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TMI Blog2017 (4) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... t the respondent. Learned counsel for the petitioner and the respondent however have addressed this court in this company petition and the same is thus considered by this court first. 3. Mr.Andhyarujina, learned counsel for the respondent has raised a preliminary objection about this court hearing this company petition along with other companion petitions at this stage on the ground that the winding up petition filed by ICICI Bank against the respondent is transferred to National Company Law Tribunal in view of the amendment to the provisions of Insolvency and Bankruptcy Code, 2016 (for short the said Code) and in view of the notification dated 7th December, 2016 issued by the Central Government in exercise of the powers conferred under sub-sections 1 and 2 of section 434 transferring various proceedings pending before the High Court to the National Company Law Tribunal. (For short "NCLT") 4. Learned counsel for the respondent invited my attention to the definition of 'corporate debtor' under section 3(8), 'creditor' under section 3(10), 'debt' under section 3(11), 'insolvency professional agency' under section 3(20) and 'secured creditor' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy and Bankruptcy Code, 2016 will prevail even if there is any inconsistency between the provisions of the Code and Companies Act, 1956. He placed reliance on section 243 of the Code and would submit that by the said provisions only certain enactment are repealed. He also placed reliance on XIth schedule of the Code thereby amending certain provisions of the Companies Act, 2013 and more particularly the provisions relating to the winding up of the company by the NCLT. 8. Learned counsel for the respondent invited my attention to the order dated 23rd December,2016 in Company Petition No.331 of 2016 and in companion Petition No.332 of 2016 and an order dated 17th January,2017 passed by Shri S.C.Gupte, J. clarifying the said order dated 23rd December,2016. It is submitted by the learned counsel that none of the provisions referred to aforesaid of the Code were pointed out before this court or were considered in the said orders dated 23rd December,2016 and 17th January,2017 passed by this court while holding that every winding up petition under Clause (e) of section 433 which is pending before the High Court and is not served by the petitioner on the respondent company shall be trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealing with the companies whereas it is the legislative intent to bring all the company proceedings and insolvency proceedings under one roof before NCLT under the provisions of Insolvency and Bankruptcy Code. 10. Learned counsel for the respondent placed reliance on the judgment of this court in case of JM Financial Asset Reconstruction Company Pvt. Ltd. vs. State of Maharashtra, 2016 SCC Online Bom 9099 and in particular paragraphs 33, 35, 36 and 42. He placed reliance on the preamble of the Insolvency and Bankruptcy Code, 2016 and submits that the purpose of winding up is a public purpose. He also placed reliance on sections 439, 439A, 440, 441, 441A, 446, 448, 454 and 455 of the Companies Act, 1956 and would submit that there is direct conflict between these provisions of the Companies Act, 1956 with the provisions of Insolvency and Bankruptcy Code, 2016. 11. Mr.Andhyarujina, learned counsel for the respondent placed reliance on the judgment of Supreme Court in case of Tata Motors Ltd. vs. Pharmaceutical Products of India Ltd., & Anr., AIR 2008 SC 2805 and in particular paragraphs 19 and 20 and would submit that those principles laid down by the Supreme Court would apply to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kers are qualified engineers/skilled workers, 15 are operators of the plant/machines, 35 work in the marketing team, 35 work in the Mumbai Office and rest of them are assisting in operation of the plant at Factory in Silvassa. She submits that the workers are fully dependent on the respondent company and if any order of winding up is passed against the respondent company, it would affect not only the respondent, its contributories, the creditors but also a large number of employees. She submits that interest of the workers has to be considered by this court before passing any order of admission of the company petition. In support of this submission, learned counsel placed reliance on the judgment of Supreme Court in case of National Textile Workers' Union and others vs. P.R.Ramakrishnan and others, (1983) 1 SCC 228 and in particular paragraphs 6 to 8. 14. Learned counsel also placed reliance on the following judgments :- (1) Kotak Mahindra Bank Ltd. vs. J.B.Diamonds Ltd., (2011) 163 Comp.Cas 152(Bom.) (Paragraphs 30, 33, 34, 37 and 38) (2) B.Viswanathan vs. Seshasayee Paper and Boards Ltd., 1992, Vol.73, Company Cases Madras, 136 (at page 140) (3) Narendra Glass Works (P) L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up under clause (e) of Section 433 of the Act on the ground of inability to pay its debts pending before a High Court and where the petition has not been served on the respondent as required under Rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub-section (4) of section 419 of the Act, exercising territorial jurisdiction and such petitions shall be treated as applications under Sections 7, 8 or 9 of the Code, as the case may be, and dealt with in accordance with Part II of the Code. Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with Rule 7, required for admission of the petition under Sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal within sixty days from the date of this notification, failing which the petition shall abate. (2) All cases where opinion has been forwarded by Board for Industrial and Financial Reconstruction, for winding up of a company to a High Court and where no appeal is pending, the proceedings for winding up initiated under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition filed by the ICICI Limited against the respondent which is transferred to the NCLT is not admitted and corporate insolvency resolution process has not been initiated. He submits that the insolvency commencement date as defined under Section 5(12) of the Code has not occurred. The NCLT has not declared any Moratorium prohibiting institution or continuation of pending suit or any other proceedings against the corporate debtor. 22. In so far as the reliance is placed under Section 238 of the Code by Mr.Andhyarunjina, learned counsel for the respondent is concerned, it is submitted by the learned senior counsel for the petitioner that there is no quarrel with the proposition of law canvassed by the learned counsel for the respondent in so far as the said provision is concerned. He further submits that in this case, however, Section 238 of the Code has no application. He submits that the said provision would be attracted only if there is any conflict between the provisions of the Code and the provisions of the Companies Act, 1956 or the Companies Act, 2013. He submits that as on today, there is no order passed by the NCLT declaring Moratorium under Section 14 of the Code. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition No.136 of 2014 on merits and adjourned the other company petitions. 27. Mr.Sen, learned senior counsel for the petitioner invited my attention to the affidavit filed by M/s.Kotak Mahindra Bank Ltd. and would submit that there are no chances of revival of the respondent company. He submits that various minutes of meetings of CDR group of lenders clearly indicates that the CDR has failed. All the lenders have already exited and have decided to file recovery proceedings against the respondent. The account of the respondent is declared as fraudulent by the secured creditors. None of the person is willing to be on board of directors of the respondent. 28. Learned senior counsel for the petitioner invited my attention to various averments made in the petition. He submits that the petitioner had granted short Term Loan aggregating to the total amount of Rs. 67 crores during the period between January 2012 to July 2012 to the respondent. During the period between September 2012 to October 2012, the respondent acknowledged each of the amounts lent by the petitioner to the respondent aggregating to the total debt amount of Rs. 67 crores and had executed bill of exchange and issued 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r group of petitions. He submits that there is no jurisdictional embargo. 33. In so far as the submission made by Ms.Singhania, learned counsel for the workers is concerned, it is submitted by the learned senior counsel for the petitioner that there are no averments made by the applicant in the Company Application that about 350 workers are supporting the applicant. No proof of such alleged support is annexed. He submits that even if the workers' support is relevant for deciding the winding up proceedings against the respondent company, such support is not decisive. He also invited my attention to the order passed by the this Court on 22nd January 2016 recording the statement made by the respondent that the respondent was a sick company. 34. It is submitted that the plea of the workers may be decisive at the time of hearing of the company petition finally. He placed reliance on the judgment of Delhi High Court in case of Citibank N.A. vs. Moser Baer India Ltd., (2015) 188 Company Cases 416. It is submitted by the learned senior counsel that before all the assets of the respondent are frittered away, this court shall appoint an Official Liquidator as a Provisional Liquidator i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions made by the learned senior counsel for the petitioner on merits of the petition submits that the meeting of the joint lenders forum is now scheduled. He does not dispute that a decree came to be passed in favour of the petitioner and against the respondent which decree has attained finality. Learned counsel invited my attention to paragraphs 3, 4, 8, 10 and 11 of the affidavit in reply filed by the Indian Overseas Bank supporting the case of the respondent. He also placed reliance on the additional affidavit filed by the Indian Overseas Bank dated 15th December,2015. He does not dispute that the CDR scheme has failed. He submits that Kotak Mahindra Bank has now already withdrawn the company petition against the respondent. 39. It is submitted that all the assets of the respondent are already mortgaged. The respondent is carrying on production only to the extent of 30% of the total capacity of the respondent. He placed reliance on the judgment of Punjab and Haryana High Court in case of Canara Bank and others vs. Arihant Industries Ltd., 2002 Vol.110 Company Cases 70 (Punjab and Haryana). He submits that the company court has ample discretionary power to consider t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company court that the net assets of the respondent are in negative is of no significance. 