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TMI Blog2018 (8) TMI 1866X X X X Extracts X X X X X X X X Extracts X X X X ..... teria to give effect to the amended section 36 of the Arbitration and Conciliation Act - In the instant case, there is no provision in the Code prior to June 6, 2018 that require a special resolution passed by the shareholders of the corporate debtor to trigger corporate insolvency resolution process by a corporate applicant under section 10 of the I and B Code. Such a condition precedent is for the first time introduced by way of ordinance by replacing the earlier section 10(3) and by substituting section 10(3)(a), (b) and (c) which came into force with effect from June 6, 2018. It is not a case where an existing right has been taken away. It is a case where a special condition is made applicable for filing of, applications by the corporate applicants under section 10 of the I and B Code - therefore, a new condition was brought into the Code by way of amendment, such conditions cannot be given retrospective effect in my view. In the case on hand, the petition is filed on May 9, 2018 much prior to coming into force of amended section 10(3)(c), which came into force on June 6, 2018 - it is not just and proper to direct the corporate applicant to take the approval of the shareh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eation of charge for ₹ 23.72 crores as filed with the Registrar of Companies, Andhra Pradesh. (e) Copy of the Certificate of Registration of Charge for creation of charge dated March 24, 2008 for ₹ 23.72 crores issued by the Registrar of Companies, Andhra Pradesh. (f) Copy of Form 8 dated April 27, 2009 for creation of charge for ₹ 24.22 crores as filed with the Registrar of Companies, Andhra Pradesh. (g) Copy of the certificate of registration of charge for creation of charge dated May 1, 2009 for ₹ 24.22 crores issued by the Registrar of Companies, Andhra Pradesh. (h) Copy of Form 8 dated April 2, 2011 for creation of charge for ₹ 47.27 crores as filed with the Registrar of Companies, Andhra Pradesh. (i) Copy of the certificate of registration of charge for creation of charge dated April 11, 2011 for ₹ 47.27 crores issued by the Registrar of Companies, Andhra Pradesh. (j) Copy of Form 8 dated June 3, 2012 for creation of charge for ₹ 29.11 crores as filed with the Registrar of Companies, Andhra Pradesh. (k) Copy of the certificate of registration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018. (x) Copies of e-auction notice published in New Indian Express, Hyderabad edition on April 14, 2018. 7. The corporate debtor proposed the name of Mr. Manivannan. J, Insolvency Professional, for appointment as under section. 8. The corporate applicant filed written communication, dated May 2, 2018, given by Mr. Manivannan J., proposed IRP in Form-2. 9. The corporate applicant filed audited financial statements for the year ended March 31, 2017 and for the year ended March 31, 2016. The corporate applicant also filed statement of affairs of the corporate debtor as on April 30, 2018. 10. On this application, notice is ordered to the financial creditors. 11. The SBI, which is one of the financial creditor, filed reply stating that the corporate debtor has initially obtained a loan amount of ₹ 12.36 crores, which was subsequently enhanced from time to time to an amount of ₹ 29.11 crores. 12. It is stated by the SBI that the loan amount of the corporate debtor has been classified as non-performing asset (NPA) on December 28, 2015 due to non-repayment of outstanding liabilities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) The management ought to have taken prior written consent of all the parties to the memorandum of understanding dated December 23, 2013 before filing this petition. (ii) On account of the financial irregularities and misappropriations, committed by the present management, Guntupalli Srinivasa Rao and others moved a petition before the Company Law Board, Chennai Bench. (iii) The management of the corporate debtor fraudulently altered the board of the company by removing Mr. Guntupalli Srinivasa Rao from the directorship, passed the resolution to file this petition. 24. Mr. Guntupalli Srinivasa Rao also stated that he is one of the financial creditors of the corporate debtor besides 48 per cent. shareholding in the corporate debtor company. 25. In the surrejoinder/written arguments Mr. G. Srinivasa Rao took a plea that in view of section 10(3)(c), as amended, special resolution passed by the shareholders of the company is necessary to file this petition. 26. It is contended by learned counsel appearing for Mr. Guntupalli Srinivasa Rao and Mrs. Guntupalli Padmaja that of section 10(3) of the IB Code, is amended by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bankruptcy Code (Amendment) Ordinance, 2018. 