TaxTMI 
TaxTMI 
2019 (10) TMI 300
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....sh Rattan, Adv. for PNB in CA Nos. 1415-16/2018 & CA No. 365/2019 in CP. No.518/2013 and for Dena Bank in CA No. 1047-48/2018 in CP No. 668/2014. Mr. Kunal Sabharwal, Adv. for applicant in CP 668/2014. Ms. Ruchi Sindhwani, Sr. Standing Counsel, Mr. Rishi Manchanda, Mr. Deepak Anand and Mr. D. Bhattacharyra, Standing Counsels with Mr. Amish Tandon & Ms. Megha Bharara, Advs. for the Official Liquidator. JAYANT NATH, J. 1. By this judgment I will dispose of all the applications filed by various parties/applicants for transfer of the present winding up petitions to National Company Law Tribunal (hereinafter referred to as the 'NCLT'). The details of the applications/ petitions are stated as follows: i) Co.Pet. No.518/2013, CA. Nos.1415/2018 & 1416/2018 (Hanung Toys & Textiles Ltd.) In this case on 12.07.2018, this court admitted the present petition and appointed the Official Liquidator as the Liquidator (hereinafter referred to as 'OL'). The Official Liquidator was directed to take all necessary steps including to take over all the assets, books of accounts and records of the respondent Company forthwith. The Official Liquidator was also directed to prepare a comp....
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....s preferred two applications, being C.A. No.1047 seeking for impleadment in the present petition and C.A. No. 1048/2018 for transfer of the present proceedings before the NCLT. It is also stated by the petitioner by filling application C.A. No. 1366/2018, that he is supporting the application, namely, C.A. No.1048/2018 for transfer of the present proceedings before NCLT. Before NCLT, proceedings were initiated under section 7 of IBC by the said applicant. The NCLT vide order dated 25.09.2018, dismissed the petition filed by the applicant stating that the Provisional Liquidator has already been appointed by the company court. iv) Co.Pet.814/2016, CA. Nos.826, 980 & 984/2018 (Premia Projects Ltd.) On 12.03.2018, this court admitted the present petition and appointed the official liquidator as the provisional liquidator. Further, the official liquidator was directed to take all necessary steps including to take over all the assets, books of accounts, documents and records forthwith. The official liquidator was also directed, to make a complete inventory of all the assets of the company when the same are taken over and the premises in which they are shall be sealed. Mr. Rah....
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....es from corporate debtors. It is stated that intention of the legislature was to enact a Code where creditors themselves would have vested powers to determine the manner of recovery of monies from debtor company. It is the objective of IBC to revive that company at the first instance through Corporate Insolvency Resolution Process. Winding up procedure would be directed only in the event of failure of Corporate Insolvency Resolution Process. Reliance is placed on the judgment of the Supreme Court in the case of Swiss Ribbons Pvt. Ltd. & Anr. V. Union of India & Ors., 2019 4 SCC 17. ii) It is also pleaded that the judgment of the Supreme Court makes it clear that under proviso to section 434(c) of the Companies Act, this Court has to mandatorily transfer pending winding up petitions to NCLT. Reliance is placed on the judgment of the Supreme court in the case of Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd., 2019 SCC OnLine 87. Reliance is also placed on the judgment of the Supreme Court in the case of Jaipur Metals & Electricals Employees Organization v. Jaipur Metals & Electricals Ltd.,(2019) 4 SCC 227. iii) It is reiterated that this court has to ....
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....r. Reliance is placed on section 450 of the Companies Act, 1956 and the judgment of the Supreme Court in the case of Bakemans Industries Pvt. Ltd. v. New Cawnpore flour Mills & Ors., (2008) 15 SCC 1 and judgment of the Division Bench of this court in Co.App. No.21/2018, decided on 18.03.2009, titled, 'Reinz Talbros Ltd. & Anr. vs Kostub Investment Ltd. & Ors. in support of the above plea. Reliance is also placed on the judgment of the Supreme Court in the case of Meghal Homes (P) Ltd. v. Shree Niwas Girni K.K.Samiti & Ors., (2007) 7 SCC 753. iv) It is further stated that the power to transfer such matters under proviso to section 434(1)(c) of the Companies Act, 2013 is purely discretionary. Reliance is also placed on the judgment of the Supreme Court in the case of Jaipur Metals & Electricals Employees Organisation v. Jaipur Metals & Electricals Ltd.(supra) to contend that the Supreme Court did not transfer the winding up petitions from the High Court. v) It is further pleaded that none of the applicants who have moved these applications for transfer are parties to the present proceedings. Hence, the matter cannot be transferred at their request. 8.....
