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TMI Blog2020 (10) TMI 1337X X X X Extracts X X X X X X X X Extracts X X X X ..... ng anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law , the provision is exhaustive. Thus, whenever a special law gives out a specific provision which is clear and unambiguous and on the same subject there is a different provision in the general law and there is an inconsistency between the two, the special law will prevail and the principles of harmonious construction will have no role to play. The time frame in winding up on just and equitable grounds is not an important condition. The very object of introducing the IBC 2016 and restricting its operation to solvency of the Company alone and provision for revival of the company within time fixed and keeping the liquidation as last resort makes it clear that time frame is important under the Code while it is not so under Section 279 of the Companies 2013 Act - An Adjudicating Authority that commences exercising of its power by entertaining a petition by a creditor on account of default by the Corporate Debtor enters into the sphere of resolution process which again deals with money and money alone ends up under liquidation. If there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of the Arbitration and Conciliation Act, for staying the further proceedings of the Arbitral Tribunal consisting of 2nd, 3rd and 4th Respondents with regard to the dispute between the Applicant and the 1st Respondent until to obtain leave from NCLT, Hyderabad to proceed with the arbitration proceedings. 2. The brief facts leading to file this application is as follows: 2.a. The applicant and the 1st Respondent entered into contract dated 05.09.2011 for the Design and Construction of Elevated Station at Meenambakkam, Architectual Builders Works and Finishes (ABWF) and Building Services Work (BS) for Chennai Airport Station, Viaducts, Ramps and Cut-cover Tunner between Officers Training Academy Station and Chennai Air Port Station on corridor 1 and was termed as the ECV-07 package of the project (Subject Project). 2.(b) As the dispute arose between them, the matter has been referred to the Arbitrator. The 1st Respondent being the claimant claimed an aggregate sum of Rs.1,98,58,82,734/-. The Applicant being the respondent in the Arbitral Proceedings, has also made a counter claim for a sum of Rs.107 Crores. It is the further case of the Applicant that after evidence was ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng provisions of law. Hence, prayed for dismissal of the application. 5. The following are not disputed. The Applicant raised claims, and Respondent raised counter claims in respect of the contract for Design and Construction of Elevated Station at Meenambakkam. Declaring Moratorium on the 1st Respondent by NCLT and thereafter 1st Respondent company liquidated is also not disputed. 6. Mr.P.H. Arvind Pandian, learned Senior Counsel for the Applicant submitted that the continuation of the Arbitration proceedings without leave of the NCLT under Section 279 of the Companies Act will lead to the situation that any award is passed in favour of any of the parties, the same will be challenged as unenforceable in the absence of leave obtained to continue the proceedings. Hence his contention is that Section 279 of the Companies Act which correspondent to Section 446 of the Companies Act 1956, has to be followed. The Insolvency and Bankruptcy Code does not delete or alter the Section nor override the provision of 279 of the Companies Act 2013. Both the provisions of Companies Act and Insolvency Bankruptcy Code ought to be read harmoniously. It is his contention that Eleventh Schedule v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings are stayed with a direction to the Liquidator to obtain appropriate order from the Tribunal in this regard. The situation may arise if any Award passed in favour of the Applicant or Respondent the same may be put into challenge on the ground of violation of provisions of Companies Act in the later point. Such a situation may lead into making the award nullity. To avoid such situation leave has to be obtained. Hence his contention is that since the Arbitral Proceedings already commenced, this Court can exercise the jurisdiction under Section 9(1)(ii)(e) of the Act to grant interim order on the ground of just and convenient reasons. 9. In support of his submissions he has relied upon the following judgments: 1. B.K. Educational Services Pvt. Ltd., v. Parag Gupta and Associates [(2019) 11 SCC 633] 2. A. Kalaimani and Ors. v. State of Tamil Nadu and Ors. [2019 SCC Online Mad 4435] 3. Mrs. Vasangtha Raman vs. Official Liquidator and Others [2003 SCC Online Mad 997] 4. Babulal Vardharji Gurjar vs. Veer Gujar Aluminium Industries Pvt. Ltd., and Another [(2020) 6 MLJ 396 (SC)] 10. Mr. Ameya Gokhale, learned Counsel appearing for the 1st Respondent/Liquidator in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to NCLT. On such transfer such petitions were to be treated as under Section 7,8,9 of the Code, subject to the provision of the transfer rules. However, the pending petitions filed under Section 433 (a) and (f) (i.e., on ground other than on account of inability to pay debt) were to be transferred to the NCLT and be treated as petitions under Companies Act 2013, subject to the provisions of the Transfer Rules. 12. It is his further contention that under the provisions of the Code, the jurisdiction with respect to the liquidation process is vested with the Adjudicating Authority. Whereas winding under Part I of Chapter XX of Companies Act vested with NCLT. When there is conflict between the Code and any other law the provisions of the Code shall have primacy, by virtue of Section 238 of the Code. Under Section 14 if Moratorium is ordered which inter alia, prohibits institution and continuation of pending suits or proceedings against the company undergoing CIR Process. There is however no bar on the Corporate Debtor to institute new or continue pending proceedings against another party. In the event, a company does not receive a resolution plan or the Adjudication Authority r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Company Law. Section 14 of the Code reads as follows: 14. Moratorium: (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing off 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 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 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. Section 14 makes it clear that once moratorium is declared, there is a bar for in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the case may be, shall be inserted; 21. A Careful reading of the above sections makes it very clear that though the Eleventh Schedule of IBC was amended, Section 279 of the Companies Act 2013, which is correspondent to Section 446 of the Companies Act, 1956 has not been deleted or amended. As per sub-Section 2 Clause (94A) the definition of the term winding up means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable. The word applicable indicates that the Eleventh Schedule not confined to Insolvency and Bankruptcy alone and also applicable to winding up took place under the Companies Act. It is also relevant to be noted that as no amendment whatsoever made in Section 279 of the Companies Act, 2013 the said provision was made effective from 15.12.2016 much after the effective date of Eleventh Schedule i.e. 15.11.2016. 