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TMI Blog2018 (3) TMI 1320X X X X Extracts X X X X X X X X Extracts X X X X ..... y object. The Insolvency & Bankruptcy Code has been in force w.e.f. 1.12.2016 and it has its share of challenges which are reflected in the reference order made by the Bench comprising of Hon'ble Mr. R. Varadharajan, Member (Judicial) and Hon'ble Ms. Deepa Krishan, Member (Technical). To understand the challenges it would therefore, be necessary to set out the reference order dated 21.08.2017 in extenso which reads thus: "No. IB-190(PB)/2017 Under section 7 Insolvency and Bankruptcy Code, 2016 IN THE MATTER OF: UNION BANK OF INDIA BRANCH OFFICE AT M-11, FIRST FLOOR, CONNAUGHT CIRCUS, NEW DELHI-110001. .... Petitioner V/s Era Infra Engineering Limited 1107, INDRAPRAKASH BUILDING, 21, BARAKHAMBA ROAD, NEW DELHI -110001 .... Respondent No.IB-110(PB)/2017 Under section 7 Insolvency and Bankruptcy Code, 2016 IN THE MATTER OF: ALCHEMIST ASSET RECONSTRUCTION COMPANY LTD. D-54, First Floor, Defence Colony, New Delhi - 110024. .... Financial Creditor/Petitioners Versus TIRUPATI BUILDINGS & OFFICES PVT. LTD. Plot No.3, District Centre Sector-10, Dwarka, New-110075 .... Corporate Debtor /Respondent ORDER PRONOUNCED ON: 21.08.2017 "Union B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is evident vide order dated 11.07.2017 that several company petitions seeking for winding up of the Corporate Debtor is pending before the Hon'ble High Court of Delhi and in the circumstances vide the said order of the Hon'ble Principal Bench the following question has been framed, namely: "Whether the process under the Insolvency and Bankruptcy Code, 2016 can be triggered in the face of the pendency of the winding up petitions or it is to be considered as an independent process?" (c) For arguments of the aforesaid issue the Company Petition was listed on 25.07.2017. Since the Hon'ble Principal Bench did not sit on the said date and as a Special Bench was constituted to hear the matters listed before the Hon'ble Principal Bench in lieu of it, this Special Bench taking into consideration the exigencies of the situation chose to hear the submissions of the respective parties in this as well as in C.P.No.110 (PB) of 2017 in the matter of Alchemist Asset Reconstruction Company Limited v. Tirupati Buildings & Offices Private Limited in which petition also a similar issue has arisen due to the pendency of winding up petitions against the Corporate Debtor therein. (d) At the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has brought to the notice of the Bench that winding up petition against the respondent company namely Punj Lloyds Ltd. is already pending before the Hon'ble Delhi High Court and taking notice of the aforesaid fact C.P. No. 1156 of 2016 was transferred back to the Hon'ble Delhi High Court. In various orders passed by this Tribunal, we have expressed the opinion that in cases where winding up proceedings are pending against a Company, then it would not be conducive for the Tribunal to trigger insolvency process against that very company as there is likelihood of conflict between the two statutory entities, namely Official Liquidator and the Insolvency Resolution Professional. Therefore, the proceedings which are continuing in the Hon'ble Delhi High Court may constitute a better basis for adjudication being earlier in point of time and the claim having been made by other Operational Creditors in the proceedings for winding up. The Ministry of Corporate Affairs has also issued notification on 29.06.2017 to that effect. Accordingly, we refer this matter for consideration of Hon'ble High Court. The Registry is directed to send all the papers at the earliest. Parties through their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Getit Infoservices Pvt. Ltd. in C.A. No. (IB) 45(PB)/2017 vide order dated 11.04.2017 had specifically held, where the Official Liquidator has been appointed as the Provisional Liquidator, then the recourse of the parties is to approach the Court which has thought it fit to appoint the Liquidator and not this Tribunal and that the proceedings cannot be sustained before this Tribunal without obtaining the leave of the Hon'ble High Court under Section 450 of the Companies Act, 1956 for continuation of the proceedings under the Code. (m) Strictly speaking the above cases referred to are not transferred cases as contemplated under Section 434 of the Companies Act, 2013 and the notifications issued thereunder from time to time to facilitate and to remove difficulties in relation to matters which are required to be transferred and for bringing in clarity as to jurisdiction of the respective judicial forums. A combined reading of Section 434 of the Companies Act, 2013 and the notifications issued thereunder from time to time, in relation to winding up, particularly under Section 433(e) of the Companies Act of 1956 discloses the following categorization and the judicial forum