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TMI Blog2023 (8) TMI 944X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer of pending proceeding by the phrase only such proceeding relating to winding up the companies as may be prescribed by the Central Government. The stage at which such pending proceeding relating to the winding up of companies needs to be transferred has been prescribed and laid down by the Companies (Transfer of Pending Proceeding) Rules, 2016. The said rule was notified on 29th June, 2017. The fifth proviso to Section 434(1)(c) introduced by Act 26 of 2018 with effect from 6th June, 2018 was primarily to tide over the difficulties and the conflict that are likely to arise by reason of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018. By reason of IBC there could be a possibility of initiation of proceeding under Sections 7 and 8 of IBC in relation to a company against whom a winding up petition is pending. The reading of the provisions of IBC with the Companies Act, 2013 undoubtedly would show that the provision of IBC would have primacy in case of conflict over the Companies Act, 2013 as the ultimate object of IBC is to resuscitate the corporate debtors who are in the red. This approach is also in some cases necessary to transfer the windin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed a stage where it would be irreversible, making it impossible to set the clock back that the Company Court must proceed with the winding up, instead of transferring the proceedings to the NCLT to now be decided in accordance with the provisions of the Code. The aforesaid judgment thus, clearly spell out that unless the court is convinced that the company is to suffer an inevitable corporate death the first choice would to be to make an all out attempt to revive the company and this procedure has been elaborately laid down in IBC. The Companies Act, 2013 is not suited for such situation. This is clearly reflected from the amended and substituted Section 434 of the Companies Act, 2013 read with Sections 7 and 8 of the IBC and the objects and reasons of both the statutes. There is no conflict between the two provisions. The Court has discretion to transfer the proceeding depending upon the stage of the proceeding. If it appears to the Company Court that the die is cast and the corporate death of the company is inevitable there is no requirement to transfer such proceeding. The said discretion is not always dependent upon any formal application being made but it is always desi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Bankruptcy Amendment Ordinance, 2018 in the present case having regard to the views expressed by the secured creditors insistent of any application for transfer would be a mere formality - Under such circumstances the order passed by the learned Single Judge in M/s. Corporate Ispat Alloys Limited is upheld. The department is directed to transfer the record of CP/419/2013 to the National Company Law Tribunal, Calcutta, forthwith. - HON BLE JUSTICE SOUMEN SEN AND HON BLE JUSTICE UDAY KUMAR For the applicant (in APO/12/2023, APO/35/202 : Mr. Ratnanko Banerjee, Sr. Adv., Mr. Nirmalya Dasgupta, Adv., Mr. Kuldip Mullick, Adv., Mr. Dibanath Dey, Adv., For the Applicant (in APO/14/2023) : Mr. Debrup Bhattacharyya, Adv., Mr. Deepak Kumar Singh, Adv., For the applicant in APO/35/2023 : Mr. Hemant Tiwari, Adv. For the Official Liquidator (In APO/12/2023, And APO/14/2023). : Ms. Debjani Mitra Neogi, Adv. For Official Liquidator : Ms. Smita Das De, Adv. JUDGMENT SOUMEN SEN, J.:- All the appeals involve common questions of law and fact and accordingly are heard analogously. The principal issue raised in this appeal by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tters, applications were filed and parallel proceedings were pending. It is submitted that the first proviso to Section 434(1)(c) makes a reference to the stages of the winding up proceeding appropriate for transfer as may be prescribed by the Central Government for the purpose of determination of transfer of winding up proceeding to NCLT. The said proviso read with the last proviso makes it clear that there is no absolute ouster of jurisdiction. It is submitted that the Act does not contemplate complete ouster of jurisdiction of the company court or makes the official liquidator functus officio. It is submitted that the learned Single Judge was possibly influenced by the use of the expression irreversible in Action Ispat (supra) and referred to in A. Navinchandra Steels Private Limited (supra). The ratio of the said decisions have been applied without proper appreciation of the facts and without considering the stages of the pending proceedings before the High Court. Mr. Banerjee has referred to Section 31 of the Recovery of Debts and Tenancy Act, 1993 and Section 15 of the Commercial Courts Act, 2015 to show that the said Sections have completely ousted the jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submission in favour of retaining the jurisdiction of the Company Court in appropriate cases depending upon the stage of the proceeding. In the year 2016 by Act 31 of 2016 Section 434 was substituted with effect from 15th November, 2016. Before substitution Section 434(1)(c) reads as follows: (c) all proceedings under the Companies Act, 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. After the substitution Section 434(1)(c) reads as follows: (c) all proceedings under the Companies Act, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Proceeding) Rules, 2016. Rule 5 of the aforesaid rules read: - 5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.