42. Mr.Sen, learned senior counsel for the petitioner in rejoinder submits that admittedly, the CDR scheme has already failed. He submits that in the minutes of the meeting of the CDR, it is clearly recorded that the account of the respondent is declared as fraudulent account. He submits that this company petition had been filed against the respondent in the year 2014. The respondent had several opportunities for revival if any in last three years but the respondent has failed to revive. He submits that there are no reasonable prospect of revival of the respondent. He submits that the judgment of this court in case of IDFC Bank Limited (supra) is clearly distinguishable in the facts of this case. In that matter, the rectification and restructuring steps were under consideration whereas in this case admittedly the attempt of revival of CDR has failed. He submits that the Indian Overseas Bank which was the lead banker participating in Joint Lenders Forum meeting has now stated that it was neither supporting nor opposing the case of the respondent but is admittedly pursuing the recovery pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a large number of petitions are pending against the respondent inter alia praying for winding up which itself indicates that the respondent is heavily indebted. Reasons and conclusions :- 46. I shall first decide whether an oral application made by the respondent to adjourn the hearing of this Petition till the Company Petition filed by the I.C.I.C.I. Bank against the respondent before NCLT shall be granted or not and this petition shall be made subject to the outcome of the petition filed by ICICI Bank Ltd. against the respondent which is pending before NCLT. It is not in dispute that this Petition along with other Company Petitions are pending for about three years in this Court for admission. The Companies Act, 1956 which is in force since 1 April 1956 provides for subject of winding up of the companies and other subjects. Section 433(c) of the Companies Act, 1956 provides for winding up of a Company, if the Company is unable to pay its debts. In the year 2013, the Parliament passed Companies Act, 2013 which seeks to repeal 1956 Act. The said 2013 Act received the assent of the President on 29th August 2013, which Act consolidates and amends the law relating to companies o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Transfer of Pending Proceedings of winding up on the ground of inability to pay debts. It is prescribed that all such pending Petitions which are pending before a High Court where the Petition has not been served on the respondent as required under Rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the National Company Law Tribunal established under Section 419(4) of the Companies Act, 2013 exercising territorial jurisdiction and such Petitions shall be treated as applications under Sections 7, 8 or 9 of the Code, as the case may be and shall be dealt with in accordance with Part II of the Code. 51. This Court by an order dated 23rd December 2016 construed the provisions of the Companies (Transfer of Pending Proceedings) Rules, 2016 and various Notifications issued by the Central Government referred to aforesaid and also considered the objects and purpose of enacting Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016. This Court in the said order also has interpreted Rules 26 to 29, Form No. 6 and Rules 96 and 98 of the Companies (Court) Rules, 1959, which provides for service of Petition and Notice upon the Company. 52. This Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside. 56. It is not in dispute that in this Petition and the other Companion Petition which were on board for admission, the service of the notice under Rule 26 of the Companies (Court) Rules, 1959 had been effected by the petitioner on the respondent Company prior to 15th December 2016. It is thus, clear that in view of the Notification dated 7th December 2016 by which the Companies (Transfer of Pending Proceedings) Rules, 2016 are notified duly construed by this Court in the said order dated 23rd December 2016 and clarificatory order dated 17th January 2017, this Petition will have to be heard by this Court and the provisions of the Companies Act, 1956 would be attracted to this Petition. This proceeding thus cannot be transferred to NCLT under the said Notification dated 7th December 2016. 57. The question now arises for consideration to this Court is, whether there is any inconsistency or conflict between the provisions of the Companies Act, 2013, Companies Act, 1956 with the provisions of Insolvency and Bankruptcy Code, 2016 insofar as provisions relating to winding up of the Company are concerned. 58. Insofar as the Company Petition filed by I.C.I.C.I. Bank against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tifying the said Companies (Court) Rules, 1959. Rule 5 of the said Rules clearly provides for Transfer of Pending Proceedings of the winding up on the ground of inability to pay debts, if the Petition has not been served on the respondent as required under Rule 26 of the Companies (Court) Rules, 1959. 