which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , reliance placed by Mr. Andhyarujina, the learned Counsel appearing for the respondent on Section 238 of the Insolvency and Bankruptcy Code, 2016 is totally misplaced. The effect of non obstante provisions if any in Section 238 of the Insolvency and Bankruptcy Code, 2016 would have been significant only if there would have been conflict in aforesaid provisions and not otherwise. In my view, Mr. Sen, the learned Counsel appearing for the petitioner is right in his submission that Section 238 of the Code has no application in this situation on the ground that there is no conflict between the provisions of the Code and the provisions of the Companies Act, l956 or the Companies Act, 2013. (o) The above extracts is from the decision rendered on 11.04.2017 by the Hon'ble High Court of Bombay in C.P.No.136 of 2014 along with C.A.No.932 of 2015 and C.A.No.887 of 2015 in the matter of Ashok Commercial Enterprises v. Parekh Aluminex Limited. (p) Thus taking into consideration all the above and more particularly the differing views taken by coordinate benches of this Tribunal, this Special Bench is of the considered view that the matter should be placed before the Hon'ble President of NC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 433 (e) and Section 434 of the erstwhile Companies Act, 1956 have been initiated and have been in progress in various High Courts when the IBC was enforced w.e.f. 1.12.2016. Section 434 of the Companies Act 2013 provides for transfer of proceedings to NCLT inter alia, pending immediately before such date before the High Courts or District Court under Companies Act, 1956. Sub-section (c) of Section 434 of the 2013 Act reads as under: "434. Transfer of Certain Pending Proceedings. (1)On such date as may be notified by the Central Government in this behalf,- (a) ............. (b)............. (c) all proceedings under the Companies Act, 1956 (1 of 1956), including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer". 4. It is evident from the opening words of Section 434(1), that the date of transfer was to be notified by the Central Government and the NCLT was to proceed to deal with such proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing relating to Voluntary Winding up: All applications and petitions relating to voluntary winding up of companies pending before a High Court on the date of commencement of this rule, shall continue with and dealt with by the High Court in accordance with provisions of the Act. 5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.(1) All petitions relating to winding 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment through MCA issued another notification dated February 28, 2017 extending the period of sixty days to six months. That notification is also extracted in-extenso which reads as under: MINISTRY OF CORPORATE AFFAIRS NOTIFICATION New Delhi, the 28th February, 2017 G.S.R. 175(E).- In exercise of the powers conferred under sub-sections (1) and (2) of section 434 of the Companies Act, 2013 (18 of 2013) read with sub-section (1) of section 239 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) (hereinafter referred to as the Code), the Central Government hereby makes the following rules further to amend the Companies (Transfer of Pending Proceedings) Rules, 2016, namely:- 1. Short title and Commencement-(1) These rules may be called the Companies (Transfer of Pending Proceedings) Amendment Rules, 2017. (2) They shall come into force on the date of their publication in the Official Gazette. 2. In the Companies (Transfer of Pending Proceedings) Rules, 2016, in rule 5, in sub-rule (1) in the proviso for the words "sixty days" the words "six months" shall be substituted. 7. The Ministry of Corporate Affairs issued yet another notification on June 29, 2017 extending t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding details of the proposed insolvency professional to the Tribunal upto 15th day of July, 2017, failing which the petition shall stand abated: Provided further that any party or parties to the petitions shall, after the 15th day of July, 2017, be eligible to file fresh applications under sections 7 or 8 or 9 of the Code, as the case may be, in accordance with the provisions of the Code: Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under this rule and remains in the High Court and where there is another petition under clause (e) of section 433 of the Act for winding up against the same company pending as on 15th December, 2016, such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent.".' 