TaxTMI 
TaxTMI 
2018 (12) TMI 654
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....ection 4(b) of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 read with section 252 of the Insolvency and Bankruptcy Code, 2016 as unconstitutional in so far it abates the proceedings before BIFR & AAIFR and does not provide for efficacious remedy for implementing the directions passed by the Hon'ble Supreme Court on 13-11-2014 and 18-11-2016 before the Adjudicating Authority under the provisions of IB Code, 2016; (b) pass an appropriate order, writ, direction upon Union of India to remove difficulty and provide remedy for implementing/execution of the directions passed by the Hon'ble Supreme Court on 13-11-2014 and 18.11.2016 read with the order dated 6-12-2017 passed by this Hon'ble Court; Alternatively, (i) pass an appropriate order, writ, direction declaring the illegal sell of assets/undervalued transaction at Saifganj, Katihar, Bihar on 2-7-2014 as void ab initio & restore the position as it existed before the said transaction; (ii) pass an appropriate order, writ, direction declaring the undervalued lease transaction dated 4-5-2017 in favour of M/s Skyscappers Niwas Pvt. Ltd. as void ab initio & restore the position as it existed before the....
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....FR had ceased to have jurisdiction as the net worth of the third respondent had turned positive and it was not a sick company under SIC Act. The third respondent in the written statement did not object to the jurisdiction of the civil court and had admitted that their net worth had become positive. The civil court passed an order restraining further proceedings before the BIFR. Thereupon, appearance was made by third parties opposing the proceedings before the civil court. The matter reached the Supreme Court. On 8th May, 2014, a restraint order was passed by the Supreme Court directing that capital assets of the third respondent would not be disposed of without taking permission of the Court. The Supreme Court vide judgment dated 13th November, 2014 reported as (2015) 1 SCC 298 after referring to the provisions of SIC Act held that the civil court lacked subject-matter jurisdiction and that the BIFR alone was competent to satisfy itself and determine whether the net worth of the third respondent had turned positive. If the BIFR was so satisfied, it would de-register the third respondent and thereupon the respondent would be out of supervisory jurisdiction of the BIFR under the Ac....
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.... of 2014, since this Court had not issued any notice to the alleged contemnors, we have not dealt with said petitions. By a separate order we issue appropriate notice to the alleged contemnors." 5. The fourth respondent was not impleaded as a party to the appellate proceedings disposed of by the Supreme Court vide aforesaid judgment dated 13th November, 2014. However, the said respondent was impleaded as a party to the contempt proceedings, which were disposed of and decided vide decision dated 18th November, 2016 Ghanshyam Sarda v. Sashikant Jha [2017] 1 SCC 599. By this judgment the third respondent and its Directors/servants were held to be guilty of transgression and violation of the interim order dated 8th May, 2014, albeit the fourth respondent and its Directors/servants had not violated the order. In totality of circumstances, the Supreme Court did not think it appropriate to exercise their power and invalidate the sale deed registered on 2nd July, 2014. Fine of Rs. 2,000/- each was imposed on the third respondent and its Directors/servants for having violated the order dated 8th May, 2014. For the purpose of clarity, we would like to reproduce some paragraphs of the said j....
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....iently brought on record, would also require assessment of facts. Thus, though there is room to suspect the involvement of the said Contemnors 2 and 3, the material on record is not conclusive enough to hold them guilty of violation of the order of 8-5-2014 [Ghanshyam Sarda v. Shiv Shankar Trading Co., (2015) 1 SCC 298, 316 (footnote 14)]. We, therefore, close these proceedings as against them. 25. XXXX 26. In the present case the Company and its Directors/servants were certainly guilty of transgressing or violating the order of 8-5-2014 [Ghanshyam Sarda v. Shiv Shankar Trading Co. (2015) 1 SCC 298, 316 (footnote 14)] but as found hereinabove, the transferee and its Directors/servants have not violated the order of 8-5-2014 [Ghanshyam Sarda v. Shiv Shankar Trading Co., (2015) 1 SCC 298, 316 (footnote 14)] . The transferee and its Directors/servants were neither parties to the proceedings nor were they served with the order of 8-5-2014 [Ghanshyam Sarda v. Shiv Shankar Trading Co., (2015) 1 SCC 298, 316 (footnote 14)] . In para 38 of the judgment of this Court dated 13-11-2014 [....
