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TMI Blog2019 (12) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... of the properties and assets, books of accounts of the said Company in his possession to the IRP appointed by NCLT? - Should further hearing of the winding up petition (C.P 1 of 2016) along with all connected applications be stayed? - Should the winding up petition along with all connected applications be transferred to NCLT to be further heard by it? Does NCLT have the jurisdiction to hear out the petitions filed by the intending purchasers? - HELD THAT:- The applications filed by the intending purchasers of the flats / units developed by the said company cannot be decided by the NCLT, it requires declaratory orders to be passed with regard to civil rights of the parties as also direction for execution of conveyance and making over possession. The NCLT does not possess the jurisdiction under IBC for passing of such orders. The IRP, however, will be free to approach the Provisional Liquidator and take inspection and obtain copies of the documents and information as required by it for preparing the resolution plan to be submitted before the NCLT. The Provisional Liquidator under no circumstances shall make over the originals of the book and the possession of the assets of the said C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal Liquidator. Propriety also demanded that NCLT should not have passed mandatory directions on the Provisional Liquidator to hand over the books, documents and assets to the IRP or directed personal presence of the Provisional Liquidator while hearing an application under Section 7 of the IBC when it knew that the Provisional Liquidator has been appointed by the Company Judge of this Court in a saved petition. This Court possesses the jurisdiction to hear out the winding up petition being CP 1 of 2016 along with all connected applications. However, the winding up petition and the connected applications thereto should not be proceeded with till NCLT comes to the conclusion as to whether the resolution plan in respect of the said company is either approved or rejected - Application disposed off. X X X X Extracts X X X X X X X X Extracts X X X X ..... s assets. 4) After appointment of the Provisional Liquidator, the hearing of the main winding up petition could not proceed much as several applications were made from time to time by persons who intended to purchase flats from the said Company. Some of them after having paid the entire consideration money were put into possession of such flats but conveyance in their favour yet to be executed. Some were mere agreement holders and alleged to have paid the entire consideration money pursuant to which allotment letter have been issued but were not put into actual physical possession. In such applications, the intending purchasers have either prayed for being put into possession and for execution of the conveyance or only for execution of conveyance allowing their respective cases. There is also an application seeking leave to proceed with the suit filed before the Alipore Court after appointment of provisional liquidator. 5) At this stage, Devi Trading & Holding Private Limited (hereafter referred to as Devi Trading) a financial creditor of the said Company obtained an order on 13th March, 2019 from the National Company Law Tribunal (in short NCLT), Kolkata Bench, Kolkata in C.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has repealed the Act of 1956 and as such the provisions of IBC will prevail over the provisions of the Act of 2013 as also the Act of 1956. That apart and in any event there is no embargo in filing an application under section 7 of the IBC even during the pendency of a winding up proceeding until the Company is wound up. In the instant case the Company has not been wound up, only the Provisional Liquidator has been appointed, thus, the application filed by Devi Trading before NCLT under the provisions of section 7 of IBC is maintainable and the order passed on 13th March, 2019 is a valid order and should be complied with. The application of the IRP should be allowed. Moreover, it is submitted that the application under the provisions of section 7 of IBC before the NCLT is an independent application and has to be brought to a logical conclusion. Till such time, a logical conclusion is arrived at before the NCLT, all proceedings in respect of the said petition and/or connected thereto should remained stayed. In the alternative, the said petition along with all connected applications should be transferred to the NCLT for being further proceeded with thereat. Two Supreme Court judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither remain stayed until NCLT disposes of the application or in the alternative, the said petition and other connected applications be transferred to the NCLT for being heard along with the application made by Devi Trading. To support the submission as to transfer of the winding up petitions with all connected applications from this Court to NCLT, the said creditors relied upon a Division Bench judgment of this Court