Validity of Insolvency Proceedings Upheld; Liberty Granted to Pursue Statutory Remedies

The court found that the insolvency proceedings initiated by respondent Nos.1 to 3 were valid and not void ab initio, as they were not based on the RBI Circular dated 12.02.2018. The petitioners were granted the liberty to pursue any statutory remedies available to them, and the petition was disposed of accordingly.

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Issues Involved:
1. Validity of proceedings before the Company Law Tribunal.
2. Restoration of control and superintendence of the Company to its shareholders.
3. Impact of the Supreme Court judgment in 'Dharni Sugars and Chemicals Ltd. vs. Union of India'.
4. Applicability of the Reserve Bank of India's Circular dated 12.02.2018.
5. Availability of alternative remedies under the Insolvency and Bankruptcy Code (IBC).

Detailed Analysis:

1. Validity of proceedings before the Company Law Tribunal:
The petitioners sought a declaration that the proceedings pending before the Company Law Tribunal are void and non est, citing the Supreme Court's judgment in 'Dharni Sugars and Chemicals Ltd. vs. Union of India'. The petitioners argued that the Tribunal's order of admission on 29.10.2018 and the subsequent proceedings under the Insolvency and Bankruptcy Code (IBC) were invalid due to the Supreme Court's quashing of the RBI Circular dated 12.02.2018. However, the court found that the decision to invoke the provisions of the IBC was taken by respondent No.1 on 20.01.2018, prior to the issuance of the Circular. Therefore, the proceedings were not based on the Circular and were not void ab initio.

2. Restoration of control and superintendence of the Company to its shareholders:
The petitioners requested the restoration of control of the Company to its shareholders as it stood before the Tribunal's order on 29.10.2018. The court noted that the Company had been given multiple opportunities to resolve the issue but failed to do so. Consequently, the court did not find merit in directing the restoration of control to the shareholders at this stage.

3. Impact of the Supreme Court judgment in 'Dharni Sugars and Chemicals Ltd. vs. Union of India':
The petitioners contended that the Supreme Court's judgment, which quashed the RBI Circular dated 12.02.2018, rendered all actions taken under the Circular, including the insolvency proceedings, non est. The court, however, clarified that the Supreme Court's judgment applied to proceedings initiated solely based on the Circular. Since the decision to initiate insolvency proceedings was taken before the Circular's issuance, the Supreme Court's judgment did not impact the current case.

4. Applicability of the Reserve Bank of India's Circular dated 12.02.2018:
The court examined the Circular, which applied to lenders with an aggregate exposure of Rs. 2,000 Crores or more. The Circular mandated timelines for referring large accounts under the IBC. However, since the Circular was quashed by the Supreme Court, the court did not delve into its applicability to the petitioner's case. The court emphasized that the insolvency proceedings were initiated independently of the Circular.

5. Availability of alternative remedies under the Insolvency and Bankruptcy Code (IBC):
The respondents argued that the petitioners had alternative remedies available under the IBC, including filing an appeal under Section 61. The petitioners countered that the Tribunal lacked the power to recall or review its order under Section 60(5) of the IBC. The court acknowledged that a pure question of law, such as the validity of proceedings in light of the Supreme Court's judgment, need not be relegated to alternative remedies. However, since the proceedings were not based on the quashed Circular, the court found no merit in the petitioners' claim that the proceedings were void.

Conclusion:
The court concluded that the insolvency proceedings initiated by respondent Nos.1 to 3 were valid and not void ab initio, as they were not based on the RBI Circular dated 12.02.2018. The petitioners were given the liberty to pursue any statutory remedies available to them. The petition was disposed of accordingly.

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