2020 (7) TMI 5 - AT - Insolvency and Bankruptcy

Voluntary Liquidation - applicability of provisions of Section 59 of the Insolvency and Bankruptcy Code, 2016 - whether the appeal under Section 42 of the 'I B Code' is maintainable before the Adjudicating Authority (National Company Law Tribunal)? HELD THAT - It is beyond controversy that 'M/s. TEIL Projects Limited' is undergoing Voluntary Liquidation Process contemplated under Chapter V of Part II of the 'I B Code'. It is indisputable that Section 59 of the 'I B Code' incorporated in Chapter V of Part II of the 'I B Code' providing for 'Voluntary Liquidation of Corporate Persons' stands duly notified vide S.O. 1005 (E) dated 30thMarch, 2017 and has been enforced w.e.f. 1st April, 2017 - The conditions necessary for initiating a Voluntary Liquidation Process, as enumerated in the aforesaid provision and coming to the fore on a plain reading thereof, are that such Voluntary Liquidation can be initiated by a Corporate Person which has not committed any default and the conditions and procedural requirements as may be specified by the Insolvency and Bankruptcy Board of India are to be complied with. The provision further envisages a declaration from majority of the Directors of the Company regarding formation of an opinion that either the Company has no debt or that it would be able to liquidate its liability from sale proceeds of its assets with further requirements that the company is not being liquidated to defraud any person. The initiation of process of voluntary liquidation of 'M/s. TEIL Projects Limited' has not been called, in question, in this appeal. The letter of rejection referred to hereinabove dated 14th May, 2019 has admittedly been passed after notifying of Section 59 of the 'I B Code'. It is nobody's case that the winding up proceedings were pending before the Hon'ble High Court. Therefore, it would be absurd to hold that the Voluntary Liquidation Process initiated by 'M/s. TEIL Projects Limited' is not governed by Section 59 - there being specific provision in the 'I B Code' dealing with admission or rejection of claim by the Liquidator with mechanism provided for questioning the same in appeal before the Adjudicating Authority and such provision being made applicable to voluntary liquidation proceedings explicitly in terms of the provisions embodied in Section 59(6) of the 'I B Code', issue raised with regard to maintainability of the appeal and jurisdiction of the Adjudicating Authority are without substance and arguments raised on this score are repelled. The jurisdiction exercised by the Adjudicating Authority is vested in it and cannot be termed improper. Despite being of the view that the claim initially left out by the Respondent No. 1 was payable, the Liquidator proceeded to reject the same without any justifiable reason which cannot be supported - Appeal dismissed.

Summary

Issues:
1. Applicability of Section 59 of the Insolvency and Bankruptcy Code, 2016 in Voluntary Liquidation initiated under the Companies Act, 1956.
2. Jurisdiction of the Adjudicating Authority (National Company Law Tribunal) in appeal under Section 42 of the Insolvency and Bankruptcy Code.

Analysis:

Issue 1: Applicability of Section 59 of the Insolvency and Bankruptcy Code, 2016 in Voluntary Liquidation initiated under the Companies Act, 1956:
The judgment revolves around the question of whether Section 59 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) is applicable to Voluntary Liquidation initiated under the Companies Act, 1956. The Appellate Tribunal clarified that the Voluntary Liquidation process of a Corporate Person should comply with the conditions and procedural requirements specified by the Insolvency and Bankruptcy Board of India. The Tribunal highlighted the importance of a declaration from the majority of the Directors of the Company regarding the absence of debt or the ability to pay debts in full from asset proceeds. The Tribunal emphasized that the provisions of Sections 35 to 53 of Chapter III and Chapter VII of the I&B Code apply to Voluntary Liquidation proceedings with necessary modifications. The judgment reaffirmed that the Liquidator's decision on admitting or rejecting claims falls within their domain, and such decisions are appealable before the Adjudicating Authority.

Issue 2: Jurisdiction of the Adjudicating Authority in appeal under Section 42 of the Insolvency and Bankruptcy Code:
The judgment addressed the jurisdiction of the Adjudicating Authority in an appeal under Section 42 of the I&B Code. It was clarified that the Adjudicating Authority has the jurisdiction to adjudicate upon claims in appeal, especially in cases where the Liquidator's decision is challenged. The Tribunal rejected arguments questioning the maintainability of the appeal, emphasizing that Section 61 of the I&B Code allows appeals by aggrieved parties before the Appellate Tribunal. The judgment confirmed that both the appeal before the Liquidator and the appeal before the Appellate Tribunal are maintainable under Part II of the I&B Code.

In conclusion, the Appellate Tribunal dismissed the appeal, stating that the jurisdiction exercised by the Adjudicating Authority was proper. The judgment upheld the Adjudicating Authority's decision to set aside the rejection of the claim by the Liquidator and affirmed the maintainability of the appeal under Section 42 of the I&B Code. The judgment provided a detailed analysis of the legal provisions governing Voluntary Liquidation processes and the jurisdiction of the Adjudicating Authority in such matters.