2017 (4) TMI 576 - HC - Insolvency and Bankruptcy

High Court admits winding-up petition against insolvent company, appoints Official Liquidator. Rules on jurisdiction and dismisses transfer plea.

M/s. Ashok Commercial Enterprises Versus Parekh Aluminex Limited

The High Court admitted the winding-up petition against the respondent company, appointing the Official Liquidator as a Provisional Liquidator due to the ... Winding up petition - Held that:- When large number of petitions are filed against the respondent which are pending for about three years for winding up of the respondent, and in view of several attempts made by the respondent for delaying the out come of these petitions on one or other frivolous grounds, we not inclined to accept the submission for the respondent to postpone the hearing of this petition along with other companion petitions and to await for the out come of the said isolated petition filed by the ICICI Bank Limited which is not even admitted till date. This petition along with other companion petitions, which are pending for about three years cannot be adjourned since die and be made subject to the out come of the said company petition filed by the ICICI Bank Limited. Insofar as the merits of the petition is concerned, the respondent could not dispute that the decree passed by this Court against the respondent has attained finality in view of the appeal filed by the respondent against the order passed by the learned single Judge of this Court and Special Leave Petition filed before the Supreme Court having been dismissed. There is no bonafide defence raised by the respondent to the company petition. The liability of the respondent in this case is not disputed. In view of the respondent having been heavily indebted and in view of large number of creditors, including unsecured creditors the petitioner has made out a case not only for admission of this company petition but also for appointment of the Official Liquidator as a Provisional Liquidator. In my view there are not even remotest possibility of revival of the respondent company. Before the remaining assets of the respondent are friterred away, appointment of the Official Liquidator as Provisional Liquidator is absolutely warranted. Insofar as so called support to the respondent made by some of the workers, who are represented by Ms.Singhania, learned counsel appearing for the intervenor is concerned, though the Company Court has to consider the say of the workers of the respondent company even at the stage of admission of the company petition, the opposition of the company petition by the workers is not decisive for the purpose of entertaining the winding up petition at the admission stage. A perusal of the two affidavits filed by the intervenor shows inconsistencies. Be that as it may, even according to the said affidavits filed by the intervenor, it is clear that even according to the workers, the respondent has not paid their dues since July, 2016 till date. The Company Petition is admitted and shall be advertised in two local newspapers, namely (i) Free Press Journal (in English) and Navshakti (in Marathi) as also in the Maharashtra Government Gazette. Any delay in publication of the advertisement in the Maharashtra Government Gazette, and any resultant inadequacy of notice shall not invalidate such advertisement or notice and shall not constitute non-compliance with this direction or with the Companies (Court) Rules, 1959. The company petition is made returnable on 19th June, 2017. The petitioner shall deposit ₹ 10,000/- towards publication charges with the Prothonotary & Senior Master, under intimation to the Company Registrar, within three weeks from the date of admission, failing which the petition shall stand dismissed for the non-prosecution without further reference to the Court. After the advertisements are issued, the balance, if any, shall be refunded to the petitioner. The service of the petition under Rule 28 of the Companies (Court), Rules, 1959 shall be deemed to have been waived. The Company Application (Lodging) No.887 of 2015, filed by the intervenor is allowed. Issues Involved:1. Jurisdiction of High Court vs. NCLT under Insolvency and Bankruptcy Code, 2016.2. Legislative conflict between Companies Act, 1956/2013 and Insolvency and Bankruptcy Code, 2016.3. Applicability of non-obstante clause in Section 238 of the Insolvency and Bankruptcy Code, 2016.4. Discretionary power of the court to adjourn proceedings.5. Admission of winding-up petition and appointment of Official Liquidator.6. Impact on workers and creditors.7. Status of other petitions and proceedings against the respondent.Detailed Analysis:1. Jurisdiction of High Court vs. NCLT under Insolvency and Bankruptcy Code, 2016:The petitioner sought the winding up of the respondent company under sections 433(e), 434(1)(a), and 439 of the Companies Act, 1956. The respondent argued that the petition should be transferred to the National Company Law Tribunal (NCLT) following the amendment to the Insolvency and Bankruptcy Code, 2016, and the notification dated 7th December 2016. The court noted that the petition was served on the respondent before 15th December 2016, thus falling under the jurisdiction of the High Court as per the Companies (Transfer of Pending Proceedings) Rules, 2016.2. Legislative conflict between Companies Act, 1956/2013 and Insolvency and Bankruptcy Code, 2016:The respondent's counsel argued that the Insolvency and Bankruptcy Code, 2016, with its non-obstante clause in Section 238, should prevail over the Companies Act, 1956/2013. The court held that there was no conflict between the provisions of the Insolvency and Bankruptcy Code, 2016, and the Companies Act, 1956/2013, regarding the jurisdiction of the High Court and NCLT for winding-up proceedings.3. Applicability of non-obstante clause in Section 238 of the Insolvency and Bankruptcy Code, 2016:The court found that Section 238 of the Insolvency and Bankruptcy Code, 2016, which gives the Code an overriding effect, was not applicable in this case, as there was no inconsistency between the Code and the Companies Act, 1956/2013. The court emphasized that the legislative intent was clear that certain winding-up proceedings would continue to be heard by the High Court.4. Discretionary power of the court to adjourn proceedings:The respondent sought to adjourn the hearing of the petition until the outcome of the petition filed by ICICI Bank before the NCLT. The court rejected this request, noting that the petition by ICICI Bank was not even admitted, and the respondent was attempting to delay the proceedings. The court decided to proceed with the hearing on merits.5. Admission of winding-up petition and appointment of Official Liquidator:The court found that the respondent was heavily indebted, unable to pay its debts, and had no bona fide defense. The court admitted the winding-up petition and ordered the appointment of the Official Liquidator as a Provisional Liquidator to prevent the frittering away of the respondent's assets.6. Impact on workers and creditors:The court considered the opposition from the intervenor representing the workers but found inconsistencies in their affidavits. The court noted that the workers' dues were unpaid since July 2016. The court held that the opposition from the workers was not decisive at the admission stage of the winding-up petition. The court also noted that the respondent's liabilities far exceeded its assets, and the creditors, including unsecured creditors, were pressing for recovery.7. Status of other petitions and proceedings against the respondent:The court noted that several other petitions for winding up were pending against the respondent, and the secured creditors had already filed recovery proceedings. The court emphasized that the petitioner's claim should not be delayed based on speculative outcomes of other proceedings, such as the one filed by ICICI Bank before the NCLT.Conclusion:The court admitted the winding-up petition and ordered its advertisement. The court also appointed the Official Liquidator as a Provisional Liquidator, emphasizing the need to protect the interests of the creditors and prevent the dissipation of the respondent's assets. The court rejected the respondent's request to adjourn the proceedings and noted that the legislative framework allowed the High Court to continue hearing the petition. The court provided a stay on the advertisement and interim relief for two weeks to allow the respondent to appeal.