TaxTMI 
TaxTMI 
2020 (10) TMI 1337
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....nd Building Services Work (BS) for Chennai 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 arbitra....
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....ies Act will lead to the situation that any award is 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 Asso....
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....grant interim order on the ground of just and convenient 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....
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....d with the Adjudicating Authority. Whereas winding under Part I of Chapter XX of Companies Act 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....
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....ansferring, encumbering, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest 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 ....
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.... Eleventh Schedule not confined to Insolvency and Bankruptcy alone and also applicable to winding up took place under the Companies Act. It is also relevant to be noted that as no amendment whatsoever 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....
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.... of voluntary winding up and cases where the company can be wound up on just and equitable grounds. Section 279 and 280 of the 2013 Act is applicable only to the cases falling under Section 271 of the 2013 Act. 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 ....
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....priorities or any other question whatsoever, whether of law or facts, including those relating to assets, business, actions, rights, entitlements, privileges, benefits, duties, responsibilities, obligations or in any matter arising out of, or in relation to 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, ....
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....ion number S.O 3453(E) dated 15th November, 2016. Prior to amendment Subsequent to amendment 271. Circumstances in which company may be wound up by Tribunal (1) A company may, on a petition under section 272, be wound up by the Tribunal,- (a) if the company is unable to pay its debts; (b) if the 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 woun....
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....mediately 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. COMPANIES ACT, 2013 SECTION 271 INSOLVENCY AND BANKRUPTCY CODE, 2016 SECTION 10 271. Circumstances in which company may be wound up by Tribunal A company may, on a petition under 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....
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....rovided that Adjudicating Authority shall, before rejecting an application, give a notice to the applicant to rectify the defects in his application within seven days from the date of receipt of such notice from the Adjudicating Authority. (5) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (4) of this section. Voluntary liquidation of corporate 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....
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....rson. (8) The Adjudicating Authority shall on an application filed by the liquidator under sub-section (7), pass an order that the corporate debtor shall be dissolved from the date of that order and the corporate debtor shall be dissolved accordingly. (9) A copy of an order under sub-section (8) shall within fourteen days from the date of such order, be forwarded to the authority with which the corporate person is registered. INSOLVENCY AND BANKRUPTCY 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 Adjudicati....
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....ted, or is submitted, before or after the order for the winding up of the company is made. 60. Adjudicating Authority for corporate persons. ... (5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of - (a) any application or proceeding by or against the corporate debtor or corporate person; any claim made by or against the corporate debtor or corporate person, including claims by or against any of its 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 ....
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....editors and members in connection with proceedings under section 230; (iii) for giving effect to the provisions of this Act as to the reduction of the capital; (iv) generally for all applications to be made to the Tribunal under the provisions of this Act; (v) the holding and conducting of meetings to ascertain the wishes of creditors and contributories; (vi) the settling of lists of contributories and the rectifying of the register of members where required, and collecting and applying the assets; (vii) the payment, delivery, conveyance, surrender or transfer of money, property, books 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 19....
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....y that commences exercising of its power by entertaining a petition by a creditor on account of default by the Corporate Debtor enters into the sphere of resolution process which again deals with money and money alone ends up under liquidation. If there is a suit for title pending before the civil court. Adjudicating Authority normally would not be able to reject the leave in such cases. It is to be noted that the tribunals of limited tribunals of limited jurisdiction do not have power to issue declaratory decrees. In Nahar Industrial Enterprises Ltd vs Hongkong & Shanghai Banking [Corp2009 8 SCC 646] also the Honourable 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 whi....
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....t or the High Court, may now be transferred to the Tribunal. Each of these proceedings would directly be governed by the Limitation Act as they are proceedings before Courts. Obviously, upon transfer of such proceedings to the Tribunal, it cannot be stated that because these proceedings are now before the Tribunal, the Limitation Act will cease to apply. Also, in fresh applications that are made after the Code comes into force, it cannot be said that to such applications, the Limitation Act will not apply, but to applications that are transferred from the District Court or the High Court, the provisions of the Limitation Act 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 ....
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....ended to be adversarial to the corporate debtor but is aimed at protecting the interests of the corporate debtor; (c) that intention of the Code is not to give a new lease of life to debts which are timebarred; (d) that the period of limitation for an application seeking initiation of CIRP under Section 7 of the Code is governed by Article 137 of the Limitation Act and is, therefore, three years from the date when right to apply accrues; (e) that the trigger for initiation of CIRP by a financial creditor is default on the part of the corporate debtor, that is to say, that the right to apply under the Code accrues on the date when default occurs; (f) that default referred 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 Innoven....