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2019 (2) TMI 1050
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....ank to file winding up petition. (1) The Bank, on being satisfied that a non-banking financial company,- (a) is unable to pay its debt; or (b) has by virtue of the provisions of section 45-IA become disqualified to carry on the business of a non-banking financial institution; or (c) has been prohibited by the Bank from receiving deposit by an order and such order has been in force for a period of not less than three months; or (d) the continuance of the non-banking financial company is detrimental to the public interest or to the interest of the depositors of the company, may file an application for winding up of such non-banking financial company under the Companies Act, 1956. (2) A non-banking financial company shall be deemed to be unable to pay its debt if it has refused or has failed to meet within five working days any lawful demand made at any of its offices or branches and the Bank certifies in writing that such company is unable to pay its debt. (3) A copy of every application made by the Bank under subsection (1) shall be sent to the Registrar of Companies. (4) All the provisions of the Companies Act, 1956 relating to winding up of a company shall ....
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.... is, thus, under the regulatory control of RBI, as per Chapter III-B of the RBI Act. By the nature of its business SIFCL is classified as RNBC, which receives deposits under any scheme/arrangements by way of contributions or subscriptions or by sale of units or certificates or other instruments or in any other manner. SIFCL was issued a certificate of registration for the said purpose under Section 45-IA of the RBI Act. The same is required for its business activities, which are to be conducted in compliance with the provisions of RBI Act and the directions, instructions, guidelines and circulars issued by RBI from time to time, either generally or specifically. 7. RBI caused inspection of SIFCL, at annual intervals, under Section 45-N of RBI Act. It was found that deposits taking activities of SIFCL were not in conformity with the prudent practice and RBI directions, guidelines etc. Since the viability of the business of the SIFCL was being negatively affected, RBI by various meetings and letters, in an around the year 2007, advised it to plan its alternate business and move out of RNBC model and complete such transition within a period of three years from 1.4.2007. SIFCL, thou....
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....sent case. But an opportunity of hearing would be appropriate, because of nature of proceedings. It shall not be construed as if we have stated so to be applicable in all cases. Because of the peculiar nature of the case, we are directing to be so done. We, therefore, direct that Respondent No.1 shall appear without any further notice before the designated authority of the Reserve Bank of India on 12.06.2008 when the matter shall be heard. It is open to Respondent No.1 to place such material on which it proposes to rely upon. Needless to say the authority shall consider all the relevant aspects of the case and pass a fresh order. Till the matter is disposed of afresh by the Reserve Bank of India, the order dated 04.06.2008 shall not be given effect to. At the same time, the interim protection given by the High Court to Respondent No.1 shall also not be operative. Since the entire matter is being disposed of in this appeal, there is no need for the High Court to deal with the writ petition. We make it clear that we have not expressed any opinion on merits. 6. The appeal is disposed of accordingly." 10. By the said order, Supreme Court required SIFCL to appear before RBI wit....
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....dia shall be made in the ensuing Annual General Meeting of the company envisaged by August 31, 2008. (v) We will continue to comply with all the requirements of the applicable provisions of the Reserve Bank of India Act and the directions, guidelines, instructions and circulars issued thereunder." 7. The RBI had by its letter of April 16, 2007, advised SIFCL to plan an alternate business and move out of the RNBC model and to complete the process of transition within a period of 3 years commencing from April 1, 2007. SIFCL did not give any positive plan for an exit which was satisfactory for over a year. This fact together with non-observance of various RBI's directions made the RBI to issue a show cause notice on May 9, 2008 to prohibit acceptance of further deposits by SIFCL. SIFCL has now submitted its difficulties in making an exit by 2010 and submitted a request for an orderly exit for RBI's consideration. 8. After a careful consideration of the present proposals of SIFCL and the assurances given by it to comply with the directions of the RBI, RBI passes the following fresh order in partial modification of its order of June 4, 2008. ORDER 9. In view....
