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TMI Blog2019 (1) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... Member (Judicial) And Shri Ravikumar Duraisamy, Member (Technical) For The Petitioner : Mr Animesh Bisht Advocate, Mr Dhananjay Kumar, Advocate, Ms Saloni Kapadia, Advocate and Mr Anish Mathur, Advocate For The Respondent : Krushi N. Barfiwala, Advocate ORDER 1. It is a Company Petition filed u/s 7 of Insolvency Bankruptcy Code, 2016 (IBC) by Bank of Baroda, Financial Creditor against Topworth Pipes Tubes Private Limited, Corporate Debtor, to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor on the grounds that, as on 31.03.2018, Corporate Debtor has defaulted in making repayment of ₹2,16,67,77,458.86/- which is due pursuant to the various loan agreements. 2. This Petitioner had granted certain term loan and working capital facilities to the Corporate Debtor from time to time which were reviewed and restructured on the terms and conditions set out under the Sanction Letter ( Restructuring Sanction Letter or RSL ) dated 27.03.2015 and the Common Debt Restructuring Agreement ( CDRA ) dated 30.03.2015 entered among the Corporate Debtor, the Financial Creditor and certain other consortium lenders. There are Work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opworth Pipes Tubes Private Ltd. ( Corporate Debtor ) from time to time under a Working Capital Consortium Agreement dated 27th April 2011 (Exhibit-8, pages 124 to 170 of the Application) and supplemented by the First Supplemental Working Capital Consortium Agreement dated 27th October 2014 (Exhibit-8, pages 171 to 198 of the Application). The said facilities were reviewed and restructured on the terms and conditions set out under the sanction letter dated 27th March 2015 ( Restructuring Sanction Letter ) (Exhibit-8, pages 199 to 215 ofthe Application) and the common debt restructuring agreement dated 30th March 2015 ( CDRA ) (Exhibit-8, pages 216 to 266 of the Application) entered into, inter alia, amongst the Corporate Debtor, Applicant and certain other consortium lenders ( Lenders ). Under the Restructuring Sanction Letter and the CDRA, the Applicant's exposure to the Corporate Debtor is as under (Exhibit-8, page 248 and page 261 of the Application): (a) Term loan facility- ₹ 28.25 Crores; (b) Funded interest term loan - I or FITL - I - ₹ 6.22 Crores; (c) Cash credit - ₹ 13 Crores; (d) Letter of credit - ₹ 95 Crores; and ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor in repayment of the Facilities is evident from the following documents annexed to the Application: a. Recall notice dated 1 February 2016 issued by the Applicant to the Corporate Debtor. (Exhibit-Il, page 428 to 429 of the Application). b. Record of default under the report of the Central Repository of Information on Large Credits dated 1 st September 2017 ( CRILC Report ) (Exhibit-9, pages 276 to 278 of the Application) (inter alia entry no. 6). c. Record of default under the report of the CBIL dated 1 st September 2017: (i) Cash Credit- Credit Facility 1 (06960500000074) (Exhibit-9, page 268269 of the Application); (ii) Term Loan (06960600000896)- Credit Facility 2 - (Exhibit-9, page 269 of the Application); (iii)FITL-1 (06960600001283) - Credit Facility 3 (Exhibit-9, page 270 of the Application); and (iv) Letter of Credit (06960900000062)- Credit Facility 4 (Exhibit-9, pages 270 and 271 of the Application). d. Entries in the bankers' book maintained by State Bank of India in accordance with Bankers' Book Evidence Act, 1891 (Exhibit-10, pages 279 to 425 of the Application). e. Standalone financial statement of the Corporate Debtor for the finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive Industries Ltd. vs. Kumar Motors Pvt. Ltd. [2018 SCC Online NCLAT 86] , Forech India Pvt Ltd vs. Edelweiss Asset Reconstruction Company Ltd Anr [2017 SCC Online NCLAT 316] , Unigreen Global Pvt Ltd vs. Punjab National Bank Ors [2017 SCC Online NCLAT 566], ( Unigreen and Arise India Limited vs. TCI Freight [2018 SCC Online NCLAT 223] . 3. The Hon'ble Bombay High Court in the PSL and the Jotun Appeal has taken a divergent view from that of the Hon'ble NCLAT after considering the decisions of the Hon'ble Supreme Court on applicability of the provisions of the erstwhile Sick Industrial Companies (Special Provisions) Act, 1985 ( SICA ) to companies under winding up. 4. It is further pertinent that the Hon'ble Bombay High Court's judgment in the Jotun Appeal is the latest judgment on the point and has been passed after the latest judgment of the Hon 'ble NCLAT in the Arise matter. 5. The Hon' ble Bombay High Court had the occasion to consider the provisions of the Code and its applicability in case of a winding up order being passed against a corporate debtor. In the case of Jotun India Pvt Ltd V PSL CA No. 572/2017 he the Hon'ble Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst such a company has already been admitted. But even in such a case, there is no express or implied bar from other creditors of such a company or the corporate debtor from filing fresh proceedings under IBC. If at all such creditors/corporate debtors are barred from approaching the High Court and not NCLT under IBC. (8) The order passed by the Hon'ble Bombay High Court in the Jotun India v s PSL matter was upheld by the Hon'ble Division Bench of the Bombay High Court 2018 SCC Online Bomb 1952 which held as under: 42. The general legal principles of interpretation of statute state that the general law should yield to the special law. In the context of the present statute i.e. IBC 2016, we are of the view that the Companies Act 1956 could be treated as general law and IBC, 2016 