passed in the case of Impex Ferro Tech Limited Vs. Auroma Coke Ltd. (APO No.273 of 2018) dated 17.12.2018. The relevant portion so relied upon is set out hereunder :- "Once the proceedings under the IBC have been admitted, the company Court should yield to the more modern mechanism under the IBC in view of the obvious legislative intent apparent. It was because the liquidation proceedings envisaged by the 1956 Act were found to be less than ideal, that an entirely different scheme has been put in place by the IBC in 2016. Thus, once proceedings pertaining to a company have been admitted by the IBC and the merits of such proceedings are to be gone into for the purpose of the preparation of a resolution plan, the proceedings pending before the company Court should or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding up petition was filed much prior to 7th December, 2016 and directions for filing of affidavits were also given prior to that date. Reliance is then placed on, the second proviso to section 465(1) of the Act of 2013 and submitted that the provisions of the Act of 1956 shall continue to apply to the proceedings which have not been transferred from this Court to NCLT. It is further submitted that on a conjoint reading of section 465 and 434(1) (c) of the Act of 2013, it is clear that applicable provisions in respect of the instant winding up proceeding is in the Act of 1956. It is further submitted that this Court, therefore, retained jurisdiction over the winding up proceedings and have passed orders therein including appointment of Provisional Liquidator in terms of the provisions of the Act of 1956. The provisions of section 447 of the Act of 1956 is then relied upon and the effect of winding up order is being shown to the Court. The provisions of section 481 of the Act of 1956 is also relied upon to submit that winding up order, as mentioned in section 443(1)(d) of the Act of 1956 is not the same as contemplated under section 481. It is then submitted that propriety demands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In view of the provisions of Section 12, such corporate insolvency resolution process was required to be completed within a period of 180 days from the date of admission of the application by which the process was initiated. The said 180 days have expired in September, 2019, but no committee of creditors had been formed till such date. As to the winding up of the company to be proceeded under the Act of 1956 or under IBC, the said creditors relied upon the judgments rendered in the case of Rajni Anand vs. Cosmic Structures Ltd. (2018 SCC On Line Del 12107); Arise India Limited vs. TCI Freight (2018 SCC OnLine NCLAT 223) and [2019] 213 Comp Cas 61 (Bom) (Jotun India P. Ltd. vs. PSL Ltd.). It appears from the judgment of Arise India Limited (supra) that the NCLAT finding that the provisional liquidator having been appointed by the Company Court rejected the initiation of proceedings under IBC. Relying upon such judgments, the said creditors submitted that assuming without admitting the winding up proceeding pending before this Court is required to be stayed to allow the NCLT to make an endeavour to revive the said company then also on the failure of revival efforts by NCLT, this Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the proviso to section 434(1)(c) and submits that the instant winding up proceedings is one, which falls in the category of cases to be retained in this Court and, therefore, shall be decided in accordance with the provisions of the Act of 1956 and the 1959 Rules. In view of the provisions of the Act of 1956 having been made applicable to the winding up petition like the instant case a winding up petition on being admitted assumes a representative character. All creditors of the said Company are thereafter required to join such proceedings unless express leave has been obtained under the provisions of section 446 of the Act of 1956. Having not done so, Devi Trading could not have proceeded with its application before the NCLT to obtain the order dated 13th March, 2019 particularly when the application was filed long back and moved after about one year from the date of filing. It was also known that the Provisional Liquidator has been appointed which in fact had been specifically brought to the notice of the NCLT by the said Company. In that view of the matter, the order dated 13th March, 2019 is an order without jurisdiction and a nullity which can be challenged even in collatera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r orders were passed by the NCLT directing the Provisional Liquidator appointed by this Court to hand over all accounts, books of accounts and release all assets in favour of IRP on the basis of its order and the matter was directed to appear on 24th October, 2019. On 24th October, 2019, a further order was passed directing the Provisional Liquidator appointed by this Court to be personally present before the NCLT on 13th December, 2019. The said creditors also submitted that from the judgment of Jaipur Metal (supra), it is clear that the orders of NCLT cannot be interfered with