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....om June 16, 2008 so that the Board shall consist of 50% of such independent directors as are acceptable to Reserve Bank of India, (b) get the appointment of these independent directors ratified at the ensuring Annual General Meeting of the company and continue the said arrangement till such time as all depositors are repaid in full, and (c) appoint statutory auditors from the panel of auditors suggested by Reserve Bank of India at the ensuring Annual General Meeting of the company envisaged by August 31, 2008 and continue to appoint statutory auditors each year from the panel suggested by Reserve Bank of India till all depositors are repaid in full. The said undertaking of SIFCL shall form a part of this order. 11. A copy of this Order be served on SIFCL with instructions to comply with the Order. The attention of SIFCL shall be drawn to the provisions of Sections 45K(4), 58B and 58C of the RBI Act as to the consequences of not complying with this Order. For the benefit of the depositors and the members of the public, this Order shall be given reasonable publicity. sd/- illegible (Gopalakrishna) Executive Director 17.06.2008" 11. SIFCL, however, continued to run the ....
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.... Non-Banking Companies (Reserve Bank) Directions, 1987 as at September 30, 2014. (iv) The Company has lent Rs. 484.67 crores to Sahara India a Partnership Firm and thus not complied with Para 20 of Non Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 which restrict lending of funds to single party not exceeding fifteen percent of its Owned Funds. B. Latest position of Directed Investments and Aggregate Liability to Deposit (ALD) holders as per Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 to find out the ALD gap after the subsequent event. Statement of Directed Investments and ALD (Rs. In Crores) Investment 31.03.2014 30.06.2014 31.07.2014 30.09.2014 45-IB 203.91 206.54 196.86 112.61 6(1)(a) 36.95 45.03 45.39 46.04 6(1)(b) 701.30 581.22 585.27 128.84 Total 942.16 832.79 827.52 287.49 Secured Loan (Note 1) 729.59 728.35 727.99 727.....
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....Accordingly, the Final Auditors' Report on the Financial Statements of the Company and till date Auditors' Report and Financial Statements could not be signed by its Chartered Accountants. By the said report it was also informed that large number of securities were also sold by SIFCL in the year 2014. In the said background, RBI moved an application before the Supreme Court, as certain matters relating to insolvency status were pending and orders with regard to all sister concern were passed therein restraining Sahara group from selling its properties. On application of SIFCL Supreme Court passed detail order on 24.2.2015. Relevant portion of the order dated 24.2.2015 reads thus:- "In the circumstances, we allow Reserve Bank of India to initiate such action as may be otherwise legally permissible under the provisions of the Reserve Bank of India Act and the Regulations framed thereunder and to pass appropriate orders on the subject after hearing the parties. A copy of the order so passed shall be placed on record." 13. By the same order, Supreme Court further directed:- "In the light of the controversy raised before us in relation to the utilisation of the maturity....
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....e, SIFCL admitted that it is in the process of winding up of business activities as per RBI directions, as it states:- "3 & 6. We mention that as per RNBC Directions, we have to maintain the Directed Investments of today against the Aggregate Deposit Liability of second proceeding quarter, e.g. suppose Company has ALD on 30.09.2014 as Rs. 500 crores and as on 31.03.2015 as Zero, then for complying RNBC Directions as on 31.03.2015, Company has to maintain Directed Investments of Rs. 500 Crores even the ALD as on 31.03.2015 is Zero. The compliance of RNBC directions is must while Company is running its business activities but when it is winding its business activities as per RBI directions, it should only ensure that repayment of depositors are being done without any delay or default which we are doing and also maintaining Directed Investments against ALD on point to point basis which was sufficient to make the payment to depositors by the Company. You will appreciate that RNBC Directions were made to regulate operating Companies which in most cases are suppose to grow and therefore rules were made that RNBC Companies maintain Directed Investments equal to Aggregate Deposit Liabil....
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....itors/investors and the entire money has been used only for discharging of public liabilities and this saved the goodwill of the group which has never defaulted in repayment to its esteemed depositors/investors/creditors since its inception. In field our esteemed depositors/investors including workers do not know or understand any constitution, they only know 'Sahara'. 7. The Company is not able to make payment of salaries to its employees since last 6 months and therefore many concerned Officials have submitted their resignations from the services of the Company including the Chief Financial Officer of the Company who has submitted his resignation w.e.f. 01.02.2015. The Company had intimated to RBI about such resignations from time to time. We are in the process of appointing new Officials including Chief Financial Officer at the earliest and shall be able to file Statutory and Supervisory returns to RBI. 8. As regard to the appointment of Independent Directors as advised by Reserve Bank of India in the meeting held on 9.4.2014 with the officials of RBI and Company Secretary, we will be submitting the name of 5 persons for consideration of RBI to appoint any 2 of the....