8. The Transfer Rules' and its subsequent amendments gave birth to numerous debates. There were arguments concerning interpretation of Rule 26 of the Companies Court Rules relating to service of petition. More significantly the controversy arose concerning cases where against the same company (a) notice of petition was served in one petition and in another petition t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A perusal of the application filed by the Financial Creditor on the prescribed proforma i.e. Form-I, disclosed in part IV of the application that the total loan amount sanctioned to the Corporate Debtor on different dates was to the extent of Rs. 1506.33 crores. The default amount stated by the Financial Creditor is Rs. 681.04 crores and in addition External Commercial Borrowing of USD 11,971,939.12 as on 31.05.2017 was also stated to be in default. It is also substantiated by Statement of Accounts filed along with the petition. In relation to the facilities granted, the Financial Creditor has highlighted in Part V of Form-1 the details of securities created by the Corporate Debtor and held by the Financial Creditor under pari-passu charge as well as in relation to certain securities on which it has first charge with the consortium of lenders as well as the personal and corporate guarantees given by the promoters of the Corporate Debtor. 11. In response to notice of the petition the Corporate Debtor put in appearance. Learned Counsel for the Corporate Debtor raised an objection that several company petitions have been filed before the Hon'ble Delhi High Court with a prayer for win ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 11 of the Code. It would be thus pertinent to read first section 11 which is set out below in ex tenso: "11. The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process under this Chapter, namely:- (a) a corporate debtor undergoing a corporate insolvency resolution process; or (b) a corporate debtor having completed corporate insolvency resolution process twelve months preceding the date of making of the application; or (c) a corporate debtor or a financial creditor who has violated any of the terms of resolution plan which was approved twelve months before the date of making of an application under this Chapter; or (d) a corporate debtor in respect of whom a liquidation order has been made. Initiation of corporate insolvency resolution process by corporate applicant. Explanation.-For the purposes of this section, a corporate debtor includes a corporate applicant in respect of such corporate debtor." In paras 3 & 4 of its order the Hon'ble Appellate Tribunal proceeded to observe as follows :- "3. From the aforesaid provision, we find that the 'Corporate Debtor' or 'Financial Creditor' is ineligible t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Code could be triggered after the winding proceedings have been initiated by appointing a liquidator. The reason is that no question of such a nature was involved in the appeal which came up before the NCLAT. 20. The other judgement rendered by NCLAT is in the case of Unigreen Global (P.) Ltd. v. P.N.B. & Others (Company Appeal (AT) (Insolvency) no 81 of 2017 decided on 1.12.20170. The NCLAT has adopted the same reasoning to reach the conclusion that in a case where winding up proceedings have been initiated against a 'Corporate Debtor' by Hon'ble High Court or NCLT or liquidation order has been passed in respect of the 'Corporate Debtor then no fresh application under section 10 would be competent. Thus the principles governing the initiation of proceedings under sections 7, 9 & 10 are govern by same principles which are found on the same rationale. 21. An interesting situation arose before Hon'ble Bombay High Court in the cases of Jotun India Private Ltd. v. PSL Ltd. [CA (L) No. 572 and 333 and 417 of 2017 in C. P. 434 of 2015] and other applications decided on 5.1.2018. 22. In that case company petition for winding up was admitted by the High Court in March 2017 and no pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Enterprises Ltd. v. Hong Kong and Shanghai Banking Corpn. [2009] 8 SCC 646 and Cotton Corpn. of India Ltd. v. United Industrial Bank Ltd. (1983) 4 SCC 625. (d) The Transfer Rule' which provide for transfer of winding up petition in case of non- service according to the provisions of Rule 26 of the Company Court Rules would give way to the Principles laid down by the Hon'ble Bombay High Court and in the order passed by the NCLAT. 23. It is in view of the aforesaid binding precedents and the principles of stare decisis that we answer the first question in affirmative. Thus there is no bar on NCLT to trigger an Insolvency Resolution Process on an application filed under sections 7,9 & 10 if a winding up petition is pending unless an official liquidator has been appointed and a winding up order is passed. The cognate question as to whether Insolvency Resolution Process could be triggered where official/provisional liquidator has been appointed is left open as in none of the cases before us such a question would arise. Re: questions No. 2, 3 & 4 24. These questions were framed contemplating an answer to the first question in the negative. As the question No. 1 has been answered i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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