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....n, a Trade Union, eighth respondent in the present writ petition, was a party to the proceedings before the Supreme Court. Similarly, Ghanshyam Sarda, who is respondent No. 7 in the present writ petition, was the appellant before the Supreme Court. 8. M/s. J.K. Jute Mills Mazdoor Ekta Union (hereinafter also referred to as 'the Union') had filed W.P. (C) No. 440/2017 before this Court for various reliefs, including a writ for declaring Section 4(b) of the Repeal Act, 2003 read with Section 252 of the IBC as unconstitutional insofar as the provisions abate the pending proceedings under the SIC Act before the BIFR and the appellate authority. They had also sought directions to remove difficulty and provide remedy to implement the orders of the Supreme Court dated 13th November, 2014 and 18th November, 2016. The eighth respondent had stated that the jute mill was lying closed and the workers were out of job since March, 2014. They had not been paid wages and workers' dues were to the extent of Rs. 127.90 crores. Claims made by Uttar Pradesh Commercial Tax Department, Employees' State Insurance Corporation, Employees' Provident Fund Organization, etc. were referred. On 26th May, 2017,....
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....f Uttar Pradesh and the same was declared illegal under the provision of Section 3 (a) of the U.P. Industrial Dispute Act 1947, which was challenged by the J. K. Jute Mills Company Limited in MISC. SINGLE No. 7208/2014 before the Hon'ble Allahabad High Court, Lucknow Bench. Thus the said legal issue is already pending before the Hon'ble Allahabad High Court in MISC. SINGLE No. 7208/2014, wherein the Hon'ble Allahabad High Court was pleased to issue interim order dated 19.11.2014. A copy of the MISC SINGLE No. 7208/2014 pending before the Hon'ble Allahabad High Court is appended herewith and marked as Annexure A-2 and a copy of the order dated 19.11.2014 passed by the Hon'ble Allahabad High Court in MISC. SINGLE No. 7208/2014 is appended herewith and marked as Annexure A-3. **** **** **** **** 11. Further, Sick Industrial (Special Provisions) Companies (SICA) Repeal Act 2003 came into effect on 01.12.2016 and on the date of repeal of SICA, the respondent No.3 company owned the factory land, plant and machinery at 84/49, Zarib Chowki, Kalpi Road, Kanpur which was lying closed since 2014. The company also owns the property in K....
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....any documents has been raised therefore the present petition is a mala fide attempt to harass the Respondent No.3 Company." (underlining supplied) 6. Reading of above paragraphs of the affidavit shows that respondent No.3 has been very vague in its disclosure. Respondent No.3 has stated that it owns property in Kolkata, which has been given on long term lease. The details and description of the said property has not been provided. 7. The Plant along with land and machinery and the Bungalow has been leased with effect from 04.05.2017 by way of registered lease deed dated 05.05.2017 & 08.05.2017. Neither a copy of the registered lease deed has been placed on record nor it has been disclosed what has been consideration received by way of security deposit or rental. The affidavit further states that respondent No.3 has five subsidiaries to whom certain assets of respondent No.3 have been transferred. No details of the assets, so transferred to the subsidiary Companies, have been specified in the affidavit. Even the details of the assets of the subsidiary Companies are not disclosed in the affidavit. 8. At this stage, learned counsel for the respondent No.3 submits that the detail....
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.... "J.K. Jute Mills Mazdoor Ekta Union has invoked writ jurisdiction of this Court under Article 226 of the Constitution of India, challenging Section 4(b) of the Sick Industrial Companies (Special Provision) Repeal Act, 2003 alleging inter alia that the provisions of the Insolvency & Bankruptcy Code, 2016 ('Code' for short) do not provide for an efficacious remedy for implementing the directions of the Supreme Court in order dated 13th November, 2014 reported as Ghanshyam Sarda v. Shiv Shankar Trading Company (2015) 1 SCC (298) and order dated 18th November, 2016 passed in Contempt Petition (Civil) No.338/2014. Another prayer made in the writ petition is for passing appropriate orders or directing the Union of India to remove difficulties and provide for a remedy for implementation of the said orders. Yet another prayer made, is for appointment of a court Receiver. 2. During the course of the hearing, learned Senior counsels for the petitioner and the respondents took us through the provisions of the Code. We need not go into the various factual and legal aspects raised, for the counsels are ad idem and have reached a consensus on the ambit and scope of power of the National Compa....