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.... or investor and as to whether mandated interest was paid. It found that SIFCL did not follow the KYC guidelines issued by RBI. Further, the data was also not certified by the Statutory Auditors of the SIFCL. It also failed to submit list of depositors as on 31.5.2015 and 30.6.2015, as per undertaking given during the personal hearing and the SIFCL failed to deposit the unclaimed amounts in the Escrow account. In the said background, RBI being satisfied that the SIFCL failed to fulfill the conditions of the order dated 17.6.2008, issued to it under Section 45- K (3) of RBI Act, and there exist grounds, as mentioned in Section 45-1A (6A) of the RBI Act, for cancellation its registration, proceeded to pass order dated 3.9.2015 whereby Certificate of Registration (CoR) of SIFCL was cancelled under Section 45-1A. The relevant portion of the order dated 3.9.2015 reads as follows:- "26. Taking into consideration all the relevant facts, developments and affairs of the company, the Bank is satisfied that the company has failed to fulfill the conditions of the Speaking Order dated June 17, 2008 issued to it under the powers vested in the Bank under section 45-K (3) of RBI Act, 1934 an....
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....cording such satisfaction, therefore, the present winding up petition is not maintainable. In support of his submissions, Sri Mathur strongly relies upon the judgments reported in 1994 (4) SCC 269: Indian Nut Products and others. Vs. Union of India and others; (2008) 144 Com Cas 780 (Delhi): JVG Leasing Ltd. In Re; (2015) 17 SCC 324: State of Uttar Pradesh and others. Vs. Aryaverth Chawal Udyog and others. 20. On this issue submission of Sri Prashant Chandra, counsel for RBI is that there is no necessity of passing a separate order, as the details given and record, filed with the winding up petition itself, shows satisfaction of the RBI for filing present winding up petition. He submits that RBI can place record before this court to satisfy it about need for filing the present winding up petition. He further submits that in fact SIFCL is not disputing that on merits the present petition could be filed. The objection is raised on technicality only, that there does not exist any prior decision of RBI, recording a categorical decision, for filing the present winding up petition. Sri Prashant Chandra places reliance upon the judgments in case of Reserve Bank of India Vs. Krishi Expo....
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....e full particulars on the basis of which the Government claims to be satisfied that there is a case for taking over the factory. As already pointed out above, there is not even an assertion in the notice that there has been any unemployment much less large scale unemployment. The ground simply says that the Government was of the opinion that the closure of the factory " will lead to a large scale unemployment". We are of the view, that in the facts and circumstances of the present case, the notice issued to the petitioners with the so-called grounds was not in accordance with the requirement of the provisions of sub-section (1) of Section 3 of the Act. The notices issued to different petitioners are, therefore, declared to be null and void. Consequent thereto, the order dated 6-7- 1988 is also quashed. 23. Again, the case of Aryaverth Chawal Udyog (supra), relates to U.P. Trade Tax Act, 1948. Section 21 of the U.P. Trade Tax Act provides that if the Assessing Authority has reasons to believe that the whole or any part of the turnover of the dealer, for any assessment year or part thereof, has escaped assessment to tax, it would have power to re-visit the same. The relevant parag....
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....hange of opinion." 17. Section 21(1) of the Act provides, that, if the assessing authority has reason to believe that the whole or any part of the turnover of a dealer, from any assessment year or part thereof, had escaped assessment of tax or has been under assessed or has been assessed to tax at a rate lower than that at which it is assessable under the Act, or any deductions or exemptions have been wrongly allowed in respect thereof, the assessing authority may, after issuing notice to the dealer and making such inquiry as it considers necessary, assess or reassess the dealer to tax according to law. 19. Under section 21(1) of the Act, the reassessment proceedings can only be initiated if the assessing authority has "reason to believe" that there is a case of escaped assessment and not otherwise. It is now trite law that whenever a statute provides for "reason to believe", either the reasons should appear on the face of the notice or they must be available on the materials which have been placed before him. (See Aslam Mohd. Merchant v. Competent Authority [2008] 14 SCC 186)." 24. I find that the aforesaid judgments are about cases, where, on being satisfied, the authori....
