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TMI Blog2019 (10) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... would not have been intended. Normally, this court would transfer the matter to NCLT. This would also give an opportunity to try and revive the company by the Insolvency Resolution Process. There may be exceptional circumstances where the Liquidator has made much progress and the chances of Insolvency Resolution Process are very bleak then, in that eventuality this court may exercise its discretion and not transfer such a matter. Application disposed off. - CO.PET. 518/2013, CA. Nos.1415/2018 & 1416/2018,CO.PET. 814/2016, CA. Nos.826, 980 & 984/2018CO.PET. 668/2014, CA. Nos.1366, 1047 & 1048/2018,CO.PET. 987/2015, CA. Nos. 718/2018 & 1444/2018, - - - Dated:- 30-9-2019 - MR. JAYANT NATH J. Present: Mr. Nikhilesh Kumar, Adv. for the petitioner in CP 668/2014. Mr. Sanjeev Anand, Mr. Sjresh Khadav and Mr. Varun K. Bala, Advs. for applicant in CP 668/2014. Ms. Abha Sinha, Adv. in CA No. 444/2019 in CP 668/2014. Mr. Anil Kumar Airi, Sr. Adv. with Mr. Abhinav Mishra, Mr.Siddhant Tripathi, Ms. Nivedita Chauhan, Mr. Karan Nagpal, Advs. for applicant/Intervener in CA 121/2019 in CP 668/2014. Mr. Vivek Kohli, Mr. Sandeep Bhuraria, Mr. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounts, documents, records and other papers of the respondent company. The State Bank of India has filed two applications being CA No. 718/2018 for intervention in the present petition and CA No. 1444/2018 for transfer of present proceedings before NCLT. No application for impleadment has been filed by SBI. Proceedings were initiated, under section 7 of the IBC by the applicant before the NCLT. The NCLT vide order dated 08.02.2018, dismissed the petition filed by the applicant, stating that the OL had already been appointed by this court and that hence an IRP cannot be appointed where a corporate debtor is already undergoing liquidation process. NCLAT also dismissed the appeal of the applicant, vide order dated 12.03.2018. The applicant has filed an appeal in the Supreme Court of India which is still pending. iii) Co.Pet.668/2014,CA. Nos.1366, 1047 1048/2018(MVL Ltd.) On 05.07.2018, this court admitted the present petition and appointed the Official Liquidator as the Provisional Liquidator. The Official Liquidator was directed to take all necessary steps including to take over all the assets, books of accounts and records of the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petition to the NCLT. The NCLT vide order dated 30.01.2019 dismissed the petition as Provisional Liquidator had already been appointed by this court but the NCLT recalled its order and vide order dated 11.3.2019 again appointed the IRP. 2. The applicants essentially plead that in terms of the powers vested in this court under proviso to section 434(c) of the Companies Act, 2013, it is mandatory for this court to transfer these petitions to NCLT. 3. The Official Liquidator, some of the creditors of the respondent companies and the ex-management of the respondent company have opposed the transfer of these petitions before NCLT. They have objected saying that where the OL has been appointed as provisional liquidator or liquidator, such matters cannot be transferred to NCLT. However, where the OL has not been appointed as provisional liquidator or liquidator, it is stated that this court has discretion to transfer such matters to NCLT under the proviso to section 434(c) of the Companies Act, 2013. 4. In the light of the above controversy, I have heard submissions of the learned counsel for the parties. Some of the parties have also filed their written submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank in Co.Pet. 518/2013. It is reiterated that special law prevail over general laws and in terms of section 238 of IBC, IBC would prevail over all other statutory provisions. Submissions made by learned counsel for SBI have been broadly reiterated. 7. Learned Senior Standing counsel appearing for the OL has however opposed the present applications. She has pleaded as follows: i) She has stated that none of the judgments relied upon by the learned counsel for the financial creditors dealt with a case where the OL had been appointed as provisional liquidator or liquidator. It is stated that in the judgments of the Supreme Court relied upon by the financial creditors, namely, Forech India Ltd. v. Edelweiss Assets Reconstruction Co.Ltd.(supra), Jaipur Metals Electricals Employees Organisation v. Jaipur Metals Electricals Ltd.(supra) and judgment of the learned Single Judge of the Bombay High Court in Jotun India Private Limited Ors. v. PSL Limited.