TaxTMI 
TaxTMI 
2020 (10) TMI 1337
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.... Airport Station, Viaducts, Ramps and Cut-cover Tunner between Officers Training Academy Station and Chennai Air Port Station on corridor 1 and was termed as the ECV-07 package of the project (Subject Project). 2.(b) As the dispute arose between them, the matter has been referred to the Arbitrator. The 1st Respondent being the claimant claimed an aggregate sum of Rs.1,98,58,82,734/-. The Applicant being the respondent in the Arbitral Proceedings, has also made a counter claim for a sum of Rs.107 Crores. It is the further case of the Applicant that after evidence was over, the moratorium imposed on the 1st Respondent by National Company Law Board, Hyderabad vide order dated 07.08.2017 and subsequent to the moratorium period, by an order dated 27.08.2018 liquidation was ordered and consequently Liquidator was appointed. It is the contention of the Applicant that to continue the proceedings, leave of the NCLT have to be obtained under Section 279 of the Companies Act, 2013. The 1st Respondent being the Liquidator took a stand that no leave is required to be sought under Section 279 of the Companies Act for continuance of the pending arbitral proceedings. A request was made before the....
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.... passed in favour of any of the parties, the same will be challenged as unenforceable in the absence of leave obtained to continue the proceedings. Hence his contention is that Section 279 of the Companies Act which correspondent to Section 446 of the Companies Act 1956, has to be followed. The Insolvency and Bankruptcy Code does not delete or alter the Section nor override the provision of 279 of the Companies Act 2013. Both the provisions of Companies Act and Insolvency Bankruptcy Code ought to be read harmoniously. It is his contention that Eleventh Schedule viz., Section 225 of IBC was notified on 15.11.2016, wherein the Companies Act 2013 was amended in the manner specified in the Eleventh Schedule. Companies Act Section 279 was made effective from 15.12.2016. If the intention of the legislation not to give any effect to 279, particularly winding up proceedings under Section 279, the same would not have been made effective from 15.12.2016 much after the Eleventh Schedule was made effective from 15.11.2016. Hence his contention that Apex Court in the the Judgement of B.K. Educational Services Pvt. Ltd., v. Parag Gupta and Associates [(2019) 11 SCC 633] wherein it is held that S....
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.... reasons. 9. In support of his submissions he has relied upon the following judgments: 1. B.K. Educational Services Pvt. Ltd., v. Parag Gupta and Associates [(2019) 11 SCC 633] 2. A. Kalaimani and Ors. v. State of Tamil Nadu and Ors. [2019 SCC Online Mad 4435] 3. Mrs. Vasangtha Raman vs. Official Liquidator and Others [2003 SCC Online Mad 997] 4. Babulal Vardharji Gurjar vs. Veer Gujar Aluminium Industries Pvt. Ltd., and Another [(2020) 6 MLJ 396 (SC)] 10. Mr. Ameya Gokhale, learned Counsel appearing for the 1st Respondent/Liquidator in this matter mainly submitted that invoking jurisdiction under Section 9 of the Arbitration and Conciliation Act is misconceived. The Application filed under Section 9 of the Arbitration Conciliation Act mainly based on the writ orders passed by this Court. It is his contention that Order passed in the writ petition is ex-parte order. The conferment of the jurisdiction is a legislative function and jurisdiction cannot be conferred by any court. The Arbitral Tribunal has already concluded that leave is not required. Objection of the applicant was rejected. Such order or objection would fall within the ambit of Section 16 or Section 19 of the....
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....ct vested with NCLT. When there is conflict between the Code and any other law the provisions of the Code shall have primacy, by virtue of Section 238 of the Code. Under Section 14 if Moratorium is ordered which inter alia, prohibits institution and continuation of pending suits or proceedings against the company undergoing CIR Process. There is however no bar on the Corporate Debtor to institute new or continue pending proceedings against another party. In the event, a company does not receive a resolution plan or the Adjudication Authority rejects a resolution plan, Adjudication Authority passes an order requiring a company to be liquidated in the manner as provided in liquidation process. It is his further contention that there is no bar on continuation of pending suits and legal proceedings by the Corporate Debtor during the period of liquidation as per Section 33(5) of the Code. Hence prayed for dismissal of the Application. 13. Before deciding the maintainability of Section 9 of the Arbitration and Conciliation Act, this Court is inclined to going to the submissions of both sides as to whether or not leave is required to continue the Arbitral Proceedings. 14. The fact that ....
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....therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. Section 14 makes it clear that once moratorium is declared, there is a bar for institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority. Above section makes it very clear that institution of suit or continuation of suit or other proceedings against the is barred during the moratorium period. 17. Section 33(5) of the Code reads as follows: "33(5) Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor: Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the....
