TaxTMI 
TaxTMI 
2018 (6) TMI 1167
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...., at the same time the claim of workmen was also being examined for which the valuation report has been directed to be conducted by the Official Liquidator; there was no occasion for intervention by NCLT in the matter. It appears that no notice was issued to the State Government nor workmen were given any opportunity before admitting the same under the Code of 2016. Learned Advocate General as well as Additional Advocate General state that they would like to file reply to the affidavit filed by the Interim Resolution Professional and pray for interim protection. Taking into consideration the aforesaid aspect, implementation and effect of order passed by NCLT shall remain stayed and till question is decided whether Code of 2016 will over ride the present proceedings, till that date, the State Government shall not hand over the possession of building and material of of JMEL to the Interim Resolution Professional appointed by NCLT. List on 3rd May, 2018." 2. The question before this Court essentially is whether the present proceedings can continue or whether the NCLT order appointing the IRP could be allowed to act in terms of IBC, 2016 while the present proceedings in re....
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....nducted by the State Government. It was directed to submit the details about various proceedings which have been undertaken in relation to the Company. On 02/11/2017, following orders were passed by this Court:- "The case was directed to be listed today. At the request of the State Government, the case had been put up for re-hearing. A concrete proposal is required to be put by the State Government with regard to revival. The said proposal alongwith scheme and the decision of the State Government may be placed before this Court within two weeks hereinafter with advance copy to the concerned parties to this petition, the concerned parties may also submit their response to the said proposal. It is made clear that attempt should be made to revive the company and start its operations and it would be always in the interest of all that the company starts production again. However, it would be subject to concerned parties proposal and the manner in which they may accept the proposal of the State Government. Let the pleadings in this regard be completed within four weeks. Let the matter come up again on 07.12.2017. All the matters relates to Jaipur Metals & Electricals be liste....
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....n the present writ petition are praying for payment of salary and their dues. It is stated that the goods and material of value of more than Rs. 35,000,0000/- is lying in the factory premises of J.M.E.L. The possession of the premises are with the State Government. The salary of the workmen which is lying due since long can be meted out to certain extend by selling of the material in the factory premises. Taking into consideration, the submissions of the counsel for the petitioner-workmen, it is directed that the State Government shall submit an evaluation report relating to the entire material which is lying in the factory premises and also for the said purpose. I direct the Official Liquidator to act provisionally attached to this Court and conduct along with the Officers of the State Government the said evaluation thorough evaluation experts and submit the report to this Court on 4.1.2018. So that further decision referring to release of salary dues for the workers may be taken by this Court, accordingly. List again on 4.1.2018." 9. All the parties, who had stake in the matter, had put up their proposal and the OL also submitted his report relating to valuation. 10. Whil....
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....ider claims of all employees in terms of Regulation 9 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. 12. Learned counsel also submits that effect of the moratorium will apply. However, he submits that it is only applicable for the limited time during which the proceedings can be continued i.e. six months with an extension period of another 90 days and thereafter, the case in the High Court can continue. It is further stated that as the NCLT has already passed an order, the same can only be a subject matter of challenge before the NCLAT by any party which is aggrieved of the same and relies on the law laid down by the Apex Court in the case of Authorized Officer, State Bank of Travancore Vs. Mathew KC: 2018(3) SCC 85 as well as other judgments to the same effect. The submission is that the Alchemist Asset Reconstruction Company Ltd. is required to be declared as a financial creditor and as the State Government has affirmed that it does not have any revival plan of its own, the State Government would have no locus in the matter to oppose the proceedings undertaken by the applicant before the IBC. 13. Per-contra, Mr. Rajendra Prasad,....
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....dvocate General that from above, it is apparent that all the proceedings which are reserved for orders shall not be transferred. Further, it is submitted that Rule 5 of the Rules of 2016, which deals with transfer of pending proceedings of winding up, would only relate to such winding up proceedings initiated within the meaning of Section 433(e) i.e. inability to pay debts which is not the question in the instant case. 17. The third submission of learned Addl. Advocate General is with regard to Rule 6 which provides the continuity of proceedings of winding up before this Court in relation to the petitions pending under Clause (a) and Clause (f) of Section 433 of the Act of 1956. The said provisions do not relate to inability of the Company to pay its debts and as the present case also does not fall within Section 433(e), it is submitted that the present proceedings cannot be stalled or transferred on account of the wrongful action with the applicant ALCHEMIST in moving proceedings before the NCLT under IBC 2016. 18. Learned Addl. Advocate General further submitted that the reference by BIFR under Section 20(1) proceeds on the ground that "it is just and equitable that the Company....
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....ll not be filed for reasons of inability to pay debt. 22. Learned Addl. Advocate General further submits that as per Section 434(1)(c) of the Companies Act, 2013, all the proceedings before the notified date were to be transferred to the NCLT which would have proceeded to deal with from the stage before their transfer. However, the IBC 2016 itself vide Section 255 provided, "The Companies Act 2013 shall be amended in the manner specified in the Eleventh Schedule." The Eleventh Schedule to IBC 2016 vide Section 34 has substituted Section 434 of the Companies Act, 2013 and the provision of Section 434(1)(c) provides for transfer of winding up petitions. But the proviso to this Section reads that "provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government." 23. Thus, it is submitted that the substituted provision of Section 434 of the Companies Act, 2013 is very much part and parcel of the IBC 2016 itself and therefore, the question of IBC 2016 overriding its own provisions does not arise and therefore Section 238 of IBC has no bearing in the matter. 24. Le....