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....who can file winding up petition are specifically mentioned and the RBI is not named therein. However, notwithstanding the same the Legislature wanted specific power to be conferred upon the RBI to seek winding up of erring NBFC. However, section 45 MC is more than mere enabling provision as it contains the specific grounds on which the RBI can file winding up petition. It may be noted that section 433 of the Companies Act stipulates the circumstances under which a company can be wound up. However, as far as petition of RBI under section 45MC of the RBI Act is concerned, it is not that the RBI shall file a petition on the grounds mentioned in section 433 of the Companies Act. On the contrary, sub-section (1) of section 45 MC of the RBI Act lists four circumstances under which the RBI can file such a petition. Apart from the ground of inability to pay the debt, which is common with section 433 of the Companies Act, other grounds are peculiar to nonbanking financial institutions. These grounds relate to the malfunctioning of such NBFCs, namely, (b) has by virtue of the provisions of section 45-IA become disqualified to carry on the business of a nonbanking financial institution; (c) ....
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....nace of dubious practices which could be adopted by these companies. I may immediately add here that when a petition is filed by the RBI under section 45MC of the RBI Act, it is for the court to examine as to whether in a given case whether the orders of winding up of such a company are to be passed or not. However, once it is found that any of the grounds mentioned in sub-section (1) of section 45MC exists and the company should be ordered to be wound up. 19. It would not be permissible for such a company to take a detour by coming out with a plea that it is ready to do some business other than nonbanking financial business and should be permitted to do so and under such a cloak file a scheme of arrangement,. A company which is essentially a non-banking financial company and has suffered winding up order because it violated the financial discipline provided under the RBI Act, as it has no right to exist as NBFC and is to be wound up. When any of the conditions for winding up, as laid down in subsection (1) of section 45MC is satisfied, it is obvious that irregularities committed by it are serious enough justifying its winding up. In the process it is normally established that t....
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....he scheme with much circumstances. Otherwise, as rightly contended by Mr. Dushyant Dave, learned senior counsel appearing for the RBI, it would amount to permitting the petitioner to do something indirectly which it cannot do directly. The petitioner has got money from depositors. Assets are acquired from the funds created in the form of such deposits and now, the company wants to do some other business with those assets thereby retaining the funds of those depositors and wants to pay them in phased manner as envisaged in the proposed scheme. 29. In the aforesaid case, the issue was different and not as is being raised in the present case, i.e. as to whether, without there being a reasoned order, winding up petition can be filed. The dispute in the said case was that whether, on there being a feasible scheme for revival available, the power under Section 45-MC could be exercised for winding up. The Court while discussing the matter came to the conclusion that the RBI is a regulator, which is empowered by the Parliament, in the specific circumstances, to file a winding up petition, as it is the best judge. Therefore, the aforesaid judgment also does not support the case of pet....
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....on as mentioned in the opening part of Section 45-MC of the Reserve Bank of India Act loses much of its significance because ultimately it is for the Court to form an opinion on the basis of the material placed on record as to whether the ground exists for allowing the winding up petition. It would be recalled that as per Section 45- MC (4) of the Reserve Bank of India Act, all the provisions of the Companies Act, 1956 relating to winding up petition of a company apply to winding up proceedings initiated on the application made by the Bank under this provision. Section 443 of the Companies Act relates to the powers of the Court hearing a winding up petition. On hearing a winding up petition, the Court may dismiss it, make any interim order that it thinks fit; or make an order for winding up of a company or any other order that it thinks fit. It is thus clear that many options are open to the Court depending upon the facts and circumstances of each case. The point that I wish to emphasize is that ultimately it is the Court hearing winding up petition which has to come to a decision as to what order is to be passed in a particular case. The truth of the matter is that the winding up ....
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....hat the said condition is not fulfilled. Reference, in this context, may be made to the decision of this Court in Swadeshi Cotton Mills Co. Ltd. v. State of U.P.1 wherein it has been observed: (SCR pp. 432 and 434) "The validity of the order therefore does not depend upon the recital of the formation of the opinion in the order but upon the actual formation of the opinion and the making of the order in consequence. It would therefore follow that if by inadvertence or otherwise the recital of the formation of the opinion is not mentioned in the preamble to the order the defect can be remedied by showing by other evidence in proceedings where challenge is made to the validity of the order, that in fact the order was made after such opinion had been formed and was thus a valid exercise of the power conferred by the law. The only exception to this course would be where the statute requires that there should be a recital in the order itself before it can be validly made. * * * We cannot accept the extreme argument of Shri Aggarwala that the mere fact that the order has been passed is sufficient to raise the presumption that conditions precedent have been satisfied, even though ....
