TaxTMI 
TaxTMI 
2021 (3) TMI 38
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....e order dated 06.10.2016, the Division Bench stayed the order dated 07.10.2015 and directed SRUIL to deposit INR14 crore with the Prothonotary and Senior Master of the High Court or furnish a bank guarantee for the same, failing which the stay order would get vacated. The said appeal is pending as on date. We are also informed that an execution application, being Execution Application (L) No.934 of 2016 was filed by the Appellant before the Bombay High Court and the same is also pending as on date. 2. Sometime in 2015, the Appellant had filed a winding up petition, being Company Petition No.1039 of 2015 against SRUIL before the Bombay High Court, the same being pending as on date. 3. A winding up petition, being Company Petition No.1066/2015 filed by Respondent No.3 herein, M/s Action Barter Pvt. Ltd. ["Action Barter"] against SRUIL, by a conditional order dated 05.10.2016, stood admitted on the failure of SRUIL to deposit INR 5.90 crore. The appeal instituted by SRUIL against this order was dismissed by the Division Bench of the High Court on 17.01.2017, whereas the appeal instituted by Action Barter was allowed vide the same order and the amount to be deposited by SRUIL was enh....
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.... under Sections 13(2) and 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ["SARFAESI Act"]. The Court referred to an order of 12.04.2018, by which the provisional liquidator was to take physical possession of the assets of SRUIL within one week of the date of that order. Importantly, paragraph 2 of the said order stated: "2. Ms. Maitra states that the secured creditors have already commenced proceedings under SARFAESI against the company. As and when the banks may take out an application for banks submissions to hand over that part of the assets secured to the bank, appropriate orders will be passed." 6. This being the case, the learned Company Judge allowed the application in the following terms: "13. For the reasons aforesaid, the present Application is allowed. The Provisional Liquidator is directed to forthwith handover possession of the Mortgaged Property to the Applicant. However, the Applicant shall conduct the sale of the property in consultation with the Official Liquidator. The Applicant shall also deposit the sale proceeds or part thereof with this Court as and when the Court directs the Applicant to ....
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....word "not" that occurred in paragraph 5 of the order dated 07.02.2020. 10. An appeal was then filed to this Court by Action Barter on 08.10.2020, in which this Court, by order dated 27.10.2020, issued notice and directed the parties to maintain status quo qua the mortgaged property and also stayed further proceedings before the NCLAT. An appeal was also filed by the Appellant on 09.12.2020, in which this Court, by order dated 18.12.2020, issued notice and stayed further proceedings before the NCLT and tagged the appeal with the appeal filed by Action Barter. 11. We have been informed that pursuant to a settlement between Action Barter and the purchaser of the mortgaged property, i.e., Honest Shelters, Action Barter has now withdrawn its appeal that was filed before this Court. Thus, the only surviving appeal before us is Civil Appeal Nos.4230-4234 of 2020, filed by A. Navinchandra Steels Pvt. Ltd. 12. Dr. Abhishek Manu Singhvi and Shri Ranjit Kumar, learned Senior Advocates appearing on behalf of the Appellant, argued that in view of the judgment in Action Ispat and Power Pvt. Ltd. v. Shyam Metalics and Energy Ltd., 2020 SCC OnLine SC 1025 ["Action Ispat"], this matter is conclu....
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....He also argued, in the alternative, that there are no irretrievable steps that have been taken in the winding up proceeding in the present case, as the provisional liquidator continues to be seized of other assets of SRUIL. He further argued that a private sale by a secured creditor outside the winding up is not the irretrievable step that is spoken of in Action Ispat (supra), such step having to be taken by the provisional liquidator himself in selling the assets of the company in the process of winding up the company. He also added that, on facts, two orders dated 28.11.2019 and 20.01.2020 of the Bombay High Court would indicate that the Company Court itself had directed the provisional liquidator to hand over the records and assets of SRUIL to the interim resolution professional ["IRP"] that had been appointed in the Section 7 proceeding. Doubtless, such assets had not been handed over because they were only to the handed over two weeks after certain payments had been made by the IRP to the provisional liquidator, which payments have not yet been made. 14. Having heard learned counsel for all the parties, it is important to restate a few fundamentals. Given the object of the IB....
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....956, the Companies Act, 1956 can be treated as a general statute. This is clear from para 19 of that judgment. It was observed: "Further, the provisions of the special Act, i.e., the LIC Act, will override the provisions of the general Act, viz., the Companies Act which is an Act relating to companies in general." (emphasis in original) Thus, some High Courts rightly treated the Companies Act as a general statute, and the RDB Act as a special statute overriding the general statute. Special law v. special law 40. Alternatively, the Companies Act, 1956 and the RDB Act can both be treated as special laws, and the principle that when there are two special laws, the latter will normally prevail over the former if there is a provision in the latter special Act giving it overriding effect, can also be applied. Such a provision is there in the RDB Act, namely, Section 34. A similar situation arose in Maharashtra Tubes Ltd. v. State Industrial and Investment Corpn. of Maharashtra Ltd. [(1993) 2 SCC 144] where there was inconsistency between two special laws, the Finance Corporation Act, 1951 and the Sick Industries Companies (Special Provisions) Act, 1985. The latter contained S....