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.... ambit and power of the NCLT under the Code, learned Senior counsel for the petitioner submits that the workmen would invoke the jurisdiction of the NCLT under Sections 6, 8 and 9 of the Code and would move applications under Sections 47 and 49 of the Code for appropriate relief and directions before the NCLT. It is obvious that the application so filed would be dealt with in accordance with the provisions of the Code. 8. It will be open to the workmen to allege and assert that there has been a violation of the orders passed by the Supreme Court and by this Court, as well as violation of the restraint orders passed by the Board for Industrial and Financial Reconstruction ('BIFR') under Section 22A of the Sick Industrial Companies (Special Provisions) Act, 1985. Third respondent and others can contest the said submissions. 9. We may note that the learned Senior counsel for the petitioner and the respondent No. 6 have alleged that the respondent No. 3-company has violated the aforementioned orders. Contention of the respondent No. 3 is that they have not violated any orders. Respondent No. 7, on the other hand, states that he is a bonafide purchaser for good value. We clarify tha....
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....er as to costs." 12. Immediately after the order dated 6th December, 2017 was passed relegating the workers to proceed in terms of the IBC, the third respondent instituted two civil suits on 12th December, 2017 and 15th December, 2017 before the Civil Judge, Kanpur against about 3000 workmen and ex-workmen. The prayer in the first suit against the workers was to injunct them from representing their dues in various forums till the suit is decided; declare any document submitted in the DRS before the BIFR by any third party as null and void; declare that no amount was due and payable, if any, to any of the workmen impleaded; award damages, etc. Similar though not identical prayers have been made in the suit against the ex-workers. 13. Pursuant to the order dated 6th December, 2017, some of the workers of the third respondent had approached National Company Law Tribunal, Allahabad (NCLT, for short) under Section 9 of the IBC. By order dated 4th July, 2018, their application was dismissed on the ground that the third respondent had already filed the civil suit in Kanpur and had sought various declarations. The civil suit had been preferred by the third respondent before notice of dem....
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....nding before the NCLT, in which order has been reserved. On the question of stay, learned counsel for the petitioner has submitted that the interim order passed in WP(C) No.440/2017 should be extended till the next date of hearing. Learned counsel appearing for respondent No.3, M/s J.K. Jute Mills Company Ltd., now known as Geo Jute Ltd., has submitted that the Supreme Court has passed a restraint order in an appeal against the order passed by the NCLT. She states that the said respondent would abide by and comply with the restraint order passed by the Supreme Court. Senior Counsel for the petitioner submits that interim restraint order passed by the Supreme Court, and it is accepted, relates to the assets of the third respondent, whereas the restraint order(s) passed by this High Court in WP(C) No.440/2017 were applicable to respondent Nos.4, 9 and 10, which are separate companies. Counsel for respondent No. 3 states that this writ petition has been filed by the petitioner at the behest of the 7th respondent. 7th respondent and petitioner have denied the allegation. As we have issued notice, we are inclined, at this stage, to restore the interim orders dated 16.6.2017, 6....
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.... stipulation in the registered lease deed that the respondent No. 9 can at any time during the pendency of the agreement but not later on expiry of ten years from the date of commencement of the agreement, exercise option to buy the demised premises for Rs. 11 crores. The second aspect highlighted by the petitioner and the Union is that the third respondent and its subsidiary have not accounted for the sale consideration received on transfer of the Gulab Bagh property to the tenth respondent. Our attention was drawn to the affidavit filed by the third respondent, quoted in the order dated 16th June, 2017 passed in Writ Petition (C) No. 440/2017, to the effect that payment for Gulab Bagh, Bihar property shall be made to the subsidiary, i.e., M/s JKJM Housing Private Limited and not to the third respondent. Our attention is also drawn to affidavit filed by S.K. Jha on behalf of the third respondent dated 29th June, 2017, which records that the third respondent would not get any amount from the sale of the godown at Gulab Bagh, Bihar as per the enclosed sale deeds. The Union to contradict this assertion had drawn our attention to the sale deeds dated 5th May, 2017, which record that p....
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....reme Court dated 18th November, 2016 it was submitted by the petitioner and the Union that the order was passed in contempt proceedings gave benefit of doubt to the fourth respondent, while the third respondent was held to be guilty. Issue raised and subject matter of enquiry in terms of paragraph 38 of the order dated 13th November, 2014 stands and has to be examined. Cancellation of sale deed for violation of the restraint order of the court, and enquiry mandated as per paragraph 38 of the order dated 13th November, 2014 stand on a different footing. Contempt jurisdiction was relating to wilful disobedience of the order of the Supreme Court, whereas direction given in the order dated 13th November, 2014 covers other aspects including misstatement of sale consideration. 21. Third and fourth respondents contest this submission and state that once proceedings under SIC Act have abated, directions given in paragraph 38 would not survive for adjudication. In case of doubt or difficulty, the party aggrieved should approach the Supreme Court. In alternative, it is submitted that the second order of the Supreme Court dated 18th November, 2016 had taken all the aspects and issues into co....