by this Court while exercising Company jurisdiction. It is also submitted that on a conjoint reading of Jaipur Metal (supra) and Forech (supra), this Court cannot proceed with the winding up petition any further until insolvency proceedings is brought to a logical conclusion before the NCLT. Moreover, a moratorium under Section 14 of IBC has been passed and as such no further steps in the winding up proceedings can be taken by this Court. With regard to the issue of ratio decidendi laid down in a judgment it is submitted that there has been discussion in details with reference to the course of action to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, however, continued to hear winding up petitions as Sections 270 and 271 of the Act of 2013 dealing with winding up of a company by the Tribunal (i.e. Company Law Board - in short CLB) came into operation with effect from 15th November, 2016. iv. The transfer of winding up proceedings from the High Court to the NCLT is provided under Section 434 (1)(c) of the Act of 2013. The said Section originally provided that the winding up of companies pending in the High Court immediately before such date shall stand transferred to the Tribunal (NCLT) and NCLT may proceed to deal with such proceedings from the stage before their transfer. The Section was substituted with effect from 15th November, 2016. In the substituted Section 434(1)(c), a proviso was introduced which says that only such proceedings relating to winding up of companies shall be transferred to NCLT that are at a stage as may be prescribed by the Central Government. The substituted Section 434 (1)(c) further provide that the proceedings relating to winding up of companies which have not been transferred from the High Courts shall be dealt with in accordance with provisions of the Act of 1956 and the Companies (Court) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set out hereinbelow :- "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 case may be, including details of the proposed insolvency professional to the Tribunal within sixty days from date of this notification, failing which the petition shall abate. (2) All cases where opinion has been forwarded by Board for Industrial and Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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". 15) At the hearing of the said application several provisions of the Act of 1956, 1959 Rules, the Act of 2013, 2016 Transfer Rules and the IBC have been referred. The provisions so referred to are set out hereunder for convenience:- Sections 433, 446, 447 and 481 of the Companies Act of 1956:- "[433. Circumstances in which company may be wound up by Tribunal. - A company may be wound up by the Tribunal, - (a) if the company has, by special resolution, resolved that the company be wound up by the Tribunal; (b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting; (c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year; (d) if the number of members is reduced, in the case of a public company, below seven, and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. - An order for winding up a company shall operate in favour of all the creditors and of all the contributories of the company as if it had been made out on the joint petition of a creditor and of a contributory. 481. Dissolution of company. - (1) When the affairs of a company have been completely wound-up [or when the [Tribunal] is of the opinion that the liquidator cannot proceed with the winding up of a company for want of funds and assets or for any other reason whatsoever and it is just and reasonable in the circumstances of the case that an order of dissolution of the company should be made], the [Tribunal] shall make an order that the company be dissolved from the date of the order, and the company shall be dissolved accordingly". Companies (Court) Rules, 1959. "R. 26. Service of petition. - Every petition shall be served on the respondent, if any, named in the petition and on such other persons as the Act or these rules may require or as the Judge or the Registrar may direct. Unless otherwise ordered, a copy of the petition shall be served along with the notice of the petition. R. 28. Service on company. - (1) Where a petition is presented against a compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious to the day of hearing, and in the case of a petition for winding-up not later than five days previous to the day of hearing. Such notice shall be in Form No.9, with such variations as the circumstances may require, and where such person intends to oppose the petition, the grounds of his opposition, or a copy of his affidavit, if any, shall be furnished along with the notice. Any person who has failed to comply with this rule shall not except with the leave of the Judge, be allowed to appear at the hearing of the petition". Sections 434 and 465 of the Companies Act of 2013 (in short the Act of 2013):- "[434. Transfer of certain pending proceedings. - (1) On such date as may be notified by the Central Government in this behalf, - (a) all matters, proceedings or cases pending before the Board