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Issues: (i) Whether an application filed by a company under section 4(b) of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003, after abatement of proceedings before BIFR/AAIFR, is barred by section 11(d) of the Insolvency and Bankruptcy Code, 2016. (ii) Whether the direction to initiate prosecution under section 77(a) of the Insolvency and Bankruptcy Code, 2016 was without jurisdiction and contrary to natural justice.
Issue (i): Whether an application filed by a company under section 4(b) of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003, after abatement of proceedings before BIFR/AAIFR, is barred by section 11(d) of the Insolvency and Bankruptcy Code, 2016.
Analysis: The substituted provision in section 4(b) of the Repeal Act, read with section 252 of the Insolvency and Bankruptcy Code, 2016, preserved the right of a company whose proceedings had abated to make a reference to the Adjudicating Authority for initiation of corporate insolvency resolution process. The filing in Form-6, in the absence of a separate prescribed form for such reference, did not convert the proceeding into an application under section 10 of the Insolvency and Bankruptcy Code, 2016. Since section 11(d) applies to applications under the insolvency code in the stated circumstances, it did not bar a reference made under the amended section 4(b).
Conclusion: The reference under section 4(b) was not barred by section 11(d), and the finding against the company was unsustainable.
Issue (ii): Whether the direction to initiate prosecution under section 77(a) of the Insolvency and Bankruptcy Code, 2016 was without jurisdiction and contrary to natural justice.
Analysis: Before referring a matter for prosecution, the Adjudicating Authority was required to form a prima facie opinion and afford hearing to the person concerned. No notice or opportunity of hearing was given, and the appellant was not impleaded before the direction was issued. The subsequent bench also could not sit in appeal over the earlier order admitting the insolvency process.
Conclusion: The direction to initiate prosecution under section 77(a) was without jurisdiction and offended natural justice.
Final Conclusion: The impugned order was set aside, the appeal was allowed, and the matter was remitted for passing an appropriate order on approval of the resolution plan.
Ratio Decidendi: A company whose BIFR/AAIFR proceedings have abated under the amended section 4(b) of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 may seek insolvency resolution notwithstanding section 11(d), and prosecution cannot be directed without a prima facie finding and hearing to the affected person.
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