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....he said respondent's right to purchase the property. 23. Consequent to abatement of proceedings before the BIFR, the Union i.e. M/s. J.K. Jute Mills Mazdoor Ekta Union had filed W.P. (C) No.440/2017 in this Court wherein interim orders were passed restraining the third respondent and its subsidiaries from transferring, alienating, encumbering or creating any third party rights in any of the assets without leave of the Court. Direction was also given to ensure that the third respondent would reserve an amount of Rs. 2.5 crores being claimed by the workmen. The aforesaid writ petition was disposed of vide order dated 6th December, 2017, relegating the workers to invoke proceedings under the IBC. However, it was directed that the interim orders passed would remain in operation for a further period of two months from the said date to enable the workmen to approach the NCLT, who would then decide whether or not to continue with the said interim orders and/or to modify, amend or vacate the same. Immediately after the order dated 6th December, 2017, the third respondent had filed two suits on 12th and 15th December, 2017 against 3000 existing and erstwhile workmen to injunct them from re....
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....ird respondent. The aspect and issue of affect of the order dated 18th November, 2016 on the order dated 13th November, 2014 and on merits would possibly arise and survive for consideration if the primary or core issue - whether and if any amount is due and payable by the third respondent to the workmen/ex-workmen is examined and decided. Another aspect would relate to the forum/court that should decide this lis/dispute. Yet another aspect relates to the person(s) entitled to raise the lis/dispute regarding the Katihar property. Some of the workmen pursuant to order dated 6th December, 2017, passed in W.P. (C) No.440/2017 have approached NCLT under the IBC but their petitions have not been accepted and are pending or the applications made have been rejected. The third respondent, it is apparent, relies upon the two civil suits filed by them against 3000 workmen and ex-workmen before the Civil Judge, Kanpur on 12th and 15th December, 2017. On being questioned, counsel for the third respondent did not give candid answer on whether the workmen or ex-workmen would be operational creditors under the IBC. An ambiguous stand was taken that workmen or ex-workmen could be classified as oper....
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....laims of ex-workmen/workmen. There is urgency and need for determining and deciding the claim and issues raised by ex-workmen/workmen given the fact that the third respondent has transferred and alienated capital assets and immoveable properties to third persons and subsidiary companies, which in turn have again transferred their assets to third persons. There are allegations that true and full transfer considerations have not been recorded and accounted for in the books. The allegation is denied, albeit this issue and contention has to be examined and decided on merits to form a firm and final opinion. This adjudication is to be made in proceedings in accordance with law etc. At present, the question of locus and appropriate jurisdiction/forum having jurisdiction is pending consideration before the Supreme Court, in this writ petition, before the NCLT and also before NCLAT. Perhaps an authoritative pronouncement would be made in Civil Appeal No. 20978/2017 filed by M/s JK Jute Mills Mazdoor Morcha pending before the Supreme Court. 29. The third respondent has raised allegations against the petitioner that he is fighting a proxy and backdoor litigation on behalf of Ghanshyam Sarda....
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....ondent i.e. the Union has stated that they would examine and take appropriate action as may be required and necessary to protect the interest of the workmen/ex-workers including approaching the Supreme Court in Civil Appeal No.20978/2017. 31. One of the reasons why we have narrated the aforesaid facts and given the background is that the learned Senior counsel appearing for the third respondent had stated that they cannot agree to extension of stay in terms of the statement made by the counsel for the petitioner. However, learned Senior Advocate appearing for the fourth respondent had stated that they have no intention of transferring or alienating the Katihar property at present and without prejudice to their rights and contentions, being the bona fide purchasers for which they rely upon order dated 18th November, 2016, passed in the contempt proceedings by the Supreme Court, they would not sell, alienate or transfer the Katihar property for a period of 21 days from 2nd November, 2018. Learned counsel appearing for the ninth and tenth respondents, namely, M/s. Skyscrappers Niwas Pvt. Ltd. and M/s. Kurina Real Estate Pvt. Ltd., on instructions, has made a similar statement that th....