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....e of the workmen." The view taken therein was reiterated by a three-Judge Bench of this Court in Rajasthan State Financial Corpn. v. Official Liquidator [(2005) 8 SCC 190] wherein it was stated: (SCC pp. 201-02, para 18) "18. In the light of the discussion as above, we think it proper to sum up the legal position thus: (i) A Debts Recovery Tribunal acting under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 would be entitled to order the sale and to sell the properties of the debtor, even if a company-in-liquidation, through its Recovery Officer but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him. (ii) A District Court entertaining an application under Section 31 of the SFC Act will have the power to order sale of the assets of a borrower company-in-liquidation, but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him. (iii) If a financial corporation acting under Section 29 of the SFC Act seeks to sell or otherwise transfer the assets of a debtor company-in-liquidation, the said power could be exercised by it only....
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....in question. The first thing to be noticed is the difference between Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Section 37 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 does not include the Sick Industrial Companies (Special Provisions) Act, 1985 unlike Section 34(2) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Section 37 of the Securities and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 states that the said Act shall be in addition to and not in derogation of four Acts, namely, the Companies Act, the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 1992 and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. It is clear that the first three Acts deal with securities generally and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 deals with recovery of debts due to banks and financial institutions. Intere....
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.... proceedings before the High Court. It was open for Respondent 3 at any time before a winding-up order is passed to apply under Section 7 of the Code. This is clear from a reading of Section 7 together with Section 238 of the Code which reads as follows: "238. Provisions of this Code to override other laws.-The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." 20. Shri Dave's ingenious argument that since Section 434 of the Companies Act, 2013 is amended by the Eleventh Schedule to 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 to 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 NCLT was absolutely correct in applying ....
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.... in Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407 and Swiss Ribbons (supra), this Court held: "7.4. Section 16-G(1)(c) refers to the proceeding for winding up of such company or for the appointment of receiver in respect thereof. Therefore, as such, the proceedings under Section 9 IBC shall not be limited and/or restricted to winding up and/or appointment of receiver only. The winding up/liquidation of the company shall be the last resort and only on an eventuality when the corporate insolvency resolution process fails. As observed by this Court in Swiss Ribbons (P) Ltd. [Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17 : AIR 2019 SC 739], referred to hereinabove, the primary focus of the legislation while enacting IBC is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate debt by liquidation and such corporate insolvency resolution process is to be completed in a time-bound manner. Therefore, the entire "corporate insolvency resolution process" as such cannot be equated with "winding up proceedings". Therefore, considering Section 238 IBC, which is a subsequent Act to th....
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....arious Sections dealing with winding up of companies under the Companies Act, 2013, this Court then held: "20. What becomes clear upon a reading of the three judgments of this Court is the following: (i) So far as transfer of winding up proceedings is concerned, the Code began tentatively by leaving proceedings relating to winding up of companies to be transferred to NCLT at a stage as may be prescribed by the Central Government. (ii) This was done by the Transfer Rules, 2016 [Companies (Transfer of Pending Proceedings) Rules, 2016] which came into force with effect from 15.12.2016. Rules 5 and 6 referred to three types of proceedings. Only those proceedings which are at the stage of pre-service of notice of the winding up petition stand compulsorily transferred to the NCLT. (iii) The result therefore was that post notice and pre admission of winding up petitions, parallel proceedings would continue under both statutes, leading to a most unsatisfactory state of affairs. This led to the introduction of the 5th proviso to section 434(1)(c) which, as has been correctly pointed out in Kaledonia [Kaledonia Jute & Fibres Pvt. Ltd. v. Axis Nirman & Industries Ltd., 2020 SCC OnL....
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.... proceedings that may be filed qua the same company. Given the object sought to be achieved by the IBC, it is clear that only where a company in winding up is near corporate death that no transfer of the winding up proceeding would then take place to the NCLT to be tried as a proceeding under the IBC. Short of an irresistible conclusion that corporate death is inevitable, every effort should be made to resuscitate the corporate debtor in the larger public interest, which includes not only the workmen of the corporate debtor, but also its creditors and the goods it produces in the larger interest of the economy of the country. It is, thus, not possible to accede to the argument on behalf of the Appellant that given Section 446 of the Companies Act, 1956 / Section 279 of the Companies Act, 2013, once a winding up petition is admitted, the winding up petition should trump any subsequent attempt at revival of the company through a Section 7 or Section 9 petition filed under the IBC. While it is true that Sections 391 to 393 of the Companies Act, 1956 may, in a given factual circumstance, be availed of to pull the company out of the red, Section 230(1) of the Companies Act, 2013 is inst....
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....uch a creditor prefers to assert his right, not as a mortgagee, but as a creditor. He may say 'I will prove in respect of my debt'. If so, he comes into the winding up". It is also summarised in Palmer's Company Precedents Vol. II, page 415: "Sometimes the mortgagee sells, with or without the concurrence of the liquidator, in exercise of a power of sale vested in him by the mortgage. It is not necessary to obtain liberty to exercise the power of sale, although orders giving such liberty have sometimes been made". The secured creditor is thus outside the winding up and can realise his security without the leave of the winding up Court, though if he files a suit or takes other legal proceedings for the realisation of his security he is bound under Section 231 (corresponding with Section 171 of the Indian Companies Act) to obtain the leave of, the winding up Court before he can do so although such leave would almost automatically be granted. Section 231 has been read together with Section 228(1) and the attachment, sequestration, distress or execution referred to in the latter have reference to proceedings taken through the Court and if the creditor has resort to those proceedin....