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....ferred at the instance of any person who seeks intervention in the proceedings. Had this been the intention of the Legislature it would have made appropriate provision for transfer of all the proceedings of winding up pending before the Company Court in the High Court to NCLT. However, no such provision has been made by the Legislature either in The Companies Act, 2013 or in the Code. Hence the High Court while exercising powers under proviso to Section 434(i)(c) of the Companies Act has discretion to transfer or retain the proceedings before itself. (v) It is further stated that if the order of appointment of OL is withdrawn the management and assets of the respondent company will go back to the Ex.Management till the time an IRP is appointed by the NCLT. There may be a situation where NCLT may refuse appointment of IRP leading to anomaly. This could not have been the intention of the Legislature. 9. Learned senior counsel appearing for MVL Customers Association has also opposed the transfer application filed in Co.Pet. 668/2014 where the respondent company is MVL Limited. The transfer application is filed being CA 1048/2018 by Dena Bank. Apart from repeating the conte....
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....us to the entire proceedings since 2014 and the application of judicial mind by this court in passing the order for admission of the Company Petition and appointment of the Provisional Liquidator. If the present petition is transferred to NCLT treating it as fresh application under section 7 or 9 of The IBC such proceedings will begin de novo and the entire effort of High Court of four years would be wasted. It is further stated that the infrastructure of the projects of the respondent company are more or less ready and some finishing work is left to be done. It would be in the interest of the company and its flat buyers that this court entrusts the Ex. Management with this task under strict supervision by appointment of Court Commissioner including preferably a Retired High Court Judge to supervise the whole affair. 10. The basic issue here is whether in exercise of powers under the proviso to Section 434 of the Companies Act, 2013, this court should transfer the present proceedings to NCLT. 11. Section 434 of the Companies Act, 2013 as amended (2019) reads as follows:- "Section 434 of the Companies Act, 2013 reads as follows: "434. Transfer of certain pend....
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....edings are not reserved by the High Courts shall be transferred to the Tribunal: Provided also that - (i) all proceedings under the Companies Act, 1956 other than the cases relating to winding up of companies that are reserved for orders for allowing or otherwise such proceedings; or (ii) the proceedings relating to winding up of companies which have not been transferred from the High Courts, shall be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959 Provided also that proceedings relating to cases of voluntary winding up of a company where notice of the resolution by advertisement has been given under sub-section (1) of section 485 of the Companies Act, 1956 but the company has not been dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959. (2) The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this section." ....
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....ice at Mahipalpur, New Delhi is a tenanted property which has been sealed by the OL. The landlord of the premises is seeking desealing of the suit premises. 13. In my opinion in the facts and circumstances of this case, it would be in the interest of the creditors that the proceedings are transferred to NCLT and an attempt is made for initiation of corporate insolvency resolution. In case the same is successful, the same would be in the interest of creditors." 13. The Division Bench of this Court upheld the aforesaid judgment in the appeal titled Shree Shyam Pulp & Board Mills Ltd. v. Tata Capital Financial Services Ltd. & Ors., 2018 SCC OnLine Del 12777. The Division Bench held as follows: "27. The above submissions have been considered. The proviso to Section 434(1)(c) of the Act has already been reproduced hereinbefore. Although, Ms. Luthra may be technically right in contending that UCO Bank was not a party to any proceedings relating to the winding up which were pending in any Court, the fact remains that the OL was a party to the winding up proceedings. The OL had initially not opposed the prayer of UCO Bank. The OL's attempt to withdraw its consent t....
