Tribunal Allows Company's CIRP Application, Sets Aside Rejection Order

The Tribunal held that the Company's application for Corporate Insolvency Resolution Process (CIRP) was not barred under Section 11(d) of the I&B Code as it was filed under Section 4(b) of the SIC Repeal Act, 2003. The Adjudicating Authority's rejection of the application and order for prosecution under Section 77(a) of the I&B Code were set aside due to procedural irregularities and lack of jurisdiction. The Tribunal remitted the case for an appropriate order under Section 31 of the I&B Code, considering the approved Resolution Plan.

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Issues Involved:
1. Whether the application preferred by the Company in terms of Section 4(b) of the SIC Repeal Act, 2003 is barred under Section 11(d) of the I&B CodeRs.
2. Whether the impugned order directing the Registrar of Companies to lodge prosecution against the Company under Section 77(a) of the I&B Code is uncalled for and without jurisdictionRs.

Issue-wise Detailed Analysis:

1. Whether the application preferred by the Company in terms of Section 4(b) of the SIC Repeal Act, 2003 is barred under Section 11(d) of the I&B CodeRs.

The Company filed Form-6 for the initiation of 'Corporate Insolvency Resolution Process' (CIRP) against itself. The Adjudicating Authority treated this as an application under Section 10 of the I&B Code and admitted it. However, the Adjudicating Authority later observed that the Company had suppressed material facts, specifically that a liquidation order had already been passed by the Bombay High Court. Section 11(d) of the I&B Code prohibits a corporate debtor, in respect of whom a liquidation order has been made, from initiating a CIRP. The Adjudicating Authority concluded that the Company was ineligible to file the application under Section 10 due to the existing liquidation order and rejected the petition with costs, directing the Registrar of Companies to lodge prosecution under Section 77(a) of the I&B Code.

The Tribunal noted that the application was filed under Section 4(b) of the SIC Repeal Act, 2003, which allows a company whose appeal or reference stands abated to make a reference to the National Company Law Tribunal (NCLT) under the I&B Code. The Tribunal clarified that the application should not be treated as one under Section 10 of the I&B Code but as a reference under Section 4(b) of the SIC Repeal Act, 2003. The Tribunal emphasized that the prohibition under Section 11(d) does not apply to references made under Section 4(b) of the SIC Repeal Act, 2003. Thus, the Company had the right to file the reference, and the Adjudicating Authority's order was incorrect in treating it as a Section 10 application and rejecting it based on Section 11(d).

2. Whether the impugned order directing the Registrar of Companies to lodge prosecution against the Company under Section 77(a) of the I&B Code is uncalled for and without jurisdictionRs.

The Adjudicating Authority directed the Registrar of Companies to lodge prosecution against the Company under Section 77(a) of the I&B Code for suppressing material facts. The Tribunal held that before referring any matter for prosecution, the Adjudicating Authority must record its prima facie opinion and provide an opportunity of hearing to the concerned party. In this case, the Adjudicating Authority did not issue any notice or provide an opportunity of hearing to the appellant before passing the impugned order, which violated the principles of natural justice.

Additionally, the Tribunal observed that the application for CIRP was initiated more than a year back by a different Bench of the Adjudicating Authority. At the stage of approval of the Resolution Plan, it was not open to another Bench of the Adjudicating Authority to declare the initiation of CIRP as illegal. The subsequent Bench had no jurisdiction to sit in appeal over the order passed by the earlier Bench.

Conclusion:

The Tribunal set aside the impugned order dated 29th January 2019 and remitted the case to the Adjudicating Authority to pass an appropriate order under Section 31 of the I&B Code, taking into consideration the fact that the Resolution Plan had already been approved by the Committee of Creditors with a voting share of 83.02%. The Adjudicating Authority was directed to pass the order immediately, after hearing the parties, preferably within three weeks. The appeal was allowed with no costs.

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