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....e of Madras Vs. C.P. Sarathy and another, AIR 1953 SC 53 (ii) M/s. Avon Services Production Agencies (P) Ltd. Vs. Industrial Tribunal, Haryana and others, (1979) 1 SCC 1 (iii) R.M. Narayana Chettiar and another. Vs. N. Lakhmanan Chettiar and others, (1991) 1 SCC 48 (iv) Govindbhai Gordhanbhai patel and others. Vs. Gulam Abbas Mulla Allibhai and others (1977) 3 SCC 179 Relevant portions of the aforesaid judgments read as follows: State of Madras Vs. C.P. Sarathy and another:- "16. This is, however, not to say that the Government 'will be justified in making a reference under section 10 (1) without satisfying itself on the facts and circumstances brought to its notice that an industrial dispute exists or is apprehended in relation to an establishment or a definite group of establishments engaged in a particular industry, and it is also desirable that the Government should, wherever possible, indicate the nature of the dispute in the order of reference.s. The observations in some of the decisions in Madras do not appear to have kept this distinction in view." M/s. Avon Services Production Agencies (P) Ltd. Vs. Industrial Tribunal, Haryana and others. ....
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....uld, in a given case, point out that the persons who are applying for leave under section 92 are doing so merely with a view to harass the trust or have such antecedents that it would be undesirable to grant leave to such persons. The desirability of such notice being given to the defendants, however, cannot be regarded as a statutory requirement to be complied with before leave under section 92 can be granted as that would lead to unnecessary delay and, in a given case, cause considerable loss to the public trust. Such a construction of the provisions of section 92 of the Code would render it difficult for the beneficiaries of a public trust to obtain urgent interim orders from the court even though the circumstances might warrant such relief being granted. Keeping in mind these considerations, in our opinion, although, as a rule of caution, court should normally give notice to the defendants before granting leave under the said section to institute a suit, the court is not bound to do so. If a suit is instituted on the basis of such leave, granted without notice to the defendants, the suit would not thereby be rendered bad in law or non-maintainable. The grant of leave c....
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....tc., in Krishi Export Case, paragraph 17 of which finds:- "17. It is crystal clear from the discussion made hereinabove that Deepak Singhal as Deputy Manager of DNBS is the competent person authorised under the Scheme of Reserve Bank of India Act and the Regulation/ Notification made thereunder to file the instant windingup petition and to verify the same. The petition filed by him is in accordance with the provisions of the Reserve Bank of India Act and also meets the requirement of Rule 21 of the Companies (Court) Rules, 1959. There is no delegation of delegation as complained of by the learned counsel for the respondent. The act of the Committee of the Central Board is to be taken as of Central Board itself except for matters specifically reserved by the Act for Central Government or Central Board. Under valid authority, the Committee of Central Board of the Bank has issued notification dated 11.9.1998, relevant provisions whereof have been reproduced above to clear the mist. It is not ultra vires. Hyper-technical objection based on hairsplitting has been advanced by the respondent to challenge the maintainability of this winding-up petition which has been filed by the Bank t....
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....ng authority of the bank; or (v) has been prohibited from accepting deposit by an order made by the bank under the provisions of this Chapter and such order has been in force for a period of not less than three months: PROVIDED that before canceling a certificate of registration on the ground that the non-banking financial company has failed to comply with the provisions of clause (ii) or has failed to fulfill any of the conditions referred to in clause (iii) the bank, unless it is of the opinion that the delay in canceling the certificate of registration shall be prejudicial to public interest or the interest of the depositors or the nonbanking financial company, shall give an opportunity to such company on such terms as the bank may specify for taking necessary steps to comply with such provisions or fulfillment of such condition: PROVIDED FURTHER that before making any order of cancellation of certificate of registration, such company shall be given a reasonable opportunity of being heard. (7) A company aggrieved by the order of rejection of application for registration or cancellation of certificate of registration may prefer an appeal, within a period of thir....