22. Originally the winding up or liquidation of companies were dealt with by the Companies Act. the Companies Act 2013 also dealt with the winding up exhaustively. However, the need to enact a separate Code which would deal with not only the insolvency of corporate persons but also partnership firms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in pari materia of Section 238 of the Insolvency and Bankruptcy Code, 2016 and therefore Section 33(5) will override Section 279 of Companies Act, 2013. There is no need to harmonize such provisions. 25. Insolvency and Bankruptcy Code, 2016 deals with cases which are solely based on claim for money or money s worth. It takes into account the cases which fall under Section 433(e) of the Companies Act 1956, namely, on being unable to pay debts. Section 271 of Companies Act 2013 deals with winding up of Companies in cases of voluntary winding up and cases where the company can be wound up on just and equitable grounds. Section 279 and 280 of the 2013 Act is applicable only to the cases falling under Section 271 of the 2013 Act. Section 281 cannot be taken out of context and extrapolated in Section 33(5) of the 2016 Code. 26. The comparison between Companies Act 1956, Companies Act 2013 and Insolvency Bankruptcy Code are tabled hereunder: COMPANIES ACT, 1956 COMPANIES ACT, 2013 SECTION 446 SECTION 279 446. Suits Stayed On Winding Up Order (1) When a winding up order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sixty days. (2) Nothing in sub-section (1) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court. 280. Jurisdiction of Tribunal. [Brought to force from 15th December, 2016 vide notification number S.O. 3677(E) dated 07th December, 2016.] The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of,- (a) any suit or proceeding by or against the company; (b) any claim made by or against the company, including claims by or against any of its branches in India; (c) any application made under section 233; (d) any question of priorities or any other question whatsoever, whether of law or facts, including those relating to assets, business, actions, rights, entitlements, privileges, benefits, duties, responsibilities, obligations or in any matter arising out of, or in relation to winding up of the company, whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made or such scheme has been submitted, or is submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fraudulent manner or the company was formed for fraudulent and unlawful purpose or the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and that it is proper that the company be wound up; (d) if the company has made a default in filing with the Registrar its financial statements or annual returns for immediately preceding five consecutive financial years; or (e) if the Tribunal is of the opinion that it is just and equitable that the company should be wound up. COMPANIES ACT, 2013 COMPANIES ACT, 2013 SECTION 271 SECTION 271 Substituted by Section 255 of the Insolvency and Bankruptcy Code, 2016 read with the clause(10) of the Eleventh Schedule thereto, with effect from 15th November, 2016 vide notification number S.O 3453(E) dated 15th November, 2016. Prior to amendment Subsequent to amendment 271. Circumstances in which company may be wound up by Tribunal (1) A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances in which company may be wound up by Tribunal A company may, on a petition under section 272, 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 the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality; (c) if on an application made by the Registrar or any other person authorised by the Central Government by notification under this Act, the Tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent manner or the company was formed for fraudulent and unlawful purpose or the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and that it is proper that the company be wound up; (d) if the company has made a default in filing with the Registrar its financial statements or annual returns for immediately preceding five consecutive financial years; or (e) if the Tribunal is of the opinion that it is just and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt, a corporate applicant thereof may file an application for initiating corporate insolvency resolution process with the Adjudicating Authority. (2) The application under sub-section (1) shall be filed in such form, containing such particulars and in such manner and accompanied with such fee as may be prescribed. (3) The corporate applicant shall, along with the application, furnish- (a) the information relating to its books of account and such other documents for such period as may be specified; (b) the information relating to the resolution professional proposed to be appointed as an interim resolution professional; and (c) the special resolution passed by shareholders of the corporate debtor or the resolution passed by at least three-fourth of the total number of partners of the corporate debtor, as the case may be, approving filing of the application. (4) The Adjudicating Authority shall, within a period of fourteen days of the receipt of the application, by an order- (a) admit the application, if it is complete and no disciplinary proceeding is pending against the proposed resolution professional]; or (b) reject the application, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duration, if any, fixed by its articles or on the occurrence of any event in respect of which the articles provide that the company shall be dissolved, as the case may be and appointing an insolvency professional to act as the liquidator: Provided that the company owes any debt to any person, creditors representing two-thirds in value of the debt of the company shall approve the resolution passed under sub-clause (c) within seven days of such resolution. (4) The company shall notify the Registrar of Companies and the Board about the resolution under sub-section (3) to liquidate the company within seven days of such resolution or the subsequent approval by the creditors, as the case may be. (5) Subject to approval of the creditors under subsection (3), the voluntary liquidation proceedings in respect of a company shall be deemed to have commenced from the date of passing of the resolution under sub-clause (c) of sub-section (3). (6) The provisions of sections 35 to 53 of Chapter III and Chapter VII shall apply to voluntary liquidation proceedings for corporate persons with such modifications as may be necessary. (7) Where the affairs of the corporate p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is section shall be disposed of by the Tribunal within sixty days. (2) Nothing in sub-section (1) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court. 