TaxTMI 
TaxTMI 
2018 (3) TMI 1320
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....ew regime in a manner as to achieve its primary object. The Insolvency & Bankruptcy Code has been in force w.e.f. 1.12.2016 and it has its share of challenges which are reflected in the reference order made by the Bench comprising of Hon'ble Mr. R. Varadharajan, Member (Judicial) and Hon'ble Ms. Deepa Krishan, Member (Technical). To understand the challenges it would therefore, be necessary to set out the reference order dated 21.08.2017 in extenso which reads thus: "No. IB-190(PB)/2017 Under section 7 Insolvency and Bankruptcy Code, 2016 IN THE MATTER OF: UNION BANK OF INDIA BRANCH OFFICE AT M-11, FIRST FLOOR, CONNAUGHT CIRCUS, NEW DELHI-110001. .... Petitioner V/s Era Infra Engineering Limited 1107, INDRAPRAKASH BUILDING, 21, BARAKHAMBA ROAD, NEW DELHI -110001 .... Respondent No.IB-110(PB)/2017 Under section 7 Insolvency and Bankruptcy Code, 2016 IN THE MATTER OF: ALCHEMIST ASSET RECONSTRUCTION COMPANY LTD. D-54, First Floor, Defence Colony, New Delhi - 110024. .... Financial Creditor/Petitioners ....
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....e of the petition by the Financial Creditor on the Corporate Debtor, appearance on behalf of the Corporate Debtor/Respondent was put in and as per the representation made by the Counsel for the respondent before the Hon'ble Principal Bench, NCLT which is evident vide order dated 11.07.2017 that several company petitions seeking for winding up of the Corporate Debtor is pending before the Hon'ble High Court of Delhi and in the circumstances vide the said order of the Hon'ble Principal Bench the following question has been framed, namely: "Whether the process under the Insolvency and Bankruptcy Code, 2016 can be triggered in the face of the pendency of the winding up petitions or it is to be considered as an independent process?" (c) For arguments of the aforesaid issue the Company Petition was listed on 25.07.2017. Since the Hon'ble Principal Bench did not sit on the said date and as a Special Bench was constituted to hear the matters listed before the Hon'ble Principal Bench in lieu of it, this Special Bench taking into consideration the exigencies of the situation chose to hear the submissions of the respective parties in this as well as in C.P.No.110 (P....
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.... Hon'ble NCLT Bench, Chennai. (h) On the other hand the Hon'ble Principal Bench, NCLT, New Delhi in several of its orders including the one passed in M/s. Nauvata Engineering Pvt. Ltd. v. Punj Llyods Ltd. in C.P. No. (IB)-217(PB)/2017 on 19.07.2017 has held as follows:- Learned Counsel for the respondent has brought to the notice of the Bench that winding up petition against the respondent company namely Punj Lloyds Ltd. is already pending before the Hon'ble Delhi High Court and taking notice of the aforesaid fact C.P. No. 1156 of 2016 was transferred back to the Hon'ble Delhi High Court. In various orders passed by this Tribunal, we have expressed the opinion that in cases where winding up proceedings are pending against a Company, then it would not be conducive for the Tribunal to trigger insolvency process against that very company as there is likelihood of conflict between the two statutory entities, namely Official Liquidator and the Insolvency Resolution Professional. Therefore, the proceedings which are continuing in the Hon'ble Delhi High Court may constitute a better basis for adjudication being earlier in point of time and the claim having been ....
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....it did not consider the same in view of holding that the petitioner will fall under the category of 'Financial Creditor' as compared what was otherwise held by Hon'ble NCLT and had thus remitted back the matter to NCLT, New Delhi for admission, if the papers are otherwise in order. (l) In addition, this Special Bench of NCLT in the case of M/s. Nowfloats Technologies Pvt. Ltd. v. M/s. Getit Infoservices Pvt. Ltd. in C.A. No. (IB) 45(PB)/2017 vide order dated 11.04.2017 had specifically held, where the Official Liquidator has been appointed as the Provisional Liquidator, then the recourse of the parties is to approach the Court which has thought it fit to appoint the Liquidator and not this Tribunal and that the proceedings cannot be sustained before this Tribunal without obtaining the leave of the Hon'ble High Court under Section 450 of the Companies Act, 1956 for continuation of the proceedings under the Code. (m) Strictly speaking the above cases referred to are not transferred cases as contemplated under Section 434 of the Companies Act, 2013 and the notifications issued thereunder from time to time to facilitate and to remove difficulties in relation to matter....