of Company Law Administration (herein in this section referred to as the Company Law Board) constituted under sub-section (1) of section 10-E of the Companies Act, 1956 (1 of 1956), immediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act; (b) any person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repealed enactments) shall stand repealed: Provided that the provisions of Part IX-A of the Companies Act, 1956 (1 of 1956) shall be applicable mutatis mutandis to a Producer Company in a manner as if the Companies Act, 1956 has not been repealed until a special Act is enacted for Producer Companies: Provided further that until a date of notified by the Central Government under sub-section (1) of section 434 for transfer of all matters, proceedings or cases to the Tribunal, the provisions of the Companies Act, 1956 (1 of 1956) in regard to the jurisdiction, powers, authority and functions of the Board of Company Law Administration and Court shall continue to apply as if the Companies Act, 1956 (1 of 1956) has not been repealed: Provided also that provisions of the Companies Act, 1956 (1 of 1956) referred in the notification issued under section 67 of the Limited Liability Partnership Act, 2008 (6 of 2009) shall, until the relevant notification under such section applying relevant corresponding provisions of this Act to limited liability partnerships is issued, continue to apply as if the Companies Act, 1956 (1 of 19560 has not been repealed". Sections 238 and 255 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016. This service is in terms of Rule 26 of the Act of 1959 and was made prior to 28th May, 2016 when IBC came into operation. The service of the said petition was also effected much before 7th December, 2016 when the 2016 Transfer Rules came into operation. Direction for filing of affidavits was issued and affidavits were exchanged prior to 7th December, 2016. The said petition, therefore, fell in the category of winding up petitions which were not required to be transferred to the NCLT since the service was effected and even affidavits were exchanged before 7th December, 2016 or the cut off date declared by the Central Government in terms of section 434(1) of the Act of 2013. This Court, therefore, retains jurisdiction to hear the winding up petition. On conjoint reading of section 434 of the Act of 2013 and Rule 5 and 6 of the 2016 Transfer Rules, it is clear that the Act of 1956 and the 1959 Rules are applicable for the purpose of adjudicating the said petition and/or connected applications. b) Even after promulgation of IBC, none of the creditors of the said Company filed any application between 28th May, 2016 and 14th March, 2018 when the application of Devi Trading under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and NCLT is better equipped in view of the new mechanism but at the end transfer of the saved petition has been refused by upholding the order of the Learned Single Judge. d) The creditor's winding up petition always stood on a different platform than one initiated at the recommendation of BIFR. BIFR after considering a reference to it under the provisions of SICA from all concerns on finding that the company is sick, used to make recommendation before the High Court having jurisdiction over the registered office of such company under section 20 of SICA to initiate winding up proceedings. This was done as there was no mechanism to wound up a company. With the repealing of SICA, there is no act of like nature except the provisions of IBC to consider the fate of a company, which has become insolvent or bankrupt. The definition of sick company under SICA may not be the same to that of an insolvent or bankrupt company under the IBC but in essence the IBC deals with such sick company under a new format. e) Even after the introduction of IBC which took away the creditors' power to institute a winding up proceeding initially available under section 271(2) of the Act of 2013 due t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 where RDB Act was considered to be a special law whereas Companies Act, 1956 as the general law. It was also held that between two Special Laws the latter will normally prevail over the former if there is a provision in the latter Special Act which gives it an over-riding effect. RDB Act in section 34 provides such over-riding effect and as such the said Act will prevail over the Act of 1956 to the extent that there is anything inconsistent between the said two Acts. In the said judgment the question of jurisdiction of the Debts Recovery Tribunal under the RDB Act, vis-a-vis the Company Court also arose for a decision. The Hon'ble Supreme Court held that even where a winding-up petition is pending, or a winding-up order has been passed against the debtor company, the adjudication of liability and execution of the certificate in respect of debts payable to banks and financial institutions, are respectively within the exclusive jurisdiction of the Debts Recovery Tribunal and the Recovery Officer under the RDB Act and in such a case, the Company Court's jurisdiction under Sections 442, 537 and 446 of the