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....NCLT admitted the application and a moratorium was declared under Section 14 of the Code. An IRP was appointed. The High Court thereafter passed the impugned order and set aside order of NCLT stating that it had been passed without jurisdiction. In those facts, the Supreme Court on the issue of transfer of petitions from the High Court to NCLT held as follows:- "17. However, though the language of Rule 5(2) is plain enough, it has been argued before us that Rule 5 was substituted on 29-62017, as a result of which, Rule 5(2) has been omitted. The effect of the omission of Rule 5(2) is not to automatically transfer all cases under Section 20 of the SIC Act to NCLT, as otherwise, a specific rule would have to be framed transferring such cases to NCLT, as has been done in Rule 5(1). The real reason for omission of Rule 5(2) in the substituted Rule 5 is because it is necessary to state, only once, on the repeal of the SIC Act, that proceedings under Section 20 of the SIC Act shall continue to be dealt with by the High Court. It was unnecessary to continue Rule 5(2) even after 29-6-2017 as on 15-12-2016, all pending cases under Section 20 of the SIC Act were to continue to be de....
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.... to the respondent therein to any time before a winding up order is passed to apply under section 7 of the Code. 18. Reference may also be had to the judgment of the Supreme Court in the case of Forech India ltd. vs. Edelweiss Assets Reconstruction Co. ltd., (supra). That was a case wherein a winding up petition was filed before the High Court on 20.01.2014. Notice on that petition was served. Respondent No. 1 Company being a financial creditor moved the NCLT under Section 7 of the Insolvency & Bankruptcy Code in 2017. In May - June, 2017 the said petition was admitted. Against the said order, an appeal was filed by the appellant before NCLAT i.e. the Appellate Tribunal. It was held by NCLAT that since there was no winding up order passed by the High Court, the financial creditor's petition would be maintainable. As a result the appeal was dismissed. This order of NCLAT was impugned in the Supreme Court. The relevant submission of the appellant was that the winding up proceedings before the High Court should continue and not proceedings filed by the other creditors under the Code. The Supreme Court in those facts held as follows: - "17. The resultant position in law is that, ....
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.... Section 434 of the Companies Act, 2013 is amended by the Eleventh Schedule of the Code, the amended Section 434 must be read as being part of the Code and not the Companies Act, 2013, must be rejected for the reason that though Section 434 of the Companies Act, 2013 is substituted by the Eleventh Schedule of the Code, yet Section 434, as substituted, appears only in the Companies Act, 2013 and is part and parcel of that Act. This being so, if there is any inconsistency between Section 434 as substituted and the provisions of the Code, the latter must prevail. We are of the view that the NCLT was absolutely correct in applying Section 238 of the Code to an independent proceeding instituted by a secured financial creditor, namely, the Alchemist Asset Reconstruction Company Ltd. This being the case, it is difficult to comprehend how the High Court could have held that the proceedings before the NCLT were without jurisdiction. On this score, therefore, the High Court judgment has to be set aside. The NCLT proceedings will now continue from the stage at which they have been left off. Obviously, the company petition pending before the High Court cannot be proceeded with further in view ....
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....h Court in the case of PLS Ltd. vs. Jotun India Pvt. Ltd., 2019 (213) Co. Cases 61 and accepted the law declared by the said judgment stating "the same has our approval." In Jotun India Private Limited v. PSL Limited.(supra), the issue that arose for consideration in the said petition was whether the company court had jurisdiction to stay the proceedings filed by a corporate debtor in NCLT where there is a previously instituted company petition in the High Court by a corporate debtor which may have been admitted but where a provisional liquidator has not been appointed. In that case in March, 2017 the winding up petition was admitted but the OL was not appointed as provisional liquidator. In May, 2017 an application was filed in NCLT, Ahmedabad under section 10 of the IBC. NCLT reserved the matter for orders. On the same date, the petitioner before the High Court filed an application seeking appointment of a provisional liquidator. The company court in Bombay High Court passed orders restraining NCLT from continuing with the IBC application. In those facts, the Single Bench of the Bombay High Court held as follows: "70. It is clear from the above that the winding up petiti....