32. The material on record further discloses the existence of debt and occurrence of default. The corporate applicant also proposed the name of the insolvency professional to act as IRP and filed his written communication in Form 2. 33. The contention raised by the SBI is that this petition is a mala fide petition to prevent the proceedings under the SARFAESI Act. 34. It is settled that the pendency of any other proceeding for recovery of amount in default from the corporate debtor is no bar for initiation of corporate insolvency resolution process. 35. The proceedings under the IB Code are having overriding effect over all other proceedings under other Acts in view of section 238 of the I and B Code, more so, when there is no repugnancy between the I and B Code and the SARFAESI Act. Innoventive Industries Ltd. v. ICICI Bank [2017] 205 Comp Cas 57 (SC) decided by the hon'ble Supreme Court in Civil Appeals Nos. 8337 and 8338 of 2017 on August 31, 2017 is the law laid down by the hon'ble Supreme Court on the point. 36. The main point involved in this petition is wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e initiated prior to October 23, 2015. 44. A distinction was made between the arbitration proceedings that were initiated prior to October 23, 2015 and the applications before court under section 34 that were filed prior to October 23, 2015. 45. It is held by the hon'ble Supreme Court that if an application is filed under section 34 prior to October 23, 2015 the amended section 36 is not applicable. If an application is filed under section 34 on or after October 23, 2015 amended section 36 is applicable even though arbitral proceedings commenced prior to October 23, 2015. 46. The hon'ble Supreme Court further held that the amended provisions of section 36 should apply even if an application under section 34 of the Arbitration Act has been filed before the Arbitration Act was amended. 47. The hon'ble Supreme Court and the hon'ble Bombay High Court made a distinction between the vested right and existing right and further made bifurcation between arbitrate proceedings and court proceedings. 48. Prior to the amendment of the Arbitration and Conciliation Act, there was an existing right to have a stay as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the hon'ble Supreme Court in [2008] 304 ITR 308 (SC) ; [2008] 9 SCC 622 (CIT v. Gold Coin Health Food P. Ltd.), contended that when the amendment is clarificatory in nature, it must be given retrospective effect. 58. The said decision relates to section 271(1)(c)(iii) Explanation 4(a) of the Income-tax Act, as amended by the Finance Act, 2002 with effect from April 1, 2003. 59. In that case, the hon'ble Supreme Court held that the amendment is clarificatory in nature. 60. The hon'ble Supreme Court held that Explanation 4 of section 27(1)(c) of the Income-tax Act is clarificatory and not substantial and therefore it is given retrospective effect. 61. In that judgment, the hon'ble Supreme Court held even if a statute does not contain a statement to the effect that the amendment is clarificatory or declaratory that it is not the end of the matter and the court is to analyse the post or pre-scheme of the statute and nature of the amendment. 62. In that judgment, the hon'ble Supreme Court considered the aspect of imposing of penalty for concealment of negative income or loan and held it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presumed to be retrospective in its application, should not be given an extended meaning and should be strictly confined to its clearly- defined limits. (ii) Law relating to forum and limitation is procedural in nature, whereas law relating to right of action and right of appeal even though remedial is substantive in nature. (iii) Every litigant has a vested right in substantive law but no such right exists in procedural law. (iv) A procedural statute should not generally speaking be applied retrospective where the result would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished. (v) A statute which not only changes the procedure but also creates new rights and liabilities shall be constructed to be prospective in operation, unless otherwise provided, either expressly or by necessary implications. 71. Therefore, in any view of the matter in this case the petitioner need not be called upon to file a special resolution passed by the shareholders of the company in order to admit this petition if it is otherwise complete. 72. In view of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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