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....he order is questioned on the ground of want of jurisdiction, the law of restraint for alternative remedy would not apply. It is further submitted that it is settled position of law that if a Court or Tribunal inherently lacks jurisdiction, its orders/decrees would be nullity and therefore they can be questioned at any stage and even in collateral proceedings. It has, therefore, been prayed that the order of NCLT be declared as void ab-initio and nullity in law and the NCLT be restrained from proceedings further on the application under Section 7. 29. Before examining the issues involved in the present case, it would be appropriate to quote Provisions which are relevant for the purpose. 30. Rules 1, 5 and 6 of the Companies (Transfer of Pending Proceedings) Rules, 2016 as under:- 1. Short title and Commencement. - (1) These rules may be called the Companies (Transfer of Pending Proceedings) Rules, 2016. (2) They shall come into force with effect from the 15th December, 2016 except rule4, which shall come into force from 1st April, 2017. 5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.-(1) All petitions relating to winding up under cl....
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.... the corporate debtor. (2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed. (3) The financial creditor shall, along with the application furnish- (a) record of the default recorded with the information utility or such other record or evidence of default as may be specified; (b) the name of the resolution professional proposed to act as an interim resolution professional; and (c) any other information as may be specified by the Board. (4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub- section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3). (5) Where the Adjudicating Authority is satisfied that- (a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or (b) default has not occurred or the application under sub-section (2) is incom....
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.... shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. (4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process: Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be. 30. Submission of resolution plan :- (1) A resolution applicant may submit a resolution plan to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the repayment of other debts of the corporate debtor; (b) provides for the repayment of the debts of operational credito....
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....mpensations. 34. Taking into consideration all the aspects, this Court appointed the OL attached to this Court as a Provisional Liquidator to conduct valuation of the goods lying in the factory premises. The valuation was conducted and the valuation report has also been placed for perusal. 35. It is noted that the applicant ALCHEMIST invoked provisions of IBC and also put up their proposal for revival. This Court is inclined to accept the submissions as noted by the learned Additional Advocate General and finds that in terms of Rules of 2016, the pending proceedings before this Court for winding up are not in relation to Section 433(e) of the Act of 1956 but is a petition under Clause (a) and (f) of Section 433 of the Act of 1956. Thus, Rule 5 of the Rules of 2016 would not apply. 36. As notices have already been served under Rule 26 of the Companies (Court) Rules, 1959 and all the parties are present before the Court and even a Provisional Liquidator was appointed, the present proceedings before this Court would not be transferable under Rule 6 of the Rules of 2016. In terms of Rule 5 proviso 3, since the winding up petition is pending before this High Court, no fresh applicati....
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....d by this Court in relation to the Company. Moreover, the entire provisions of IBC 2016 are to be applied for cases where the proceedings have not been undertaken under the Act of 1956 as is apparent from the tenor of the Rules of 2016, as quoted above. The only cases which have been transferred are those where notices have not been served. Thus, the legislature clearly intended to transfer the proceedings where no action has been taken by the concerned Court whereas in the present case, the proceedings have been going on since 2002 and the present case is not of such a nature where it can be said that notices have not been issued or the steps under the Act of 1956 have not been undertaken with regard to winding up. Thus, there was no occasion for the applicant ALCHEMIST to have approached the NCLT for invoking the provision of the Rules of 2016. 39. In the case of West Hills Realty Private Ltd. Vs. Neelkamal Realtors Tower Pvt. Ltd. (Company Petition No.331 of 2016), decided on 23/12/2016, reported in (2017) 3 CompLJ 225 (Bom) by the High Court of Bombay, a similar controversy had arisen and after appreciating the various provisios and Rule 26 of the Companies (Court) Rules, 1959....
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....jurisdiction to hear and decide. That is the effect of Section 41(b) of the Specific Relief Act, 1963, particularly when the IBC itself permits such continuation under the notifications issued under Sections 239 and 255 of the IBC. 24. The principle of Comity of Courts cannot be invoked to restrain the High Court from proceeding with a winding up petition which Parliament intended the High Court alone to decide as per the notifications issued under Sections 239 and 255 of the IBC. Since this winding up petition did not get transferred to the NCLT by virtue of the notifications dated 7.12.2016 and 29.6.2017 issued under the very IBC, the NCLT cannot have any jurisdiction in regard to the petitioner or to the winding up petition and it's order cannot be interpreted to restrain this Court." 41. In caveat to above is a judgment passed subsequently by coordinate Bench of the High Court of Bombay in the case of Jotun India Pvt. Ltd. Vs. PSL:2018(2)ABR 350 wherein the Single Judge, while noting the earlier judgments of the same Court, has taken a different view without distinguishing the earlier judgment. In the opinion of this Court, the provisions of Section 252 have not been cor....