(supra), no appointment of the OL as provisional liquidator or liquidator had been done. The aforenoted judgments deal with different factual situations. The dicta of the said judgments would not apply to the facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over management and control of the respondent and also has possession of the assets and accounts of the company and has incurred huge expenses. The OL has also received claims for several creditors of the respondent company. Further both NCLT and National Company Law Appellate Tribunal (NCLAT) have dismissed the corporate insolvency applications of the applicant. Nothing is pending adjudication before the Tribunals. (iii) It is further pleaded that the reliance of learned counsel for the applicant/SBI on Jotun India Private Limited Ors. vs. PSL Limited (supra) of the Bombay High Court and judgments of the Supreme Court in Forech India Ltd. vs. Edelweiss Assets Reconstruction Co.Ltd. (supra) and Jaipur Metals Electricals Employees Organisation vs. Jaipur Metals Electricals Ltd. (supra) is misplaced. In these judgments the OL was not appointed by the High Court. On the other hand the petition of the concerned financial creditors of the company had been admitted by NCLT. In the present case winding up order has been passed way back on 18.1.2018 and the OL has taken over the management and control of the respondent company. Moreover, insolvency proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elweiss Assets Reconstruction Co.Ltd. (supra) is misplaced. It is pleaded that use of the words have to be as spelt out in the said judgment read in consonance of the discretionary power vested in the High Court under the proviso to section 434(i)(c) by use of the word may shows that the intention of the Legislature was to vest the High Court with discretionary power to apply its judicial mind. Reliance is placed on the judgment of Supreme Court in the case of Hamdard (Wakf) Laboratories v. Dy.Labour Commisioner Ors., (2007) 5 SCC 281 to plead that a judgment has to be construed in such a manner so as not to offend the provisions of any statute. Reliance is also placed on the judgment of the Supreme Court in the case of Gajraj Singh Ors. v. State of U.P. Ors., (2001) 5 SCC 762 where the court held that it has to be assumed that the judgment was delivered consistently keeping in view the provisions of law and therefore, a course or procedure in departure from or not in conformity with statutory provisions cannot be said to have been intended or laid down by the court unless it has been so stated specifically. It is pleaded that where statement/part of the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may if it is satisfied that the appellant was prevented by sufficient cause from filing an appeal within the said period, allow it to be filed within a further period not exceeding sixty days; and (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: Provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government. Provided further that any party or parties to any proceedings relating the winding up of companies pending before any Court immediately before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows:- 10. As per the proviso any party or parties to the proceedings relating to the winding up of companies may file an application for transfer of such proceedings to the NCLT which will be dealt with by the Tribunal under Insolvency Bankruptcy Code, 2016. The proviso further adds that this court may by an order transfer the winding up proceedings to the NCLT. It is clear from a reading of the proviso to Section 434 of the Companies Act, 2013 that the proviso is discretionary and it gives discretion to this court to transfer the matters. However, in my opinion, once an Official Liquidator has been appointed as Provisional Liquidator, normally the matter would not be transferred to NCLT. 11. However, the present winding up petition is at an initial stage. This court on 15.05.2018 had revived the order appointing the OL as the provisional liquidator. The order appointing the OL was originally passed on 07.08.2015 which had been put in abeyance on account of settlement between the petitioner and, the respondent. Pursuant to this order of revival passed on 15.05.2018 the OL has taken steps and sealed the head office, as per ROC records, which is locate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this Court concurs with the Company Court that it was in the best interest of all the creditors that the matter should be transferred to NCLT. Consequently, the Court finds no reason to interfere with the impugned order of the Company Court. 14. Against the aforesaid order of the Division Bench, an SLP was filed before the Supreme Court being SLP(C) No.45524/2018. This SLP was dismissed on 14.12.2018. 15. However, subsequent to the aforesaid judgment of the Division Bench of this court, there have been some judgments of the Supreme Court where observations have been made which have a material bearing on the issue which is being dealt with by the present judgment. I may look at these judgments. 16. The first such judgment is in the case of Jaipur Metals Electricals Employees Organisation vs. Jaipur Metals Electricals Ltd.