- 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 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 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 bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) the Hon ble Supreme Court observed 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 IBC Code was held to be a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The Hon ble Supreme Court noticed that after the introduction of the transfer rules 2016 only those proceedings which are at the stage of pre service of notice of the winding up petition stand compulsorily transferred to NCLT. The Hon ble Supreme Court noticed that by reason of Rules 5 and 6 of the transfer rules which would result in parallel proceedings to continue before the Company Court and pre admission proceeding would be compulsorily transferred to NCLT. The observations of the Hon ble Supreme Court in this regard are at paragraph 14.1 to 14.4, the said paragraphs are stated below: 14. What becomes clear upon a reading of the three judgments of this Court is the following: 14.1. So far as transfer of winding up proceedings is concerned, the Code began tentatively b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sell the company as a going concern. So long as no actual sales of the immovable or movable properties have taken place, nothing irreversible is done which would warrant a Company Court staying its hands on a transfer application made to it by a creditor or any party to the proceedings. It is only where the winding up proceedings have reached a stage where it would be irreversible, making it impossible to set the clock back that the Company Court must proceed with the winding up, instead of transferring the proceedings to the NCLT to now be decided in accordance with the provisions of the Code. Whether this stage is reached would depend upon the facts and circumstances of each case. (Emphasis supplied) In Action Ispat and Power Pvt. Ltd. (supra) the liquidators had taken possession and control of the Registered Office of Action Ispat and its factory premises, records and books and no irreversible steps towards winding up of the Company had otherwise taken place and in that perspective the Hon ble Supreme Court observed that the Company Court has correctly exercised its discretion vested in it by the fifth proviso Section 434(1)(c) and did not interfere with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a reorganisation of the company's share capital by the consolidation of shares of different classes or by the division of shares into shares of different classes, or by both of those methods. What is clear by this Section is that a compromise or arrangement can also be entered into in an IBC proceeding if liquidation is ordered. However, what is of importance is that under the Companies Act, it is only winding up that can be ordered, whereas under the IBC, the primary emphasis is on revival of the corporate debtor through infusion of a new management. 26. On facts also, in the present case, nothing can be said to have become irretrievable in the sense mentioned in paragraph 31 of Action Ispat (supra). It was thus clarified that so long as no actual sale of the immovable or movable properties have taken place, nothing irreversible is done which would warrant a Company Court staying its hands on a transfer application made to it by a creditor or any party to the proceedings. It is only where the winding up proceedings have reached a stage where it would be irreversible, making it impossible to set the clock back that the Company Court must proceed with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venience, paragraph 9 of the report is reproduced below: 9. As per direction made by His Lordship vide order dated 14.09.2022 it is submitted that after disposal of CA No.8 of 2022 disbursement of dues of merely two creditors of the company (In Liquidation) will be made. Thereafter, the only step remains to place an application under Section 481 of the Companies Act, 1956 read with Rule 282 of the Companies (Court) Rules, 1959 for final dissolution of the company (In Liquidation). A copy of the order dated 14.09.2022 is annexed herewith and marked as A . In view thereof the order dated 12th December, 2022 is set aside. The winding up of the company is required to be completed by the Company Court. APO 14 of 2023 with I.A. No. ACO/1/2023 is allowed. However, there shall be no order as to costs. Re: M/s. Abhijeet Projects Limited (In Liquidation) In M/s. Abhijeet Projects Limited (in Liquidation) the official liquidator filed a status report. There are about 15 creditors which consists of banks and financial institutions. On 20th July, 2023 an order was passed directing the Official Liquidator to obtain the views of the Secured Creditors. Pursuant to such d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of aircraft by DRT may also come to a stand-still due to moratorium where the sale of the aircraft (exclusive charged property) is in the advanced stage through DRT. (emphasis supplied) The ouster of jurisdiction should not be easily inferred. The continuance of existing legislation, in the absence of an express provision of repeal, being presumed, the burden to show that there has been a repeal by implication lies on the party asserting the same. [ See. Lybbe v. Hart (1883) 29 Ch D 8 @ page 15] A general rule applicable to the construction of statutes is that there is not to be presumed without express words, an authority to deprive the tribunal of a jurisdiction it had previously exercised. Moreover, the rule of implied prohibition is, however, subservient to the basic principle that the court must, as far as possible, adopt a construction which effectuates the legislative intent and purpose. [ See, G.P. Singh Principles of Statutory Interpretation, 15th Edition, Jamal Uddin Ahmad v. Abu Saleh Najmuddin, AIR 2003 SC 1917: 2003 (4) SCC 257, Paragraphs 11 and 12] The presumption is, however, rebutted and a repeal is inferred by necessary implication wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f them sought for the time to place the issue before their higher authority to provide the written view on that issue. Such request of the secured creditors was considered with an instruction to convey their views by Monday i.e. 31st July, 2023. 7. That the minutes of the meeting was being sent to all the secured creditors on the same day with a request for trail mail confirmation of their views in regard to transfer of the proceedings to NCLT. A copy of the minutes dated 28th July, 2023 is annexed with this affidavit as exhibit 2. 8. That the Official Liquidator has so far received and or obtained the views from UCO Bank, Axis Bank, IFCI Ltd., Punjab National Bank and Union Bank of India which contemplates that they are in the views of transfer the proceedings to NCLT as directed by the Hon ble Judge taking company matters. The email confirmation upholding transfer of the proceedings to NCLT so received from the secured creditors are collectively annexed as exhibit 3. (emphasis supplied) In the said report the Official Liquidator in paragraph 8 has clearly stated that five financial institutions are of the view that the transfer of proceeding to NCLT as di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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