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....perspective and harmoniously considered various provisions of the relevant enactments keeping in view the object behind the special statutes. We do not find any error or perversity in the view adopted by the learned Single Judge." 21. Hence, the Supreme Court has in the case of Jaipur Metals & Electricals Employees Organisation vs. Jaipur Metals & Electricals Ltd. (supra), stated, that it was open to a financial creditor to any time before a winding up order is passed to apply under section 7 of the Code. It is further noted in the said judgment that once an application for transfer is filed, the High Court must transfer such proceedings to NCLT which will then deal with the same as an application for initiation of corporate insolvency resolution process. This view was reiterated by the Supreme Court in the case of Forech India Ltd. vs. Edelweiss Assets Reconstruction Co. Ltd.(supra). In the case of Jotun India Private Limited vs. PSL Limited(surpa), the judgment of which case was approved by the Supreme Court, the Division Bench of the Bombay High Court noted the likelihood of conflict and confusion in case both the forums, namely, the Company Court and NCLT are allowed to go a....
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....proceedings which are not transferred under the Transfer Rules, 2016. However, the proviso does not say that these proceedings would automatically stand transferred. Rather it leaves the discretion with the Court, where the winding up proceedings are pending, to transfer the same or not to transfer the same. There have to be reasons to exercise such power. In the present case, entire application is silent as to why power to transfer the winding up petition should be exercised by the Court and the winding up petition should be transferred. I find that this Court has heard this matter at great length. In fact, both the parties before filing of the present application completed nearly all the arguments on merits of the case. The Court had also placed 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 f....
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....ion clause of other enactment could be borrowed to interpret the words under the Act, 2013. Hence, the arguments of the learned Senior counsel for the applicant has to be negated....." 25. What would follow from the two judgments of the Supreme court, namely, in the case of Jaipur Metals & Electricals Employees Organization v. Jaipur Metals & Electricals Ltd.(supra) and Forech India Ltd. v. Edelweiss Assets Reconstruction Co.Ltd.(supra) and the judgment of the Division Bench of the Bombay High Court in the case of Jotun India Private Limited & Ors. v. PSL Limited (supra) read with the relevant proviso to Section 434 (1) (c) of the Companies Act is that a discretion has been granted to the High Court to transfer matters at the request of any party to the NCLT. Where the Official Liquidator has not been appointed as the Liquidator, the Company Court would transfer such matters to the NCLT on receipt of an appropriate request by a party. However, where a Liquidator has been appointed, such matters would normally not be transferred to NCLT. 26. I am fortified by the above conclusion based on the provisions of the Companies Act, 1956 which deal with dissolution of a Company and al....
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.... assets of the company any money requisite; (e) to do all such other things as may be necessary for winding up the affairs of the company and distributing its assets. (2) The liquidator in a winding up by the Court shall have power- (i) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts, and other documents, and for that purpose to use, when necessary, the company' s seal; (ia) to inspect the records and returns of the company on the files of the Registrar without payment of any fee; (ii) to prove, rank and claim in the insolvency of any contributory, for any balance against his estate, and to receive dividends in the Insolvency, in respect of that balance, as a separate debt due from the insolvent, and rateably with the other separate creditors; (iii) to draw, accept, make and endorse any bill of exchange, hundi or promissory note in the name and on behalf of the company, with the same effect with respect to the liability of the company as if the bill, hundi, or note had been drawn, accepted, made or indorsed by or on behalf of the company in the course of its business; (iv....
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....the company be dissolved from the date of the order, and the company shall be dissolved accordingly. (2) A copy of the order shall, within thirty days from the date thereof, be forwarded by the liquidator the Registrar who shall make in his books a minute of the dissolution of the company. (3) If the liquidator makes default in forwarding a copy as aforesaid, he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues." 29. In Meghal Homes (P) Ltd. v. Shree Niwas Girni K.K.Samiti & Ors.(supra), the Supreme Court stated as follows: "31. Now to recapitulate, the Company was ordered to be wound up on 25.7.1984 and the Official Liquidator was directed to take possession of the assets of the Company. Once an order of liquidation had been passed on an application under Section 433 of the Companies Act, the winding up has to be either stayed altogether or for a limited time, on such terms and conditions as the court thinks fit in terms of Section 466 of the Act. If no such stay is granted, the proceedings have to go on and the court has to finally pass an order under Section 481 of the Act dissolving the ....
