by the High Court, should not be discharged or directed to hand over possession of the company's assets and books to the Interim Resolution Professional (IRP). The Provisional Liquidator will remain in place, and the IRP can inspect and obtain copies of necessary documents for preparing the resolution plan. The Provisional Liquidator will assist the IRP but retain control over the original documents and assets. Interaction Between IBC and Winding-Up Proceedings: The High Court retains jurisdiction over the winding-up petition, but the proceedings should be stayed until the NCLT concludes whether a resolution plan for the company is approved or rejected. If the resolution plan is approved, further orders regarding the revival of the company may be sought. If the plan is rejected and the order achieves finality, the High Court will proceed with the winding-up process under the Companies Act, 1956. Transfer of Winding-Up Proceedings to NCLT: Given the High Court's retained jurisdiction and the specific category of saved petitions, there is no need to transfer the winding-up petition and connected applications to the NCLT. The applications filed by intending purchasers of the flats/units developed by the company require declaratory orders and directions for conveyance and possession, which are beyond the NCLT’s jurisdiction under the IBC. Role of Creditors: Creditors, including Devi Trading, are required to join the winding-up proceedings before the High Court once the petition assumes a representative character after advertisement. The High Court retains jurisdiction over the saved petition, and creditors must participate in the proceedings under the Companies Act, 1956, and the Companies (Court) Rules, 1959. Conclusion: The High Court retains jurisdiction to hear the winding-up petition and connected applications under the Companies Act, 1956, and the Companies (Court) Rules, 1959. The Provisional Liquidator will not be discharged and will assist the IRP. The winding-up proceedings will be stayed until the NCLT concludes the resolution process. The winding-up petition will proceed in the High Court if the resolution plan is rejected. The NCLT should not interfere with the High Court’s jurisdiction over the saved petition.
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