Companies Act stood ousted. Hence, no leave of the Company Court was necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent with the relevant provisions of the Companies Act regarding distribution of the assets of the company-inliquidation". i) The IBC in section 238 has a similar over-riding effect like that in section 34 of the RDB Act but such provision will not affect the instant case in view of the specific retention power given under section 434 of the Act of 2013 read with the provisions of Rule 5(1) and 6 of the 2016 Transfer Rules in respect of the saved petitions. Even if it is held that NCLT under IBC has the exclusive jurisdiction as to the insolvency and bankruptcy of the said Company as held in Canara Bank (supra) for IBC being a Special Act and the Act of 1956, a general law, then also in view of the specific retention power the Company Judge of this Court does not lose the jurisdiction over the saved petitions. On the contrary in view of the ratio laid down in Rajasthan State Financial Corp. (supra) and Jotun India P. Ltd. (supra), I am of the view that NCLT may be permitted to proceed upto the level of revival of the said Company. If the revival effort fails, the Company Judge of this Court shall proceed with the winding up proceedings and distribute the sale proceeds received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of a financial creditor, even after a creditor's winding up petition is admitted by the Company Court and assumes a representative capacity pursuant to the advertisement by filing an application under section 7 without joining the winding up proceedings which all creditors of the said Company are required to do, under the provisions of the Act of 1956 and the 1959 Rules. This in effect will render the legislative intent in retaining a particular category of creditor's winding up (saved petitions) with the Company Court, otiose this cannot also be permitted. (b) By allowing NCLT to proceed up to the stage of revival, we also bring a logical conclusion to the first part of section 7 petition under IBC which ends with the approval of the revival plan or rejection thereof. The Official Liquidator being an officer appointed by the Central Government will be more accountable and responsible than a resolution professional for the purpose of carrying out the liquidation process. After considering all the judgments cited by the parties and for the reasons aforesaid, I am of the view that the Company Judge of this Court retains the jurisdiction to try the aforesaid winding up petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to civil rights of the parties as also direction for execution of conveyance and making over possession. The NCLT does not possess the jurisdiction under IBC for passing of such orders. The IRP, however, will be free to approach the Provisional Liquidator and take inspection and obtain copies of the documents and information as required by it for preparing the resolution plan to be submitted before the NCLT. The Provisional Liquidator under no circumstances shall make over the originals of the book and the possession of the assets of the said Company to the IRP. If the IRP has to inspect any asset of the said Company for the preparation of the Resolution Plan he should approach the Provisional Liquidator who will render necessary assistance and cooperation. 19) Issue No.(v) is answered as follows :- The winding up petition (CP 1 of 2016) was filed on or about 4th January, 2016 and, as such, it is an admitted position that the same was filed prior to the IBC coming into operation. IBC, according to me, like all other statutes has a prospective effect since it has not been specifically made operational retrospectively. However, in view of the provisions of a winding up petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... autious while passing orders directing the Provisional Liquidator to hand over the books, documents and assets of the company knowing that the Provisional Liquidator was appointed by the Company Judge of this Court in a saved petition and further on being informed that the Company Judge is considering an application of the IRP for discharge of the Provisional Liquidator. Propriety also demanded that NCLT should not have passed mandatory directions on the Provisional Liquidator to hand over the books, documents and assets to the IRP or directed personal presence of the Provisional Liquidator while hearing an application under Section 7 of the IBC when it knew that the Provisional Liquidator has been appointed by the Company Judge of this Court in a saved petition. 22) At the end, I hold that this Court possesses the jurisdiction to hear out the winding up petition being CP 1 of 2016 along with all connected applications. However, the winding up petition and the connected applications thereto should not be proceeded with till NCLT comes to the conclusion as to whether the resolution plan in respect of the said company is either approved or rejected. In case of approval, further ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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