TaxTMI 
TaxTMI 
2019 (8) TMI 1841
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....Article 226 & 227 of the Constitution of India, the petitioners inter alia seeks a declaration where the proceeding pending before the Company Law Tribunal are void and non est in the light of law laid down by Supreme Court in 'DHARNI SUGARS AND CHEMICAL LTD., VS. UNION OF INDIA'. The petitioners also seeks a direction to restore the control and superintendence of the Company to the shareholders of the Company, as it stood prior to 29.10.2018 i.e., an order of admission passed by the National Company Law Tribunal (hereinafter referred to as 'the Tribunal' for short), Bengaluru. In order to appreciate the petitioners grievance, few facts need mention, which are stated hereinafter: 2. The petitioners are shareholders of Associate Decor Limited, a Public Limited Company (hereinafter referred to as 'the Company' for short). The petitioner No.2 is a majority shareholder of the Company holding 51.47% of the equity shares in the Company. The petitioners company executed a term loan agreement on 15.02.2010 with a consortium of banks comprising respondent Nos. 1 to 3 for a term loan facility of Rs.233 Crores. Subsequent to the execution of term loan agreement, the company was in ne....
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....nt Nos.2 and 3. It is also pleaded that the proposal had to be discussed at the Board level of respondents, however, the same was rejected by the Deputy General Manger without assigning any cogent reasons. It is also pleaded that on 20.11.2018, the majority shareholders of the company filed a writ petition viz., W.P.No.1391/2018 before the Supreme Court of India, in which challenge was made to the validity of the Circular issued by the Reserve Bank of India dated 12.02.2018. The Supreme Court granted an ad interim order of status quo in respect of the affairs of the Company on 30.11.2018. Thereafter, vide judgment dated 02.04.2019, in all the writ petitions including the writ petition of the petitioners, the Circular issued by the Reserve Bank of India was quashed and it is the case of the petitioners that Supreme Court also quashed all the proceedings initiated under Section 7 of the Code which as initiated on the basis of the Circular issued by Reserve Bank of India as non est. It is the case of the petitioners that due to judgment of the Supreme Court, the proceeding initiated against the company under the Code are non est and void ab initio. 5. The Reserve Bank of India has is....
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....al submitted by the Company afresh and till then, the proceedings before the Tribunal be kept in abeyance. It is also submitted that judgment has to be read in its entirety and the stand taken by the respondent Nos.1 to 3 that it did not proceed against the Company on the basis of Circular issued by the Reserve Bank of India dated 12.02.2018 is incorrect. It is also argued that Tribunal has no power under Section 60(5) of the Code to recall / review its order. It is also submitted that at this stage, the remedy of appeal provided under Section 61 of the Code is not available to the petitioners. In support of aforesaid submissions, reliance has been placed on decisions of the Supreme Court in 'COMMISSIONER OF INCOME TAX VS. SUN ENGINEERING WORKS (P) LTD.', (1992) 4 SCC 363, 'KESAR DEVI (SMT) VS. UNION OF INDIA AND OTHERS', (2003) 7 SCC 427, and LOKHANDWALA KATARIA CONSTRUCTION PRIVATE LIMITED VS. NISUS FINANCE AND INVESTMENT MANAGERS LLP, CIVIL APPEAL NO.9279/2017 and decision in 'ANANT KAJARE VS. EKNATH AHER & ANR.', 2017 SCC ONLINE NCLAT 434. 7. On the other hand, learned counsel for respondent Nos.1 to 3 submitted that the Code confers a statutory right on the consortium to invo....
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....ode. Therefore, at this stage, the aforesaid remedy is not available to the petitioners. 9. In view of rival submissions made at the bar, the core issue which arises for consideration is whether the proceeding initiated by respondent Nos.1 to 3 under the Code are non est and ab initio void, in view of judgment dated 02.04.2019 passed in DHARNI SUGARS AND CHEMICALS LTD., supra. It is well settled in law that when an issue involves a pure question of law, a party need not be relegated to alternative remedy. [SEE: 'DR.BALAKRISHNA AGARWAL VS. STATE OF U.P. & ORS.', (1995) 1 SCC 614]. In view of aforesaid enunciation of law by the Supreme Court, I am not inclined to examine the issue with regard to availability of alternative remedy raised on behalf of respondent Nos.1 to 3. A pure question of law viz., whether in view of the order passed by the Supreme Court dated 02.04.2019 in DHARNI SUGARS AND CHEMICALS LTD., supra, the proceeding initiated by respondent Nos.1 to 3 are non est and ab initio void arises for consideration in this case. 10. Before proceeding further, it is apposite to take note of the Circular dated 12.02.2018 issued by the Reserve Bank of India. From careful scrutiny....
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....nce dates for implementing the RP to ensure calibrated, time-bound resolution of all such accounts in default. 13. It is however, clarified that the said transition arrangement shall not be available for borrower entities in respect of which specific instructions have already been issued by the Reserve Bank to the banks for reference under IBC. Lenders shall continue to pursue such cases as per the earlier instructions. 11. Thus, it is evident that clause (D) of the Circular alone deals with the lenders who have an aggregate exposure of Rs.2,000/- Crores. However, it is not necessary for this Court to examine the issue whether or not the Circular applies to the fact situation of the case, as the aforesaid Circular has been quashed in its entirety by the Supreme Court vide its judgment dated 02.04.2019. The relevant extract of the operative portion of the judgment of the Supreme Court writ petition dated 02.04.2019 reads as under: It is very difficult to segregate the non-banking financial institutions from banks so as to make the Circular applicable to them even if it is ultra vires insofar as banks are concerned. For these reasons also, the impugned Circular will have to be dec....
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....well before 180 days time prescribed under the Reserve Bank of India's Circular. Therefore, for this reason also the respondent No.1's action of initiating the proceeding under Section 7 of the Code cannot be termed as an action taken under the directions of the Reserve Bank of India's Circular as there was no requirement to do so prior to expiry of 180 days from 01.03.2018. For yet another reason, the judgment of the Supreme Court do not apply to the fact situation of the case as the judgment would apply to the proceeding under the Code, which have been initiated before the Adjudicating Authority against the debtors only because of operation of the Circular issued by Reserve Bank of India and where such proceedings are non est and cannot be proceeded with. The proceeding initiated by respondent No.1 is initiated under Section 7 of the Act, which is independent of the Circular issued by the Reserve Bank of India. Therefore, the judgment of the Supreme Court has no impact on the proceeding initiated by respondent Nos.1 to 3 in exercise of the statutory right under Section 7 of the Act as the Supreme Court has quashed the proceedings, which are initiated on the basis of the Circular,....