to be a special statute to the extent of the provisions relating to revival or resolution of the company as per provision under Chapter 11 of the IBC. Even if the Companies Act and the IBC 2016 are considered as special statutes operating in their respective field, we are of the view that the IBC 2016 being later enactment and in view of the statement and objects and the purpose [or whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plications by financial or operational creditors. (10) The Indiabulls, Kumar Motors etc. decisions of the Hon'ble NCLAT rely on the rationale that once winding up order is passed the stage of any resolution or revival of the company is over and the company must now necessarily be liquidated. However, this proposition also is not consistent with the provisions of the Companies Act, 1956 ( Companies Act ) itself as well as the decisions of the Supreme Court which have consistently held that an order of winding up is not a culmination of proceedings but in effect the commencement of the process of winding up. (11) The Hon'ble Supreme Court in the case of Rishab Agro Industries Ltd. vs P.N.B. Capital Services Ltd. [(2000) 5 SCC 515] has held that: 1l. It may also be noticed that winding up order passed under the Companies Act is not the culmination of the proceedings pending before the Company Judge but is in effect the commencement of the process. The ultimate order to be passed in such a petition is the dissolution of the company in terms of Section 481 of the Companies Act. The words shall be deemed to commence in Section 441 of the Companies Act clearly show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Code to a corporate debtor under insolvency resolution as the provisions of Section 22 of SICA are pari materia to Section 14 of the Code. (17) The question of applicability of the moratorium under SICA to 'proceedings' post a winding up order was before the Hon'ble Supreme Court in the case of Madhura Coats Ltd. vs Modi Rubber Anr. [(2016) 7 SCC 603]. The Hon ble Supreme Court has held as under: 25. With regard to the merits of the controversy before it, this Court took the view that it could not be said that the provisions of Section 22 of the SICA would not be attracted after an order of winding up is passed. While referring to this Section it was held that there was no doubt that the provision would be applicable even after the winding up order is passed and no proceedings even thereafter could be taken under the Act. 27. From the above it is quite clear that different situations can arise in the process of winding up a company under the Companies Act but whatever be the situation, whenever a reference is made to the BIFR under Sections 15 and 16 of the SICA, the provisions of the SICA would come into play and they would prevail over the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the scope of the moratorium under SICA. The Hon'ble Supreme Court has upheld the said position in the case of Bank Of New York Mellon London Branch vs Zenith Infotech Limited [(2017) 5 SCC ll. (20) In the aforementioned decisions, the Hon'ble Supreme Court has categorically upheld the reference and the consequential moratorium under SCIA even after an order of liquidation/winding up had been passed against a company. An application under the Code, which has replaced SICA, must therefore also be allowed to be admitted even after an order of winding up has been passed on the same reasoning as rendered by the Supreme Court in relation to SICA (21) The object of the Code, as evident from its Statement and Objects is to provide a consolidated legal framework for insolvency resolution in a time bound manner. Under the winding up provisions of the Companies Act a single creditor, whose debt was undisputed could wind up a company, thus bringing about its untimely financial death of a debtor. The Code on the other hand mandatorily requires that an attempt at revival be made by appointing an IRP to examine whether such a company can be revived. (22) It is hence clear tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grieved party can certainly take it up to the Supreme Court and have it set aside and/or corrected or where the same issue arises in a subsequent case the issue may be re-urged before the Court to impress upon it that the decision rendered earlier, requires reconsideration. It is not open to the Tribunal to sit in appeal from the orders of this Court and not follow it. In case the doctrine of precedent is not strictly followed there would complete confusion and uncertainty. The victim of such arbitrary action would be the Rule of law of which we as the Indian State are so justifiably proud . 27. It is in the above circumstances that we are of the view that we have to exercise our powers under Article 227 of the Constitution of India. This is in view of the manner in which the impugned order of the Tribunal has chosen to disregard and/or circumvent the binding decision of this Court in respect of the same assessee for an earlier assessment year. This is a clear case of judicial indiscipline and creating confusion in respect of issues which stand settled by the decision of this Court. 28. It is in the above view, that we set aside the impugned order of the Tribunal dated 23rd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed below: I. That this Bench hereby prohibits: a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. II. That the supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period. III. That the provisions of sub-section (1) of Section 14 of IBC shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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