TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Company Law Tribunal: Insolvency Application Halts Section 241-242 Petition</h1> The National Company Law Tribunal, Ahmedabad Bench, ruled that a petition under Section 241-242 of the Companies Act, 2013 was not maintainable during the ... Maintainability of petition - Section 241-242 of the Companies Act, 2013 - whether upon admission of the insolvency application against the Company, the pending application under Section 241-242 r.w. Section 62, 75, 447, 448 and 449 of the Companies Act would be rendered infructuous or would be kept in abeyance till the conclusion of the CIRP? - HELD THAT:- It is a matter of record that one IB Petition filed under Section 7 of the IB Code is admitted on 16.03.2020 against M/s. Polygold Pre-cured Systems Pvt. Ltd. and accordingly the management is suspended and is vested upon IRP for all intent and purposes - Thus, when the Corporate Debtor is under CIRP, under such circumstances, the dispute with regard to the oppression and mismanagement cannot be dealt with as the management itself is suspended and now the Company is under the control of IRP/RP. Once it is admitted under IB Code initiating CIRP, which may end, either in approval of a resolution plan or an order for liquidation of the Corporate Debtor. Thus, under both situation, the management will never come again in the hands of the Suspended Management. Further, the decision to approve a resolution plan or to send the Company for liquidation rests with the commercial wisdom of the COC, which consists of the FCs as voting members. The commercial decision of the COC are not generally open to any analysis, evaluation or judicial review by the Adjudicating Authority. Even if the petition filed under Section 241-242 is kept in abeyance, then even it is not going to fulfil the objective of Section 241-242 of the Companies Act. Therefore, there is no reason for keeping the application filed under Section 241-242 be pending till the final outcome of the IB petition - Application dismissed. Issues:1. Maintainability of a petition under Section 241-242 of the Companies Act, 2013 during the pendency of an insolvency application under Section 7 of the IB Code.Analysis:The judgment by the National Company Law Tribunal, Ahmedabad Bench, dealt with the issue of whether a petition under Section 241-242 of the Companies Act, 2013 could be maintained while an insolvency application under Section 7 of the IB Code was pending. The petitioner had filed the instant application under Section 241-242 seeking relief against the company and other individuals. The respondent argued that the petition was not maintainable due to the admission of the insolvency application, which led to the appointment of a Resolution Professional (RP) and the suspension of the company's management. The respondent also referred to a settlement executed by the parties. The Tribunal considered the Supreme Court judgment in Innoventive Industries Ltd. vs. ICICI Bank, emphasizing the transfer of management powers to the IRP under the IB Code.The Tribunal noted that once an insolvency petition is admitted, the management is suspended and vested in the IRP, making it impractical to address issues of oppression and mismanagement. The decision on approving a resolution plan or liquidation rests with the Committee of Creditors (COC). The Tribunal highlighted that the commercial decisions of the COC are not subject to judicial review. Therefore, even if the petition under Section 241-242 was kept in abeyance, it would not serve the purpose of the Companies Act. Consequently, the Tribunal dismissed the application under Section 241-242 as it would not survive the insolvency proceedings.In a separate order, the Tribunal declared that since the main petition had been dismissed, the interim application filed in connection with it had become infructuous and was not maintainable. The judgment clarified the interplay between the Companies Act and the IB Code, emphasizing the suspension of management during insolvency proceedings and the primacy of the COC's decisions in such matters.
TaxTMI 
TaxTMI 