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....ould become inoperative merely on filing of appeal. There is no provision providing for automatic stay of order passed by RBI, merely on filing of appeal. An appeal is a creation of statue. An appeal will lie only if it is so provided in the statue. Its scope and procedure shall be as is provided there. The power, to grant or not to grant an interim order or the extent to which an interim order can be granted or an automatic stay of the impugned order, would be governed by the language of the Statute. In sub-section 7 there is nothing, which provides for an automatic stay of the impugned order, on filing of an appeal before central government. Sub-section 7 only provides that the order of RBI shall be final, in case an appeal is filed against the same, on the appeal being finally decided. But, that is a case with any appeal, whether such a line is there or not in the statue. If an appeal is filed against an order, the impugned order becomes final only on final disposal of the appeal. But the same would not mean that such an order will not be given effect during the pendency of appeal, unless stayed by the appellate court. If this interpretation, as submitted by Sri Mathur, is accep....
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.... by this court and the matter stands transferred to National Company Law Tribunal (NCLT). Strong emphasis was made that this application has to be decided first, and this case cannot be decided on merits. In fact, a statement was also made before the court, that, all the earlier counsels appearing for SIFCL were withdrawn and the new senior counsel insisted that he shall argue only the aforesaid application and nothing else and the court is bound to decide the application first. The order passed on 13.09.2018 shows the stand taken by SIFCL and reads:- "Order on application:- (C.M. Application No.99260 of 2018) Supplementary affidavit filed is taken on record. Order on petition:- In this case, hearing was started by Sri Prashant Chandra, learned Senior Advocate assisted by Sri Pritish Kumar, learned counsel for petitioner on 21.08.2018 when counsel for petitioner submitted his arguments for the petitioner-Reserve Bank of India. Thereafter from 23.08.2018, 24.08.2018, 28.08.2018, 29.08.2018 and 30.08.2018 Sri Jaideep Narain Mathur, learned Senior Counsel assisted by Sri Kumar Ayush, learned counsel for the respondent Company M/S Sahara India Financial Corporation Ltd. ....
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....he respondent company came and sat in the court and started taking notes for the respondents. It was again inquired from him as to whether he would like to argue the matter, he informs that he has no instructions in the matter. Sri Prashant Chandra, learned Senior Counsel for the petitioner has concluded his rejoinder arguments. Order reserved. It goes without saying that the application which has been filed by the respondent company which shall come before this Court tomorrow would be taken into consideration while passing orders in the matter. dt. 13.09.2018" 44. Against the said order an SLP No. 25517 of 2018 was filed and the supreme court, on 24.09.2018, passed the following order:- "Application for exemption from filing certified copy of the impugned order is allowed. Having regard to the order that is proposed to be passed we are of the view that no prejudice will be caused to the respondent if it is directed that the petitioner may be allowed to file written arguments before the High Court within seven days from today. We, therefore, order accordingly. On consideration of the written arguments to be filed, if the High Court is of the view that further argu....
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....tional and by notification No.SO 1934 (E), sub-sections (a) and (b) of Clause-1 of Section 434 of Companies Act, 2013 (2013 Act) has been brought into force. Further, with effect from 15.11.2016, Section 434 has been further amended and after amendment all pending proceedings relating to winding up of companies, under the Companies Act, stood automatically transferred to the concerned NCLT as per mandate of Section 434 (1) (c) of 2013 Act, with effect from 15.11.2016 and, thus, this Court became functus officio and lost jurisdiction to hear the matter after 15.11.2016. Reliance for the aforesaid purpose is placed upon the judgment of Calcutta High Court in CA No.563 of 2014 dated 22.3.2017 Prasant Kumar Mitra Vs. India Steam Laundry (P) Ltd. and the judgment passed by Division Bench in appeal from the said judgment in APO No.112/2017 dated 5.9.2018. 48. Second ground taken, in paragraph 9 and 10 of the said application, is that Insolvency and Bankruptcy Code (Second Amendment) Act 2018 has, with effect from 6.6.2018, inserted another proviso to Section 434 (1) (c) and now, under the same, a party can file an application for transfer of proceedings and Court may transfer such pro....