(supra). That was a case in which a reference was made to BIFR under the Sick Industrial Companies Act. The BIFR was prima facie of the opinion that the Company ought to be wound up. This opinion was forwarded to the High Court. The High Court registered the case as a company petition accordingly. In the meantime, one of the Wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Court, at that stage, may, by order, transfer such proceedings to NCLT. The proceedings so transferred would then be dealt with by NCLT as an application for initiation of the corporate insolvency resolution process under the Code. It is thus clear that under the scheme of Section 434 (as amended) and Rule 5 of the 2016 Transfer Rules, all proceedings under Section 20 of the SIC Act pending before the High Court are to continue as such until a party files an application before the High Court for transfer of such proceedings post 17-8-2018. Once this is done, the High Court must transfer such proceedings to NCLT which will then deal with such proceedings as an application for initiation of the corporate insolvency resolution process under theCode. (emphasis added) xxxxxxx 19. However, this does not end the matter. It is clear that Respondent 3 has filed a Section 7 application under the Code on 11-1-2018, on which an order has been passed admitting such application by NCLT on 13-4-2018. This proceeding is an independent proceeding which has nothing to do with the transfer of pending winding-up proceedings before the High Court. It was open for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 434 was itself substituted in 2018, in which a proviso was added by which even in winding up petitions where notice has been served and which are pending in the High Courts, any person could apply for transfer of such petitions to the NCLT under the Code, which would then have to be transferred by the High Court to the adjudicating authority and treated as an insolvency petition under the Code. This statutory scheme has been referred to, albeit in the context of Section 20 of the SICA, in our judgment which is contained in Jaipur Metals Electricals Employees Organization Through General Secretary Mr. Tej Ram Meena v. Jaipur Metals Electricals Ltd. Through its Managing Director, being a judgment by a Division Bench of this Court dated 12.12.2018. (emphasis added) 18. After referring to the statutory scheme, as aforesaid, this Court held: 17. However, this does not end the matter. It is clear that Respondent No. 3 has filed a Section 7 application under the Code on 11.01.2018, on which an order has been passed admitting such application by the NCLT on 13.04.2018. This proceeding is an independent proceeding which has nothing to do with the transfer of pendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made thereunder, held as follows: 93. The fact that post notice winding up petitions continue to be governed by the Companies Act, 1956, only means - that to those proceedings it will be the Companies Act, 1956 which will apply. It does not, however, mean that if, in a post-notice winding up petition a new proceeding is filed under IBC, and where orders are passed by NCLT, including Under Section 14 of IBC, the consequences provided for under IBC will not apply to post notice proceeding, whatever their stage may be. xxx xxx xxx 98. Furthermore, this transitional provision cannot in any way affect the remedies available to a person under IBC, vis-a-vis the company against whom a winding up petition is filed and retained in the High Court, as the same would amount to treating IBC as if it did not exist on the statute book and would deprive persons of the benefit of the new legislation. This is contrary to the plain language of IBC. If the contentions of Petitioner were to be accepted, it would mean that in respect of companies, where a post notice winding up petition is admitted or a provisional liquidator appointed, provisions of IBC can never apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not exist on the statute book and would deprive persons of the benefit of the new legislation. This is contrary to the plain language of IBC. If the contentions of petitioner were to be accepted, it would mean that in respect of companies, where a post notice winding up petition is admitted or a provisional liquidator appointed, provisions of IBC can never apply to such companies for all times to come. Having held as above, the court held that there is no bar on NCLT to proceed with the application. 20. In the appeal against the order of the learned Single Judge, the Division Bench in the said case in Jotun India Private Limited v. PSL Limited., MANU/MH/2319/2018, while upholding the judgment of the learned Single Bench held as follows: 45. In view of the afore-stated reasoning and the case laws cited, we are of the considered opinion that the Company Court while dealing with the winding up petitions (saved petitions) shall have no jurisdiction to stay the proceedings before the NCLT in respect of revival or resolution issue. We may further state that in case the forum under the IBC, 2016 i.e. NCLT fails to revive or successfully implement the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Shramik Sangh Ors. v. Shalimar Industries Ltd. Ors., [2019] 213 Comp Cas 158 (Cal), held as follows: 17. Thus, for the purpose of the issue that has been raised herein, it is evident, on a reading of Section 434(1)(c) of the Act of 2013 with clause 5(1) of the Notification of December 7, 2016 that it is only where a petition for winding-up instituted under Section 433 (e) of the Act of 1956 has not been served on the company, will such winding-up petition stand transferred to the relevant Bench of the Tribunal. 