62. In my view, it is clear that all winding up proceedings shall not stand transferred to the NCLT. It is clear that if the service of the notice of the Company Petition under Rule 26 of the Companies (Court) Rules, 1959 is not complied before the 15th December 2016 such Petitions shall stand transferred to NCLT whereas all other Company Petitions would continue to be heard and adjudicated upon only by the High Court. The Legislative intent is thus clear that two sets of winding up proceedings would be heard by two different forum i.e. one by NCLT and another by the High Court depending upon the date of service of Petition before or after 15th December 2016. In my view, there is thus, no embargo on this Court to hear this Petition along with other companion Petitions, in view of the admitted position that the notice under Rule 26 of the Companies (Court) Rules, 1959 has been served ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition along with other companion Petition admitting the Company Petition and passing any order of appointment of the Official Liquidator as provisional liquidator would seriously affect the outcome of the proceedings filed by the I.C.I.C.I. Bank against the respondent before NCLT is concerned, Mr. Andhyarujina, the learned Counsel appearing for the respondent placed reliance on the various provisions of the Code and more particularly, Section 3(8), 3(10), 3(11), 3(20), 3(30), Section 5 to 9, 12, 14, 16 to 24, 31, 32, 238 and 243. 67. During the pendency of this petition along with companion petitions, M/s.Kotak Mahindra Bank Limited withdrew Company Petition No.504 of 2016 filed by it against the respondent unconditionally. A perusal of the affidavit 22nd January, 2016 filed by M/s.Kotak Mahindra Bank Limited in this petition however indicates that the said bank had filed the said affidavit for the purpose of supporting the company petition. In the said affidavit, M/s.Kotak Mahindra Bank Limited brought on record that the respondent was referred to corporate date restructuring cell as it was facing financial difficulty. It was stated that the CDR could not fructify and the promote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further indicates that the account of the respondent has been declared as fraudulent by the secured creditors in the CDR meetings and all the lenders have already exited and have decided to file the recovery proceedings against the respondent. Most of such secured creditors have already filed the proceedings against the respondent for winding up. Several petitions are pending against the respondent. 71. This Court repeatedly gave various opportunities to the respondent to demonstrate before this Court that inspite of failure of CDR, the respondent has possibility of its revival even at this stage inspite of the respondent having been heavily indebted and with limited assets in hand, the respondent however, could not produce any proposal before this Court to demonstrate the same. The respondent though had applied before the BIFR for revival, could not succeed. All the creditors except M/s.Kotak Mahindra Bank Limited are pressing for their recovery in various proceedings filed before this Court and / before other forum. 72. The only argument advanced by the learned counsel for the respondent to postpone the hearing of this company petition along with other companion proceedings, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petition is concerned, learned counsel for the respondent could not dispute that the decree passed by this Court against the respondent has attained finality in view of the appeal filed by the respondent against the order passed by the learned single Judge of this Court and Special Leave Petition filed before the Supreme Court having been dismissed. There is no bonafide defence raised by the respondent to the company petition. The liability of the respondent in this case is not disputed. In view of the respondent having been heavily indebted and in view of large number of creditors, including unsecured creditors, in my view, the petitioner has made out a case not only for admission of this company petition but also for appointment of the Official Liquidator as a Provisional Liquidator. In my view there are not even remotest possibility of revival of the respondent company. Before the remaining assets of the respondent are friterred away, appointment of the Official Liquidator as Provisional Liquidator is absolutely warranted. 75. Insofar as so called support to the respondent made by some of the workers, who are represented by Ms.Singhania, learned counsel appearing for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be given priority in law leaving the unsecured creditors high and dry. I am therefore of the view that large number of unsecured creditors cannot be made to wait on the ground that in future NCLT may declare moratorium on the application of the ICICI Bank Limited under section 13 of the Insolvency and Bankruptcy Code, 2016 for the purpose of section 14. No cognizance of such petition filed by ICICI Bank Limited against the respondent which is pending before the NCLT thus can be taken by this Court as sought to be canvassed by the learned counsel for the respondent. 78. The Delhi High court in case of Citibank N.A. vs. Moser Baer India Ltd., (2015) 188 Company Case 416 (Delhi) has considered a situation where under the CDR scheme the amount infused by the consortium of banks was very limited and the moratorium was likely to expire in near future. The Delhi High Court observed that what would happen thereafter is a matter of speculation. The Delhi High Court in that situation admitted the company petition and impleaded the workers. The judgment of the Delhi High Court in the case of Citibank N.A. (supra) would squarely apply to the facts of this case. I am in respectful agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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