2018 (2) TMI 1736 - AT - Companies Law

Tribunal: CIRP Initiation Not Allowed During Pending Winding-Up; Appeal Dismissed

The Tribunal held that the initiation of Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code was not permissible due ... Corporate Insolvency Resolution Process - whether an application under Section 7 of the ‘I&B Code’ can be rejected on the ground of pendency of a winding-up? - Held that:- In the present case, as admittedly the High Court has already admitted the winding up proceedings and ordered for winding-up of the Respondent-‘Corporate Debtor’, we hold that the question of initiation of ‘Corporate Insolvency Resolution Process’ against same ‘Corporate Debtor’ does not arise. Appeal dismissed. Issues Involved:1. Whether an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) can be rejected on the ground of pendency of a winding-up proceeding.2. Interpretation of Section 434 of the Companies Act, 2013 and Section 255 of the I&B Code regarding the transfer of pending winding-up proceedings.3. Applicability and overriding effect of Section 238 of the I&B Code over the Companies Act, 1956/2013.4. Eligibility of filing a Corporate Insolvency Resolution Process (CIRP) application under Section 7, 9, or 10 of the I&B Code during the pendency of winding-up proceedings.5. The impact of the Companies (Transfer of Pending Proceedings) Rules, 2016 and its subsequent amendments.Issue-wise Detailed Analysis:1. Rejection of Application under Section 7 of the I&B Code due to Pendency of Winding-up Proceedings:The Appellant filed an application under Section 7 of the I&B Code for initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Adjudicating Authority rejected the application due to the pendency of winding-up proceedings against the Corporate Debtor. The main question was whether such an application could be rejected based on the pending winding-up proceedings. The Tribunal observed that if a winding-up order has already been passed and is pending before the High Court, Section 238 of the I&B Code will not override such proceedings.2. Interpretation of Section 434 of the Companies Act, 2013 and Section 255 of the I&B Code:The Adjudicating Authority referred to Section 434 of the Companies Act, 2013, and Section 255 of the I&B Code, which provide for the transfer of pending winding-up proceedings to the National Company Law Tribunal (NCLT). The Authority noted that the source for amending Section 434 comes from Section 255 of the I&B Code, indicating that High Courts can proceed with pending winding-up matters not transferred to the NCLT.3. Overriding Effect of Section 238 of the I&B Code:The Appellant argued that Sections 7, 9, and 10 of the I&B Code give a right to initiate CIRP and that Section 238 of the I&B Code provides an overriding effect over other laws, including the Companies Act. However, the Tribunal held that Section 238 does not override the effect on winding-up proceedings already saved by the I&B Code.4. Eligibility of Filing CIRP Application During Pendency of Winding-up Proceedings:The Tribunal referred to previous judgments, including 'M/s. Unigreen Global Private Limited Vs. Punjab National Bank & Ors.' and 'Forech India Pvt. Ltd. Vs. Edelweiss Assets Reconstruction Company Ltd. & Anr.,' to conclude that if a winding-up order has been passed or liquidation proceedings initiated, an application under Section 7 or 9 of the I&B Code is not maintainable. The Tribunal emphasized that mere pendency of a winding-up petition does not bar the initiation of CIRP unless a winding-up order has been passed.5. Impact of Companies (Transfer of Pending Proceedings) Rules, 2016 and Amendments:The Tribunal considered the notifications issued by the Central Government, including the Companies (Transfer of Pending Proceedings) Rules, 2016, and its subsequent amendment on 29th June 2017. The rules provided for the transfer of pending winding-up petitions to the NCLT, with specific conditions and deadlines. The Tribunal noted that the High Court retains jurisdiction over certain winding-up matters, and the I&B Code does not override these provisions.Conclusion:The Tribunal concluded that since the High Court had already admitted the winding-up proceedings and ordered the winding-up of the Corporate Debtor, the initiation of CIRP under the I&B Code was not permissible. The appeal was dismissed, and no costs were awarded.