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.... of such order: Provided that the High Court may if it is satisfied that the appellant was prevented by sufficient cause from filing an appeal within the said period, allow it to be filed within a further period not exceeding sixty days; and (c) all proceedings under the Companies Act, 1956 (1 of 1956), including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer: 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: Provided further that any party or parties to any proceedings relating to the winding up of companies pending before any Court immediately before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (ord. 6 of 2018), may file an application for transfer of such proceedings and the Court may by order transfer such proceedings to the Tri....
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....f no relevance for the present case. It is clause (c) of Sub-section-1 which is of relevance to us. Clause-(c) came into force w.e.f. 15.12.2016. The first proviso to the said sub-clause (c) provides that only such winding up proceeding shall stand transferred to the Tribunal as may be prescribed by the Central Government. The Central Government for the said purposes issued a notification No.-G.S.R. 1119(E) dated 07.12.2016 prescribing the Companies (Transfer of Pending Proceedings) Rules, 2016 (Transfer Rules, 2016). Rule 1(2) of the Transfer Rules, 2016 provides that except rule 4, rest of the rules would come into force w.e.f. 15.12.2016. Rule 3 provides for transfer of cases other than winding up. Rule 4 relates to voluntary winding up cases. It is Rule 5 and 6 which relates to winding up cases, other than voluntary winding up, pending under the old Act. Therefore, Rule 5 and Rule 6, being of relevance to our case, are being quoted below:- "5. Transfer of pending proceedings of Winding up on the ground of inability 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 pen....
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....ery first line of first paragraph, states that:- "1. Company Petition No.611 of 1998 filed under Section 155, 237, 397, 398, 399, 402, 403 and 406 of the Companies Act, 1956 along with connected applications have been assigned to me by the Hon'ble the Chief Justice for hearing and disposal. At the very outset the question arose as to whether or not the High Court still has jurisdiction to hear and dispose of the said company petition in view of Section 434 of the Companies Act, 2013, (hereinafter referred to as 'the 2013 Act') having come into force recently...................." Further paragraphs 23, 24, 25, 26 of the aforesaid judgment state:- "23 By notification No. 3676 (E) dated 7 December, 2016, the Central Government made the Companies (Removal of Difficulties) Fourth Order, 2016 which came into effect from 15 December, 2016. The said Order provides as follows:- "In the Companies Act, 2013, in Section 434, in sub- Section (1), in Clause (c ), after the proviso, the following provisos shall be inserted, namely;- 'Provided further that only such proceedings relating to cases other than winding up, for which orders for allowing or otherwise of the pro....
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.... of companies. The word including in that sub-Section is only clarificatory. I have no doubt in my mind that each and all proceedings instituted under the Companies Act, 1956 including the proceedings like the present one, pending in the High Court as on 15 December, 2016 stand transferred to the NCLT. It is an automatic transfer by operation of law. No sanction of the court is required. It is a statutory mandate and has to be followed whether such mandate is wise or not. All that the Court is required to do is to send the records of this Court to the NCLT. 26. Perhaps the only exception that has been carved out is by the Companies (Removal of Difficulties) Fourth Order, 2016 which has been extracted above. The present proceeding is not one where orders have been reserved after conclusion of hearing and thus does not come within the exception." 55. The aforesaid clearly shows that the petition before the Calcutta High Court was with regard to mismanagement of the affairs of the company filed under the Companies Act, 1956. The same was not a winding up petition filed under Section 433 of the Companies Act, 1956. The same was not at all a winding up petition filed under Section....
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....ced all its queries to counsels for both the parties. Therefore, I do not find the request made at this stage to be a bona fide request. Having argued the matter at length and having faced the queries, it is most inappropriate on part of the respondents to move such an application, that too without any reasons, what to say of strong reasons. Such application or request could have been made any time after 06.06.2018, when the proviso came in force, till the times the arguments in the case were initiated. Such a request also could have been made before initiating the arguments as a preliminary request. To raise such a request, after the conclusion of arguments on merits, cannot be called bona fide. Further, since nothing is said in the application, I find no reason to allow the application. The request of SIFCL for transfer of case under the second proviso is rejected. 59. In paragraph 2.1 of the written submissions dated 01.10.2018, counsel for SIFCL has referred to four applications filed by it. So far as application bearing C.M. Application No.99993 of 2018, dated 12.09.2018, with regard to transfer of case is concerned, the same is already considered above and is rejected. ....