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....itions, in view of the admitted position that the notice under Rule 26 of the Companies (Court) Rules, 1959 has been served on the respondent prior to 15th December 2016. In my view, since there is no inconsistency in the provisions of the Insolvency and Bankruptcy Code, 2016 and the Companies Act, 2013 or Companies Act, 1956 in respect of the jurisdiction of the Company Court or of the NCLT in so far as winding up proceedings are concerned, reliance placed by Mr. Andhyarujina, the learned Counsel appearing for the respondent on Section 238 of the Insolvency and Bankruptcy Code, 2016 is totally misplaced. The effect of non obstante provisions if any in Section 238 of the Insolvency and Bankruptcy Code, 2016 would have been significant only if there would have been conflict in aforesaid provisions and not otherwise. In my view, Mr. Sen, the learned Counsel appearing for the petitioner is right in his submission that Section 238 of the Code has no application in this situation on the ground that there is no conflict between the provisions of the Code and the provisions of the Companies Act, l956 or the Companies Act, 2013. (o) The above extracts is from the decision....
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....ces Pvt. Ltd. and Union Bank of India, Branch Office v. Era Infra Engineering Limited. The other petitions have also been tagged with the aforesaid two petitions. 3. In order to put the issues in their proper perspective and before embarking upon to consider those issues, it is imperative to notice the seminal facts which generally confront the NCLT resulting in the emergence of these legal issues. In umpteen cases proceedings for winding up on account of 'inability to pay debt' under Section 439 read with Section 433 (e) and Section 434 of the erstwhile Companies Act, 1956 have been initiated and have been in progress in various High Courts when the IBC was enforced w.e.f. 1.12.2016. Section 434 of the Companies Act 2013 provides for transfer of proceedings to NCLT inter alia, pending immediately before such date before the High Courts or District Court under Companies Act, 1956. Sub-section (c) of Section 434 of the 2013 Act reads as under: "434. Transfer of Certain Pending Proceedings. (1)On such date as may be notified by the Central Government in this behalf,- (a) ............. (b)............. (c) all proceedings under the Compa....
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....ctive Act or rules or the Code, as the case may be. 3. Transfer of pending proceedings relating to cases other than Winding up.-All proceedings under the Act, including proceedings relating to arbitration, compromise, arrangements and reconstruction, other than proceedings relating to winding up on the date of coming into force of these rules shall stand transferred to the Benches of the Tribunal exercising respective territorial jurisdiction: Provided that all those proceedings which are reserved for orders for allowing or otherwise of such proceedings shall not be transferred. 4. Pending proceeding relating to Voluntary Winding up: All applications and petitions relating to voluntary winding up of companies pending before a High Court on the date of commencement of this rule, shall continue with and dealt with by the High Court in accordance with provisions of the Act. 5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.(1) All petitions relating to winding up under clause (e) of section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not bee....
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....g up under Section 433(e) of the Companies Act, 1956 pending before the High Court were to be transferred to respective benches of NCLT as per territorial jurisdiction if the petition has not been served on the respondent as per requirement of Rule 26 of the Companies Court Rules 1959. On transfer such petitions were to be treated as applications under Section 7, 8 or 9 of the IBC and the petitioners were to furnish all information including the details of the proposed insolvency professional. All such petitioners were granted sixty days time from the date of notification failing which their petitions were to abate. Amendment extending the period 6. The Central Government through MCA issued another notification dated February 28, 2017 extending the period of sixty days to six months. That notification is also extracted in-extenso which reads as under: MINISTRY OF CORPORATE AFFAIRS NOTIFICATION New Delhi, the 28th February, 2017 G.S.R. 175(E).- In exercise of the powers conferred under sub-sections (1) and (2) of section 434 of the Companies Act, 2013 (18 of 2013) read with sub-section (1) of section 239 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016....