18. In the present case, the creditor's winding-up petition resulted in an order of winding-up being passed on June 14, 2016. Thus, as at December 7, 2016, there was no question of transfer of the winding-up proceedings to any Tribunal. 23. The Allahabad High Court in Reserve Bank of India vs. Sahara India Financial Corporation Ltd., 2019(3) ADJ 540 court held as follows:- 57. Coming to the second leg of submission for transfer, that, the second proviso to Section 434 (1)(c) provides that any party to winding up proceedings, pending before any Court immediately before the commencement of Insolvency and Bankruptcy Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court was also noted by the Karnataka High Court in the case of Milestone Real Estate Fund vs. Prisha Properties India Pvt. Ltd., MANU/KA/5616/2019 while interpreting the proviso to Section 434 of the Companies Act regarding the transfer of winding up proceedings to NCLT. The court noted as follows:- 16. In Reserve Bank of India vs. Sahara India Financial Corporation Ltd., the Hon'ble High Court of Allahabad has held that it is no doubt correct that the power under the second proviso to Section 434 is given to the Court to transfer any winding up proceedings which is pending before the High Court on 06.06.2018. The proviso no doubt be applicable to such proceedings which are not transferred under the Transfer Rules 2016. However, the proviso does not say that these proceedings would automatically stand transferred. Rather it leaves the discretion with the Court, where the winding up proceedings are pending, to transfer the same or not to transfer the same. For want of reasons, the Hon'ble Court negated the request for transfer moved by the respondents through an application. xxxxx 22. . The resultant position, therefore, is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 448 to section 481 of the Companies Act, 1956. Some relevant provisions read as follows: 448. Appointment of Official Liquidator:- (1) For the purposes of this Act, so far as it relates to the winding up of a company by the court, there shall be an Official Liquidator who:- (a) may be appointed from a panel of professional firms of chartered accountants, advocates, company secretaries, costs and works accountants or firms having a combination of these professions, which the Central Government shall constitute for the Tribunal; or (b) may be a body corporate consisting of such professionals as may be approved by the Central Government from time to time; or (c) may be a whole-time or a part-time officer appointed by the Central Government : Provided that, before appointing the Official Liquidator, the court may give due regard to the views or opinion of the secured creditors and workmen. 449. Official Liquidator to be liquidator: On a winding up order being made in respect of a company, the Official Liquidator shall, by virtue of his office, become the liquidator of the company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... administration or recover the money, be deemed to be due to the liquidator himself: Provided that nothing herein empowered shall be deemed to affect the rights, duties and privileges of any Administrator-General; (v) to appoint an agent to do any business which the liquidator is unable to do himself. (2A) The liquidator shall (a) appoint security guards to protect the property of the company taken into his custody and to make out an inventory of the assets in consultation with secured creditors after giving them notice ; (b) appoint, as the case may be, valuer, chartered surveyors or chartered accountant to assess the value the company's assets within fifteen days after taking into custody of property, assets referred to in sub-clause (a) and effects or actionable claims subject to such terms and conditions as may be specified by the Tribunal ; (c) give an advertisement, inviting bids for sale of the assets of the company, within fifteen days from the date of receiving valuation report from the valuer, chartered surveyors or chartered accountants referred to in clause (b), as the case may be. xxxxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxxxxxxx 47. When a Company is ordered to be wound up, the assets of it, are put in possession of the Official Liquidator. The assets become custodia legis. The follow up, in the absence of a revival of the Company, is the realization of the assets of the company by the Official Liquidator and distribution of the proceeds to the creditors, workers, and contributories of the company ultimately resulting in the death of the company by an order under Section 481 of the Act, being passed. But, nothing stands in the way of the Company Court, before the ultimate step is taken or before the assets are disposed of, to accept a scheme or proposal for revival of the Company. In that context, the Court has necessarily to see whether the Scheme contemplates revival of the business of the company, makes provisions for paying off creditors or for satisfying their claims as agreed to by them and for meeting the liability of the workers in terms of Section 529 and Section 529A of the Act. Of course, the Court has to see to the bona fides of the scheme and to ensure that what is put forward is not a ruse to dispose of the assets of the Company in liquidation. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsiders necessary; (f) subject to Section 52, to sell the immovable and movable property and actionable claims of the corporate debtor in liquidation by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell the same in parcels in such manner as may be specified: [Provided that the liquidator shall not sell the immovable and movable property or actionable claims of the corporate debtor in liquidation to any person who is not eligible to be a resolution applicant.] (g) to draw, accept, make and endorse any negotiable instruments including bill of exchange, hundi or promissory note in the name and on behalf of the corporate debtor, with the same effect with respect to the liability as if such instruments were drawn, accepted, made or endorsed by or on behalf of the corporate debtor in the ordinary course of its business; (h) to take out, in his official name, letter of administration to any deceased contributory and to do in his official name any other act necessary for obtaining payment of any money due and payable from a contributory or his estate which cannot be ordinarily don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auction. He seeks to take other steps to dissolve the company. Once this process has started, no purpose is served by handing over the same to another liquidator who would also perform a similar function all over again. This would set the entire effort of the Official Liquidator at naught which would not have been intended. Further the matter at that stage mostly comprises of matters where there is no prospect of Insolvency Resolution Process. Hence, once this court has appointed the Official Liquidator as the liquidator, normally such petition would not be transferred to NCLT. 33. I may hasten to add that the issue as to whether an application under Section 7 or Section 9 of IBC can be initiated before NCLT once the OL is appointed as a Liquidator by the Company Court is an issue that is said to be pending before the Supreme Court in the case of State Bank of India v. Shakti Bhog Foods Ltd. being Civil Appeal No.4536/2018. 34. I may only note that the learned senior standing counsel appearing for the OL has vehemently argued that there is no material distinction between appointment of a provisional liquidator and the official liquidator. She has relied upon sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contention of the learned senior standing counsel for the Official Liquidator cannot be accepted. Further, in my opinion, once an Official Liquidator is appointed as a Provisional Liquidator, normally the whole exercise would still be at an initial stage. In these circumstances, normally, this court would transfer the matter to NCLT. This would also give an opportunity to try and revive the company by the Insolvency Resolution Process. There may be exceptional circumstances where the Liquidator has made much progress and the chances of Insolvency Resolution Process are very bleak then, in that eventuality this court may exercise its discretion and not transfer such a matter. 38. Based on the above findings, I will now deal with the various applications filed for impleadment/transfer to NCLT. Co. Pet. 518/2013 (Hanung Toys Textiles Ltd.) and CA Nos. 1415/2018 (for impleadment) 1416/2018 (for transfer to NCLT) 39. In this case, the respondent is Hanung Toys Textiles Ltd. The OL was appointed as a Liquidator on 12.07.2018. PNB has exercised powers under the SARFAESI ACT and taken possession of the mortgaged immoveable properties and hypothecated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for appointment of IRP filed by SBI has already been rejected by NCLT. Further the OL has been appointed by this court as the Liquidator. There are no reasons to transfer these proceedings to NCLT. CA Nos. 718/2018 and 1444/2018 are accordingly dismissed. Co. Pet. 668/2014 (MVL Ltd.) and CA Nos. 1047/2018 (for impleadment) and 1048/2018 1366/2018 (for transfer to NCLT) 40. In the present petition, the respondent is MVL Ltd. In this case, the petition was admitted and the OL was appointed as the Provisional Liquidator on 05.07.2018. CA Nos. 1047/2018 and 1048/2018 have been filed by Dena Bank for impleadment and transfer of these proceedings to NCLT respectively. The petitioner in this matter is also supporting the plea of Dena Bank for transfer of proceedings to NCLT and has filed an application being CA No. 1366/2018 in this regard. In this case the proceedings initiated by Dena Bank under Section 7 of the IBC were dismissed on 25.09.2018 as this court had appointed the provisional liquidator. As per written submissions submitted by the OL, there is presently no proceeding pending before NCLT filed by the applicants before this court. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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