Rajasthan High Court - Jaipur
Jaipur Metals & Electricals Ltd vs Dhir & Dhir Asset Re-Construction Co on 1 June, 2018
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. Company Petition No. 19/2009
In Re:
M/ S Jaipur Metals Electricals Ltd
----Petitioner
=======
----Respondent Connected With S.B. Civil Writs No. 4156/1998 Vinod Kumar Jain
----Petitioner Versus Jaipur Metals And Electricals
----Respondent S.B. Civil Writs No. 504/2000 Metals Elecricals Mazdoor Sa
----Petitioner Versus State Ors.
----Respondent S.B. Civil Writs No. 3950/2000 R.c.misra And Ors.
----Petitioner Versus State And Ors.
----Respondent S.B. Civil Writs No. 3963/2000 Anjani Kumar And Ors
----Petitioner Versus State And Ors
----Respondent S.B. Civil Writs No. 3964/2000 Rameshwar Prasad And Ors
----Petitioner Versus State And Ors
----Respondent S.B. Civil Writs No. 3965/2000 (2 of 26) [COP-19/2009] Babu Lal And Ors
----Petitioner Versus State And Ors
----Respondent S.B. Civil Writs No. 3966/2000 R M Yadav And Ors
----Petitioner Versus State And Ors
----Respondent S.B. Civil Writs No. 3967/2000 Rasik Lal And Ors
----Petitioner Versus State And Ors
----Respondent S.B. Civil Writs No. 3643/2007 Dr.sanjula Thanvi
----Petitioner Versus State Of Rajasthan And Ors
----Respondent S.B. Civil Writs No. 13608/2008 Jaipur Metals And Electricals
----Petitioner Versus State Of Raj And Ors
----Respondent S.B. Company Appeal No. 6/2009 Jme Employees Cooperative Credit Thrif
----Petitioner Versus M/s Dhir Dhir Assets
----Respondent S.B. Company Appeal No. 7/2009 Jaipur Metals Electricals Ltd
----Petitioner Versus Dhir Dhir Asset Re-Construction Co
----Respondent (3 of 26) [COP-19/2009] S.B. Company Appeal No. 8/2009 State Of Raj
----Petitioner Versus M/s Dhir Dhir Assets Securitisation
----Respondent S.B. Writ Review No. 43/2018 Metals Elecricals Mazdoor Sa
----Petitioner Versus State Ors. ----Respondent For Petitioner(s) : Mr. SS Hora, Adv.
Mr. Abhiroop Das Gupta, Adv.
For Respondent(s) : Mr. Rajendra Prasad, AAG
Mr. Nitin Jain, Adv.
Mr. RC Joshi, Adv.
Mr. PK Sharma, Adv.
HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA Judgment / Order REPORTABLE Reserved on 03/05/2018 Pronounced on 01/06/2018
1. On 26/04/2018, this Court, on having received an affidavit filed on behalf of the Interim Resolution Professional, stated to have been appointed by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016 (IBC), observed as under:-
"Prima facie, once the case was pending before this Court and the concerned applicant Alchemist was already party to this Court proceedings and was well aware of the proceedings going on with regard to the revival proceedings and also had put up its proposal, at the same time the claim of workmen was also being examined for which the valuation report has been directed to be conducted by the Official Liquidator; there was no occasion for intervention by NCLT in the matter. It appears that no notice was issued to the State Government nor workmen were (4 of 26) [COP-19/2009] given any opportunity before admitting the same under the Code of 2016.
Learned Advocate General as well as Additional Advocate General state that they would like to file reply to the affidavit filed by the Interim Resolution Professional and pray for interim protection.
Taking into consideration the aforesaid aspect, implementation and effect of order passed by NCLT shall remain stayed and till question is decided whether Code of 2016 will over ride the present proceedings, till that date, the State Government shall not hand over the possession of building and material of of JMEL to the Interim Resolution Professional appointed by NCLT.
List on 3rd May, 2018."
2. The question before this Court essentially is whether the present proceedings can continue or whether the NCLT order appointing the IRP could be allowed to act in terms of IBC, 2016 while the present proceedings in relation to the Company are pending before this Court.
3. The Additional Advocate General, appearing for the State was heard alongwith the counsel appearing for the workmen as well as the counsels appearing for Alchemist Asset Reconstruction Company Ltd. The counsel for Jaipur Metals and Electrical Limited (JMEL) was also heard.
4. Before embarking on the question above, it would be useful to note certain orders which have been passed by this Court in the Company Petition as well as Writ Petitions filed by the workmen.