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....ability to pay debts.- (1) All petitions relating to winding up of a company under clause (e) of section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and, where the petition has not been served on the respondent under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub-section (4) of section 419 of the Companies Act, 2013 exercising territorial jurisdiction to be dealt with in accordance with Part II of the Code: Provided that the petitioner shall submit all information, other than information forming pan of the records transferred in accordance with rule 7, required for admission of the petition under sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal upto 15th day of July, 2017, failing which the petition shall stand abated: Provided further that any party or parties to the petitions shall, after the 15th day of July, 2017, be eligible to file fresh applications under sections 7 or 8 or 9 of the Code, as the case may be, in accordance with the provisions of the Code: Provid....
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....supra). The Union Bank of India claiming itself as Financial Creditor made a prayer for triggering the corporate insolvency resolution process in the matter of Era Infra Engineering Limited being the Corporate Debtor. The Corporate Debtor is an EPC contractor and is engaged in execution of a large construction projects like construction of highways, airports and industrial projects. It has been availing credit facility since 1990 from the Financial Creditor. The latest credit which is the bone of contention was taken in the year 2012 wherein a Working Capital Term Loan of Rs. 100 crores on standalone basis was sanctioned vide sanction letter No. IFB:CR:602.12. The loan was disbursed to the Corporate Debtor on 31.12.2012 and it was repayable with interest in 14 instalments as was agreed between the parties. A perusal of the application filed by the Financial Creditor on the prescribed proforma i.e. Form-I, disclosed in part IV of the application that the total loan amount sanctioned to the Corporate Debtor on different dates was to the extent of Rs. 1506.33 crores. The default amount stated by the Financial Creditor is Rs. 681.04 crores and in addition External Commercial Borrowing ....
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....ame. When we commenced search for the answer to the core question we came across two detailed judgments rendered by learned National Company Law Appellate Tribunal (for brevity 'NCLAT'). 16. The first judgment has been rendered by 'NCLAT' in the case of Forech India (P.) Ltd. v. Edelweiss Assets Reconstruction Co. Ltd., (Company Appeal (AT) (Insolvency) No. 202 of 2017 decided on 23.11.2017). Upholding the view of the Principal Bench admitting the petition of the 'Financial Creditor' filed under section 7 of the Code the Appellate Tribunal has rejected the argument that since a company petition for winding up was pending in the matter of 'Corporate Debtor' no petition under section 7 of the Code would be maintainable before the Adjudicating Authority -NCLT. The reasoning adopted by the Appellate Tribunal has its genesis in section 11 of the Code. It would be thus pertinent to read first section 11 which is set out below in ex tenso: "11. The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process under this Chapter, namely:- (a) a corporate debtor undergoing a corporate insolvency resolution process; or....
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....ated to be "liquidation" under the I & B Code. 7. There is no provision under the I & B Code which stipulate that if a 'winding up' or 'liquidation' proceeding has been initiated against the Corporate Debtor, the petition under Section 7 or Section 9 against the said Corporate Debtor is not maintainable. 8. However, if a 'Corporate Insolvency Resolution' has started or on failure, if liquidation proceeding has been initiated against the Corporate Debtor, the question of entertaining another application under Section 7 or Section 9 against the same very 'Corporate Debtor' does not arise, as it is open to the 'Financial Creditor' and the 'Operational Creditor' to make claim before the Insolvency Resolution Professional/Official Liquidator." 19. However the NCLAT left the question open to be decided in an appropriate case as to whether Corporate Insolvency Resolution Process under sections 7, 9 & 10 of the Code could be triggered after the winding proceedings have been initiated by appointing a liquidator. The reason is that no question of such a nature was involved in the appeal which came up before the NCLAT. 20. The other judgement rendered by NCLAT is in th....