2017 (12) TMI 560 - AT - Insolvency and Bankruptcy

Company Law Tribunal clarifies jurisdiction on Companies Act petition, sets aside previous order

The Tribunal held that the petition under Sections 433, 439, and 450 of the Companies Act, 1956 was not maintainable before the Company Law Board and ... Transfer of cases pending before the Company Law Board to the Tribunal - Transfer of certain pending proceedings - Held that:- Admittedly, no petition under Sections 433, 439 and 450 of the Companies Act, 1956 was maintainable before the erstwhile Company Law Board and it was maintainable before the Hon’ble High Court. For the said reason, the case pending before the Hon’ble High Court under Section 433 were transferred to the Adjudicating Authority (Tribunal). On the other hand, the cases under other provisions of the Companies Act, 1956 such as Sections 397 and 398 were transferred from the Company Law Board to the Tribunal, not to the Adjudicating Authority. In view of discussion aforesaid, we hold that the petition under Sections 433, 439 and 450 of the Companies Act, 1956 was not maintainable before the Company Law Board. Therefore, the question of treating the case under the I&B Code does not arise. Further, as the Rule 5 relates to transfer of cases from the Hon’ble High Court, we hold that the Rule 5 cannot be made applicable to the cases transferred from Company Law Board. Issues Involved:Transfer of case from Company Law Board to National Company Law Tribunal for adjudication; Maintainability of petition under Sections 433, 439, and 450 of the Companies Act, 1956 before the Tribunal; Jurisdiction to initiate insolvency resolution process against the appellant; Interpretation of rules framed by the Central Government under Section 434 of the Companies Act, 2013 and Section 239 of the Insolvency and Bankruptcy Code (I&B Code); Applicability of Rule 5 of 'The Companies (Transfer of Pending Proceedings) Rules, 2016' to cases transferred from the Company Law Board.Detailed Analysis:1. The respondent filed a petition under various sections of the Companies Act, 1956 before the erstwhile Company Law Board, which was later transferred to the National Company Law Tribunal for adjudication. The respondent sought winding up of a company and other reliefs. The appellant raised objections to the maintainability of the petition under certain sections of the Companies Act, 1956, arguing that the Tribunal had no jurisdiction to entertain such a petition.2. The Tribunal, in its impugned order, rejected the appellant's objection and held that it had the competence to try the company petition treating it under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code). The appellant challenged this order in the appeal.3. The appellant contended that the petition under Sections 433, 439, and 450 of the Companies Act, 1956 was not maintainable before the Tribunal, thus questioning the initiation of winding up proceedings under the I&B Code.4. On the other hand, the respondent argued that after the transfer of the case, the Tribunal had the jurisdiction to initiate insolvency resolution process against the appellant.5. The interpretation of the rules framed by the Central Government under Section 434 of the Companies Act, 2013 and Section 239 of the I&B Code was crucial to determine the transfer of cases from the Company Law Board to the Tribunal and the applicability of the I&B Code to the present case.6. The Central Government transferred cases from the Company Law Board to the Tribunal and framed the Transfer Rules under Section 434 of the Companies Act, 2013. Rule 5 of the Transfer Rules specifically addressed the transfer of pending proceedings of winding up on the ground of inability to pay debts from the High Court to the Tribunal.7. The Tribunal concluded that the petition under Sections 433, 439, and 450 of the Companies Act, 1956 was not maintainable before the Company Law Board, and thus, the question of treating the case under the I&B Code did not arise. The Tribunal held that Rule 5, which related to cases transferred from the High Court, was not applicable to cases transferred from the Company Law Board.8. Consequently, the Tribunal set aside the impugned order and directed the Tribunal to consider the Company Petition under different sections of the Companies Act, 1956. The appeal was allowed with no order as to costs.