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....ever made in Section 279 of the Companies Act, 2013 the said provision was made effective from 15.12.2016 much after the effective date of Eleventh Schedule i.e. 15.11.2016. 22. Originally the winding up or liquidation of companies were dealt with by the Companies Act. the Companies Act 2013 also dealt with the winding up exhaustively. However, the need to enact a separate Code which would deal with not only the insolvency of corporate persons but also partnership firms and individuals, was seriously felt. Therefore whole law relating to insolvency irrespective of whether it related to corporate entities or firms or individuals were brought under one law, namely, the Insolvency and Bankruptcy Code, 2016. Therefore, the insolvency relatable to living persons, an association of living persons collectively known as firms and entity which has a juristic personality has been brought under one law. Such a law is special in nature. Section 238 of the Insolvency and Bankruptcy Code, 2016 states that '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....
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.... Section 281 cannot be taken out of context and extrapolated in Section 33(5) of the 2016 Code. 26. The comparison between Companies Act 1956, Companies Act 2013 and Insolvency & Bankruptcy Code are tabled hereunder: COMPANIES ACT, 1956 COMPANIES ACT, 2013 SECTION 446 SECTION 279 446. Suits Stayed On Winding Up Order (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Tribunal and subject to such terms as the Tribunal may impose. (2) The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of - (a) any suit or proceeding by or against the company ; (b) any claim made by or against the company (including claims by or against any of its branches in India) ; (c) any application made under section 391 by or in respect of the company ; (d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in c....
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.... winding up of the company, whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made or such scheme has been submitted, or is submitted, before or after the order for the winding up of the company is made.] COMPANIES ACT, 1956 SECTION 433 COMPANIES ACT, 2013 SECTION 271 433. Circumstances in which company may be wound up by tribunal company may be wound up by the Tribunal, - (a) if the company has, by special resolution, resolved that the company be wound up by the Tribunal ; (b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting ; (c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year ; (d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two; (e) if the company is unable to pay its debts ; (f) if the Tribunal is of opinion that it is just and equitable that the company should be wound up ; (g) if the company has made a default in filing with the Regi....
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....e company has, by special resolution, resolved that the company be wound up by the Tribunal; (c) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality; (d) if the Tribunal has ordered the winding up of the company under Chapter XIX; (e) if on an application made by the Registrar or any other person authorised by the Central Government by notification under this Act, the Tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent manner or the company was formed for fraudulent and unlawful purpose or the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and that it is proper that the company be wound up; (f) if the company has made a default in filing with the Registrar its financial statements or annual returns for immediately preceding five consecutive financial years; or (g) if the Tribunal is of the opinion that it is just and equitable that the company should be wound up. (2) A company shall be deemed to be unable....
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....nder section 272, be wound up by the Tribunal,- (a) if the company has, by special resolution, resolved that the company be wound up by the Tribunal; (b) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality; (c) if on an application made by the Registrar or any other person authorised by the Central Government by notification under this Act, the Tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent manner or the company was formed for fraudulent and unlawful purpose or the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and that it is proper that the company be wound up; (d) if the company has made a default in filing with the Registrar its financial statements or annual returns for immediately preceding five consecutive financial years; or (e) if the Tribunal is of the opinion that it is just and equitable that the company should be wound up. 10. Initiation of corporate insolvency resolution process by corpo....
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....te persons. (1) A corporate person who intends to liquidate itself voluntarily and has not committed any default may initiate voluntary liquidation proceedings under the provisions of this Chapter. (2) The voluntary liquidation of a corporate person under sub-section (1) shall meet such conditions and procedural requirements as may be specified by the Board. (3) Without prejudice to sub-section (2), voluntary liquidation proceedings of a corporate person registered as a company shall meet the following conditions, namely: - (a) a declaration from majority of the directors of the company verified by an affidavit stating that - (i) they have made a full inquiry into the affairs of the company and they have formed an opinion that either the company has no debt or that it will be able to pay its debts in full from the proceeds of assets to be sold in the voluntary liquidation; and (ii) the company is not being liquidated to defraud any person; (b) the declaration under sub-clause (a) shall be accompanied with the following documents, namely: - (i) audited financial statements and record of business operations of the company for the previous two years or for the period since it....
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....KRUPTCY CODE, 2016 SECTION 25 INSOLVENCY AND BANKRUPTCY CODE, 2016 SECTION 35 25. Duties of resolution professional. (1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely: - ... (b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings; ... 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: - ... (k) to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the corporate debtor; ... COMPANIES ACT, 2013 SECTION 279 INSOLVENCY AND BANKRUPTCY CODE, 2016 SECTION 33(5) 79. Stay of suits, etc., on winding up order. (1) When a winding up order has been passed or a provisional liquidator has been appointed, no suit or ....