33. Initiation of liquidation. 33(5) Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor: Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the Adjudicating Authority ... COMPANIES ACT, 2013 SECTION 280 INSOLVENCY AND BANKRUPTCY CODE, 2016 SECTION 60(5) 280. Jurisdiction of Tribunal. The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of,- (a) any suit or proceeding by or against the company; (b) any claim made by or against the company, including claims by or against any of its branches in India; (c) any application made under section 233; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors; (iii) for the holding of meetings of creditors and members in connection with proceedings under section 230; (iv) for giving effect to the provisions of this Act as to the reduction of the capital; (v) generally for all applications to be made to the Tribunal under the provisions of this Act; (vi) the holding and conducting of meetings to ascertain the wishes of creditors and contributories; (vii) the settling of lists of contributories and the rectifying of the register of members where required, and collecting and applying the assets; (viii) the payment, delivery, conveyance, surrender or transfer of money, property, books or papers to the liquidator; (ix) the making of calls; and (x) the fixing of a time within which debts and claims shall be proved. (3) All rules made by the Supreme Court on the matters referred to in this section as it stood immediately before the commencement of this Act and in force at such commencement, shall continue to be in force, till such time the rules are made by the Central Government and any reference to the High Court in relation to winding up of a company in such rules shall be constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the case before the other authority might have progressed until the declaration of moratorium. In such circumstances, it would be imprudent to transfer the case to the file of the Adjudicating Authority and try from that stage. Whereas, in cases of fresh commencement, it could commence before the Adjudicating Authority without any delay. A power to grant leave also includes power to reject the same. A rejection of the leave necessarily entails in the authority taking over the case in conducting the same. The Legislature in its wisdom thought that in cases coming in respect of inability to pay debts and where the resolution plan has failed, there should be no further delay in the procedural aspects while dealing with the pending cases. That is why Section 33(5) omitted to consider the case of pending matters. Therefore, no analogy or support can be drawn from Section 279 in interpret Section 33(5) of the IBC2016. 29. Further, for the pending cases under Section 279 of 2013 Act, resolution plan is not even envisaged. The time frame in winding up on just and equitable grounds is not an important condition. The very object of introducing the IBC 2016 and restricting its operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd compensation. In the civil suit, the sale of the vessel was ordered and the proceeds were deposited in the Court several claim petitions were filed. Meanwhile a petition for winding up the company was filed before the Bombay High Court and a provisional liquidator was appointed. The Official Liquidator of the Bombay High Court contended that the civil suit or the claim petitions cannot be entertained without obtaining leave of the Company Court in Bombay under Section 446. The division bench of this Hon'ble Court relied on Allahabad Bank v. Canara Bank [2004 4 SCC 406]. The position of special law versus general law was discussed in detail in the said judgment. Applying the ratio the Division Bench considered the position of the Admiralty Act, 2017 and came to the conclusion that the adjudication of admiralty claims in admiralty jurisdiction, no leave was required. In Paragraph 29 of the judgment, it was held that Insolvency and Bankruptcy Code, 2016 is another special law in the sequence of RDB and SARFAESI, and finally held that leave under Section 279 of Companies Act not required. 33. In B.K. Educational Services Pvt. Ltd., v. Parag Gupta and Associates [(2019) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 upto 15th day of July, 2017, failing which the petition shall stand abated: Provided further that any party or parties to the petitions shall, after the 15th day of July, 2017, be eligible to file fresh applications under sections 7 or 8 or 9 of the Code, as the case may be, in accordance with the provisions of the Code: Provided also that where a petition relating to winding up of a company is not transferred to the 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 15 th December, 2016, such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent. Above judgment arising out of the transfer of pending proceedings of winding up on the ground of inability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the view that Section 33(5) of the IBC Code has to be interpretted on its own language. Further, as discussed, when there is no inconsistency IBC would prevail over. Such view of the fact no leave is required to continue of pending proceedings as discussed above. With regard to maintainability applicable under Section 9 of the Arbitration and Conciliation Act, Section 9 normally involves for interim measures for a. the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; b. securing the amount in dispute in the arbitration; c. the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence; d. interim injunction or the appointment of a receiver; e. such other interim measure of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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