5. In the Company Petition on 17/08/2017, arguments were heard and order was reserved on the question whether the Company should be wound up. While the judgment was reserved, an application came to be filed by the State for recalling the order dated 17/08/2017 on the ground that the State Government was not able to present its case. It was stated that the State (5 of 26) [COP-19/2009] Government has decided to invite revival proposal and written submissions were also filed by the State. This was because in SB Civil Writ Petition No.504/2000 preferred by Jaipur Metals and Electricals Ltd. Majdoor Sangh, this Court had asked the Advocate General to find out the possibilities of reviving the Company as a prayer has been made in the said writ petition for revival of the Jaipur Metals and Electricals Ltd.. It was also stated that a meeting was convened under the chairmanship of the Hon'ble Industries Minister on 24/08/2017. Taking into consideration the averments, this Court listed the case under 'to be mentioned' category and directed the State to advance its submissions whereafter the case was listed several times before the Court. The Company Petition was also placed before Hon'ble the Chief Justice to pass orders relating to consolidation of matters which had been taken up by the workman in writ proceedings whereafter the Hon'ble Chief Justice directed that the writ petitions shall be listed and heard alongwith Company Petition before the Company Judge.
6. The State Government was thereafter asked to submit a concrete proposal alongwith the Scheme. However, the State Government, later on submitted that they do not have any proposal and they were in the process of seeking proposals from the concerned parties who may come forward for putting up a proposal for revival. The applicant Alchemist Asset Reconstruction Company Ltd. also submitted a proposal in the meeting conducted by the State Government. It was directed to submit the details about various proceedings which have been undertaken in relation to the Company. On 02/11/2017, following orders were passed by this Court:-
(6 of 26) [COP-19/2009] "The case was directed to be listed today. At the request of the State Government, the case had been put up for re-hearing. A concrete proposal is required to be put by the State Government with regard to revival. The said proposal alongwith scheme and the decision of the State Government may be placed before this Court within two weeks hereinafter with advance copy to the concerned parties to this petition, the concerned parties may also submit their response to the said proposal. It is made clear that attempt should be made to revive the company and start its operations and it would be always in the interest of all that the company starts production again. However, it would be subject to concerned parties proposal and the manner in which they may accept the proposal of the State Government.
Let the pleadings in this regard be completed within four weeks.
Let the matter come up again on 07.12.2017. All the matters relates to Jaipur Metals & Electricals be listed on the said date. "
7. Another order was passed on 07/12/2017 as under:-
"We have heard the learned counsels for the Alchemist Asset Reconstruction Company Ltd, the workers of the company and the Additional Advocate General Mr.G.S.Gill. This Court finds that a minutes of meeting have been placed by the Additional Advocate General stated to have been held for discussing possibility of revival of M/s. Jaipur Metals & Electricals Ltd. Under the Chairmanship of Commissioner Industries on 21 & 22.11.2017. Minutes of meeting dated 1.12.2017 show that the submissions of the M/s Genus Power Infrastructures Ltd, Alchemist Asset Reconstruction Company Ltd and JME employees society have been noted. However, it appears that the State Government has not put up its submissions in the meeting. The minutes refer to the submissions with a view to place the same before the State Government for taking a decision.
While noting the written submissions of the State Government, this Court had directed the matter to be heard a fresh its vide order dated 24.10.2017. It was mainly on account of State Government stating in written submissions therein that they have a revival proposal. However, even as on today, no concrete proposal on behalf of the State Government has been put up for revival. This Court would like to know a (7 of 26) [COP-19/2009] concrete proposal of the State Government with regard to the possibility revival of M/s. Jaipur Metals & Electricals Ltd. be placed before this Court before any final decision is taken in the matter. Such proposal be submitted along with an affidavit of the Principal Secretary Industries before the next date.
List again on 4.1.2018 for the said purpose."
8. In SB Civil Writ Petition No.504/2000, Jaipur Metals & Electricals Mazdoor Sangh Vs. State, order was passed on the same date i.e. 07/12/2007 as under:-
"This writ petition has been placed before this Court in view of the company matter pending before this Court. A compliance report has been filed by the State.
Learned counsel for the petitioner submits that the workers by way of this writ petition have prayed and pointed out that they have 59.50% shares and 20.23% shares are held by the State Government. The company was locked out in 30.9.1998 and the workmen in the present writ petition are praying for payment of salary and their dues.
It is stated that the goods and material of value of more than Rs.35,000,0000/- is lying in the factory premises of J.M.E.L. The possession of the premises are with the State Government. The salary of the workmen which is lying due since long can be meted out to certain extend by selling of the material in the factory premises.