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....ts subsidiaries situated in India; and (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. ... SECTION 468 COMPANIES ACT PRIOR TO AMENDMENT SECTION 468 COMPANIES ACT - POST IBC (Substituted by Section 255 of the Insolvency and Bankruptcy Code, 2016 read with the clause (35) of the Eleventh Schedule thereto, with effect from 15th November, 2016 vide notification number S.O 3453(E) dated 15th November, 2016.) SUBSEQUENT TO AMENDMENT (1) The Central Government shall, make rules consistent with the Code of Civil Procedure, 1908 (5 of 1908) providing for all matters relating to the winding up of companies, which by this Act, are to be prescribed, and may make rules providing for all such matters, as may be prescribed. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:- (i) as to the mode of proceedings to be held for winding up of a company by the Tribunal; (ii) for the voluntary winding up of companies, wheth....
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....ks or papers to the liquidator; (viii) the making of calls; and (ix) the fixing of a time within which debts and claims shall be proved. (3) All rules made by the Supreme Court on the matters referred to in this section as it stood immediately before the commencement of this Act and in force at such commencement, shall continue to be in force, till such time the rules are made by the Central Government and any reference to the High Court in relation to winding up of a company in such rules shall be construed as a reference to the Tribunal. 27. Section 446 of the Company Act 1956 Act prohibited the commencement of any suit or legal proceeding when a winding up order is made. It also applied for the pending proceeding and the leave was required. Section 279 of the Companies Act 2013 also deals with the word 'pendency' and this word is conspicuously absent in the main part of Section 33(5) and in the proviso of the IBC2016. 28. Comparison between Section 446 of the 2013 Act and 279 of 1956 Act. Seeking of leave under Section 33(5) for pending cases was obviously omitted as the case before the other authority might have progressed until the declaration of moratorium. In such circu....
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....onourable Apex Court has held that the tribunal cannot grant a declaratory decree. 31. The definition of the word "claim" is found in Section 3(6), Section 3(11) defines "Debt", Section 3(12) defined "default" and Sections 3(13) to 3(18) of the Insolvency and Bankruptcy Code 2016 deals with financial aspects. Therefore the very word 'claim' is relatable to a right of payment. Such right of payment may arise on account of debt or on account of any breach of contract provided such breach gives right to a payment. In such circumstances the provisions of Companies Act which deals with cases of winding up generally cannot be read harmoniously with IBC which is a Special Law. 32. A similar situation arose before the division bench of this Court where the scope of Section 279 of the 2013 Act and admiralty suits had to be considered. In Pratibha Shipping Company Limited v. Praxis Enegery Agents SA and others, [2019 ( 5) CTC] A suit was filed under the Admiralty Jurisdiction claiming compensation. A Writ Petition was also filed seeking inquiry on the incident and compensation. In the civil suit, the sale of the vessel was ordered and the proceeds were deposited in the Court several cl....
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.... will apply. In particular, winding up proceedings pending before a High Court are liable to be transferred to the NCLT for further decision by applying the Code and not the Companies Act." 18. This becomes clear on a reading of Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016, which reads as follows: "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 (Rule 2(2) of the Companies (Transfer of Pending Proceedings) Rules, 2016 defines the "Act" as meaning the Companies Act, 1956.) on the ground of inability to pay its debts pending before a High Court, and, where the petition has not been served on the respondent under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub- section (4) of Section 419 of the Companies Act, 2013 exercising territorial jurisdiction to be dealt with in accordance with Part ll of the Code: Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with rul....
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....eferred to in the Code is that of actual non-payment by the corporate debtor when a debt has become due and payable; and (g) that if default had occurred over three years prior to the date of filing of the application, the application would be time-barred save and except in those cases where, on facts, the delay in filing may be condoned; and (h) an application under Section 7 of the Code is not for enforcement of mortgage liability and Article 62 of the Limitation Act does not apply to this application." 35. In Innoventive Industries Limited vs. ICICI Bank and Another [2018 (1) SCC 407], the Honourable Apex Court has held that Insolvency and Bankruptcy Code is an exhaustive code and bring the insolvency law in India under a single unified umbralla. In the above judgement the Apex Court considered the inconsistent between the Maharashtra Act and IBC and held that the Insolvency and Bankruptcy Code will prevail over the Maharashtra Act. 36. Therefore from the conspectus of various provisions referred above, I am of the view that Section 33(5) of the IBC Code has to be interpretted on its own language. Further, as discussed, when there is no inconsistency IBC would prevail over. S....