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.... Escrow account and now only lame excuses are being made up. There is also no proof that such amount is available with SIFCL. 62. Another objection is raised by the SIFCL by its fourth application bearing C.M. Application No.82611 of 2016, dated 23.08.2016. The said application merely prays that accompanying supplementary affidavit be taken on record. Paragraph-2 of the supplementary affidavit states:- "That the present petition is not maintainable at the thresh hold in view of notification dated 06.03.1997 bearing no.DFC(COC) No.99/FD(JRP)/97 issued under Section 45 NC of the RBI Act 1934. The said notification clearly provides that Section 45 MC of the Act shall not apply to any Non Banking Finance Company, doing the business of insurance, holding a valid certificate of registration issued under Section 3 of the Insurance Act, 1938 (IV of 1938) and Doing the business of a stock broker or sub-broker holding a valid certificate of registration obtained under Section 12 of the Securities and Exchange Board of India Act, 1992 (No.15 of 1992)." The relevant portion of Notification dated 06.03.1997 reads as follows:- "Notification DFC.(COC) No.99/ED(JRP)-97 dated March 6, 1....
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....terest of its depositors, it has itself admitted that it is on way to close its business activities and has not proposed any alternative business plan to RBI till now, petitioner-RBI is entitled to the prayer sought from this Court and the objections and arguments made by the respondent SIFCL have no force and are rejected. 66. Now, lets look into the conduct of the respondent SIFCL with regard to delaying/bench hunting tactics adopted before this Court. I have already noted above in detail the orders passed by this Court on the prayers made by SIFCL after the arguments on merits were nearly completed. The same is also repeated in writing in paragraph-5.6 to 5.8 of the written submissions dated 01.10.2018 filed by Sri Kumar Ayush, instructing counsel for the respondent SIFCL, where SIFCL states:- "5.6. The respondent submits that in view of the aforesaid submissions, in the present proceeding, an issue has arisen as to whether this Hon'ble Court has jurisdiction after 15.12.2016 to deal with the present Winding Up petition which need to be adjudicated first, as a 'Preliminary Issue' before any adjudication on the merits of the winding up petition. 5.7. Since, t....
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....d deal with its objections and at what stage. At best, a request can be made, but no party can insist upon a Court that it would not argue the case on merits or would argue the case on merits only after objections raised by it is decided by the Court. It is the discretion of the Court to see as to whether any objection is to be decided as a preliminary objection, before proceeding with the matter on merits, or to hear all the objections and petition simultaneously and decide the entire matter by one common order. A party or his counsel cannot put court to condition that "if the application on maintainability were to be rejected, he was ready to argue the matter on merits". This only shows that after the queries had been made by the Court during lengthy arguments, the respondent SIFCL was only trying to somehow find a way out so that the matter is not decided on merits. The same is also clear from the conduct of SIFCL when on 13.09.2018 in the morning its counsels appearing in the case, more particularly its instructing counsel, withdraw from the case, but came and sat in Court post lunch to note the rejoinder arguments of petitioner and after a few days filed written submissions un....
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....onal liquidator may be appointed and books of accounts may be handed over to him. Considering the rival contentions and the position, the Court feels that personal reasons of a counsel cannot be ignored and since Sri Kapil Sibbal has given a categorical assurance to the Court of assistance on the next date, the matter is adjourned today. The request of Sri Prashant Chandra may be considered on the next date fixed. On the joint agreement of the parties, list/put up this case on 13.7.2016. " 69. Counsel for SIFCL had given a categorical assurance to the Court and on his assurance, the matter was adjourned to 13.07.2016. On 13.07.2016, or on any dates thereafter, the senior counsel from Delhi never appeared in the case. In fact, he only came on 25.05.2016 and never thereafter. The order dated 13.07.2016 states:- Sri Prashant Chandra, Senior Advocate assisted by Sri Pritish Kumar, learned Counsel for the petitioner insisted to press the application for appointment of Official Liquidator as Provisional Liquidator. Sri Arohi Bhalla, learned counsel for the opposite party (Company) has submitted that this Court has already restrained the Company from alienating its asset....