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TMI Blog2019 (10) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1 That the appellant is a Corporate Debtor. It is a company which owns and manages 14 tea gardens. Out of 14 tea gardens, the Central Government vide notification dated 28.01.2016, in exercise of its power under Section 16E of the Tea Act, 1953 has taken over the control of 7 tea gardens. 2.2 That the respondent is an operational creditor of the appellant. It used to supply pesticides, insecticides, herbicides etc. to the appellant. According to the respondentoperational creditor, a sum of Rs. 41,55,500/was due and payable by the appellantcorporate debtor to the respondentoperational creditor. That the respondent initiated the proceedings against the appellantcorporate debtor before the NCLT under Section 9 of the IBC. Initiation of the proceedings under the IBC by the respondent operation creditor was opposed by the appellant corporate debtor mainly and solely on the ground that, as provided under Section 16G(1)(c) of the Tea Act, once the management of tea unit has been taken over by the Central Government, then the proceedings for winding up or appointment of receiver cannot be initiated without the consent of the Central Government. It was the case on behalf of the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under Section 16D is to have effect for a period not exceeding five years which can only be extended if the Central Government is of the opinion that it is expedient to do so in public interest, for such period not exceeding one year at a time, and for total period not exceeding six years. It is submitted that Section 16E refers to the power of the Central Government to restart the tea undertaking if it is found necessary in the interest of the general public. It is submitted that Section 16G specifically deals with a situation such as in the present application. It is submitted that an insolvency process is also meant to culminate in liquidation, if there is no revival. It is submitted that since the Tea Act permits for the Central Government to take over the management of a tea estate which is not run properly, the prior permission under Section 16G is applicable to such an estate, the management of which has been taken over by the Government. 4.2 It is further submitted by Shri Shyam Divan, learned Senior Advocate appearing on behalf of the appellant that the "winding up" process under the Companies Act, 1956 includes the insolvency proceedings under the IBC. It is submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that, in the present case, there is no such conflict between the Tea Act and the IBC. It is submitted that even the learned NCLAT in the impugned order recognizes and/or records that the provisions of the IBC and the Tea Act are not inconsistent with each other. It is submitted that the IBC process can be started if the permission is obtained from the Central Government by a financial creditor or an operational creditor. It is submitted that the provisions of Section 7 or Section 9 may not require the consent of the Central Government to initiate such proceedings, but when the management of the tea gardens have been taken over by the Central Government under the Tea Act, one will have to consider the provisions of the Tea Act which requires the consent of the Central Government. It is submitted that, therefore, the process of insolvency resolution under the IBC has not been stopped, but what it requires is an additional permission under the Tea Act for the purpose of initiation of such insolvency proceeding. It is submitted that this should be logical as the management of the tea gardens is already under the Central Government under the Tea Act for public interest and for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reorganization and insolvency resolution and for matters connected therewith or incidental thereto. It is submitted that the Code, which was promulgated in 2016, has not provided for the prerequisite of obtaining consent from the Central Government for initiating corporate insolvency resolution process like the Tea Act, which is an earlier Act enacted in 1953. It is submitted that, thus, such a prerequisite of obtaining consent cannot be imported and/or read into the Code when the self contained Code itself does not provide for it. 5.2 It is further submitted that importing the requirement of obtaining consent of the Central Government prior to initiating the corporate insolvency resolution process would be completely contrary to the overriding nature of the Code, and of the clear legislative intent of keeping the arms of the Government away from the resolution process and of not delaying the process of resolution. It is further submitted that an examination of Chapter IIIA of the Tea Act reveals that the object of restarting/revival of the tea company is a writ large in the scheme of the Tea Act. It is submitted that the said object of restarting/revival is borne out from Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Act. It is submitted that, on the other hand, initiation of corporate insolvency resolution process is provided for, and governed by, the Insolvency and Bankruptcy Code, 2016. It is submitted that both these processes are distinct from one another and not synonymous with one another. It is submitted that the power of the Parliament to make any law relating to winding up can be traced to Entry nos. 33 and 34 of the Union List of the Seventh Schedule of the Constitution. It is submitted that, on the other hand, the power of the Parliament to make any law relating to insolvency can be traced to Entry no. 9 of the Concurrent List of the Seventh Schedule of the Constitution. It is submitted that, thus, winding up and insolvency proceedings are not one and the same as they have been mentioned under two separate entries in two separate lists in the Seventh Schedule. It is submitted that, as such, Section 16G(1)(c) of the Tea Act, which mandates that no winding up proceeding can lie in any court against a company which has been taken over by the Tea Board without consent of the Central Government, does not and cannot be interpreted to mean that the said section applies to any proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect thereof shall lie in any court except with the consent of the Central Government. (2) Subject to the provisions contained in subsection (1), and to the other provisions contained in this Act, and subject to such other exceptions, restrictions and limitations, if any, as the Central Government may, by notification in the Official Gazette specify in this behalf, the Companies Act, 1956, shall continue to apply to such company in the same manner as it applied thereto before the issue of the notified order." 7.1 In the present case, it is true that by notification dated 28.01.2016 issued under Section 16E of the Tea Act, the Central Government authorised the Tea Board to take over the management or the control of the seven tea estates mentioned in the said notification. However, the appellant challenged the said notification before the High Court of Calcutta and the learned Single Judge of the High Court dismissed the said petition. However, in an appeal, the Division Bench of the High Court of Calcutta vide the interim order dated 20.09.2016 has permitted the appellant corporate debtor to continue with the management of the said tea estates. Therefore, in effect, the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely, whether before initiation of the proceedings under Section 9 of the IBC, a prior consent of the Central Government as provided under Section 16G(1)(c) of the Tea Act is required or not and/or in absence of any such consent of the Central Government, the proceedings under Section 9 of the IBC shall be maintainable or not, is concerned, at the outset, it is required to be noted that the IBC is a complete Code in itself. In a recent decision of this Court in the case of Swiss Ribbons Pvt. Ltd. (supra), this Court had an occasion to consider the Statement of Objects and Reasons of the IBC and also the Preamble of the IBC, which when noted by this Court in its earlier decision in Innoventive Industries Ltd. (supra), in paragraphs 25 and 26 in the case of Swiss Ribbons Pvt. Ltd. (supra), this Court has referred to the Statement of Objects and Reasons of the IBC and the Preamble of the IBC. Paragraphs 25 and 26 are as under: 25. The Statement of Objects and Reasons for the Code have been referred to in Innoventive Industries [Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407 : (2018) 1 SCC (Civ) 356] which states: (SCC pp. 42122, para 12) "12. ... The Statement of Obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulation of insolvency professionals, insolvency professional agencies and information utilities. Till the Board is established, the Central Government shall exercise all powers of the Board or designate any financial sector regulator to exercise the powers and functions of the Board. Insolvency professionals will assist in completion of insolvency resolution, liquidation and bankruptcy proceedings envisaged in the Code. Information Utilities would collect, collate, authenticate and disseminate financial information to facilitate such proceedings. The Code also proposes to establish a fund to be called the Insolvency and Bankruptcy Fund of India for the purposes specified in the Code. 4. The Code seeks to provide for amendments in the Indian Partnership Act, 1932, the Central Excise Act, 1944, Customs Act, 1962, the Income Tax Act, 1961, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Finance Act, 1994, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Sick Industrial Companies (Special Provisions) Repeal Act, 2003, the Payment and Settlement Systems Act, 2007, the Limited Liability Partnersh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. (See ArcelorMittal [ArcelorMittal (India) (P) Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1] at para 83, fn 3). 28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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