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....ssion of the assets of the company. That apart, the learned Company Judge, after the making of the winding up order could have made an order of stay only in exercise of the power under section 466 of the Companies Act. Admittedly, the Company under liquidation could not invoke that provision and no prayer for stay under section 466 was made by any of the persons empowered by that section. The order dated 31.03.1994 by S.K.Sen, J. had therefore to be set aside in appeal for this reason alone by the Division Bench. The question for granting any further relief and that too in the appeal filed by the CESE Limited, did not arise." 31. Under IBC, liquidation process is stated in Chapter IV. The power and duty of the Liquidator is given in section 35 which reads as follows: "35. Powers and duties of liquidator.-(1) Subject to the directions of the Adjudicating Authority, the liquidator shall have the following powers and duties, namely:- (a) to verify claims of all the creditors; (b) to take into his custody or control all the assets, property, effects and actionable claims of the corporate debtor; (c) to evaluate the assets and property of the corpo....
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....ecute and verify any paper, deed, receipt document, application, petition, affidavit, bond or instrument and for such purpose to use the common seal, if any, as may be necessary for liquidation, distribution of assets and in discharge of his duties and obligations and functions as liquidator; (n) to apply to the Adjudicating Authority for such orders or directions as may be necessary for the liquidation of the corporate debtor and to report the progress of the liquidation process in a manner as may be specified by the Board; and (o) to perform such other functions as may be specified by the Board. (2) The liquidator shall have the power to consult any of the stakeholders entitled to a distribution of proceeds under Section 53: Provided that any such consultation shall not be binding on the liquidator: Provided further that the records of any such consultation shall be made available to all other stakeholders not so consulted, in a manner specified by the Board." 32. It is manifest that two functionaries, namely, OL under the Companies Act, 1956 and Liquidator under IBC cannot concurrently carry out their functions. Such a proposition ....
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....3) Where a provisional liquidator is appointed by the Court, the Court may limit and restrict his powers by the order appointing him or by a subsequent order; but otherwise he shall have the same powers as a liquidator. (4) The Official Liquidator shall cease to hold office as provisional liquidator, and shall become the liquidator, of the company, on a winding up order being made." 36. The Supreme Court in Bakemans Industries Pvt. Ltd. v. New Cawnpore flour Mills & Ors.(supra) held as follows: "63. The Courts in India have to keep in mind different considerations. The concept of right of property which was existing in 19th Century in England would not stand the test of the act and the interpretation it deserves keeping in view the object and purport of the 1956 Act. In India, the company courts have a statutory duty to protect the rights of workmen keeping in view the parri passu charge created in their favour in terms of section 529A of the Act. Power and functions of a provisional liquidator subject to the limitations imposed by the court are the same as that of an official liquidator." (emphasis added) 37. However, keeping in view the observations of the....
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....ion pertains to the respondent-Shakti Bhog Foods Ltd. The OL was appointed as a Liquidator on 18.01.2018. CA Nos. 718/2018 and 1444/2018 have been filed by SBI for intervention and transfer of these proceedings to NCLT respectively. Phoenix ARC Pvt. Ltd. filed CA No.680/2018 stating that they have taken measures under the SARFEASI Act, 2002 and have opted to stay outside the winding up proceedings. They have further stated that they have not given up their security/charged assets. ICICI bank had moved an application stating that they seek to remain outside the winding up process. This court on 31.10.2018 directed that possession of the properties and the moveable assets hypothecated/mortgaged with the bank to be handed over to the bank subject to the terms and conditions stated therein. The assets include the properties lying at Village Samana Bahu, Tensil Nilokheri, District Karnal, Haryana and Village Samani Tehsil Thaneswar, District Kurukshetra, Haryana. I may note that the proceedings were initiated under Section 7 of the IBC by SBI before NCLT. NCLT vide order dated 08.02.2018 dismissed the said petition as the OL had already been appointed by this court. NCLAT also dis....