Taking into consideration, the submissions of the counsel for the petitioner-workmen, it is directed that the State Government shall submit an evaluation report relating to the entire material which is lying in the factory premises and also for the said purpose. I direct the Official Liquidator to act provisionally attached to this Court and conduct along with the Officers of the State Government the said evaluation thorough evaluation experts and submit the report to this Court on 4.1.2018. So that further decision referring to release of salary dues for the workers may be taken by this Court, accordingly.
List again on 4.1.2018."
9. All the parties, who had stake in the matter, had put up their proposal and the OL also submitted his report relating to valuation.
(8 of 26) [COP-19/2009]
10. While the aforesaid proceedings were going on, the NCLT has passed an order under Section 7 on 13/04/2018 whereby the NCLT, relying upon an affidavit filed by the financial creditor Alchemist Asset Reconstruction Company Ltd., affirming that till date neither any liquidation nor any admission order has been passed in the winding up proceedings and noting that no provisional liquidator or OL has been appointed, the NCLT has proceeded to pass an order appointing IRP and also has proceeded to declare moratorium in terms of Section 14 of the IBC, 2016.
11. In the aforesaid background, learned counsel appearing for Alchemist Asset Reconstruction Company Ltd. submits that the Alchemist Asset Reconstruction Company Ltd. was entitled to approach the NCLT despite pendency of the present winding up proceedings. It is submitted that it is not a case of transfer of proceedings but is rather a case of fresh initiation of CIRP proceedings before the NCLT. It is submitted that there is no bar for initiating fresh petition before the NCLT despite pendency of the present winding up proceedings. It is submitted that the Companies (Transfer of Pending proceedings) Rules, 2016 would not be applicable as it was not a case of transfer of proceedings. It is submitted that on 29/06/2017, the existing Rule 5 was substituted and the embargo created on petitions arising out of the references made by BIFR was refuted and in terms of Rule 5 proviso 2 all parties were entitled to file fresh applications under the applicable provisions of IBC, 2016. It is submitted that there is no rule which prevents the institution of fresh petitions before the NCLT under IBC, 2016 and it is asserted that it is a legitimate exercise which has statutory right which deserves to be permitted to be continued. It is further submitted that there is no power (9 of 26) [COP-19/2009] available with this Court to grant injunction in view of provisions of IBC, 2016 and the High Court would come within ambit of definition of Court for the said purpose. In terms of Section 238 of IBC, 2016, the provisions of IBC would override all other laws notwithstanding inconsistent therewith contained in any other law for the time being in force. Learned counsel relies on the judgment passed by the Supreme Court in the case of Innoventive Industries Ltd. Vs. ICICI & Anr.:2018(1) SCC
407. It is further submitted that IBC, 2016 provides a mechanism to consider claims of all employees in terms of Regulation 9 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
12. Learned counsel also submits that effect of the moratorium will apply. However, he submits that it is only applicable for the limited time during which the proceedings can be continued i.e. six months with an extension period of another 90 days and thereafter, the case in the High Court can continue. It is further stated that as the NCLT has already passed an order, the same can only be a subject matter of challenge before the NCLAT by any party which is aggrieved of the same and relies on the law laid down by the Apex Court in the case of Authorized Officer, State Bank of Travancore Vs. Mathew KC: 2018(3) SCC 85 as well as other judgments to the same effect. The submission is that the Alchemist Asset Reconstruction Company Ltd. is required to be declared as a financial creditor and as the State Government has affirmed that it does not have any revival plan of its own, the State Government would have no locus in the matter to oppose the proceedings undertaken by the applicant before the IBC.
(10 of 26) [COP-19/2009]
13. Per-contra, Mr. Rajendra Prasad, learned Additional Advocate General appearing for the State has opposed the entire action taken by Alchemist Asset Reconstruction Company Ltd. (for short, 'ALCHEMIST') before the IBC. It has been stated that the Company Petition was registered on 26/09/2002 after the recommendations of BIFR and notices had already been served on all the parties including the applicant-Company namely; ALCHEMIST. After the judgment had been reserved, because other writ petitions were also clubbed, an order was passed in the annexed writ petition i.e. SB Civil Writ Petition No.504/2000 directing the OL to act provisionally and thus, it is submitted that a Provisional Liquidator was already acting and has also performed the work of valuation of the property of Jaipur Metals and has submitted its report. Thus, the OL is actively involved in the proceedings before this Court.
14. Learned Additional Advocate General also submitted that the applicant ALCHEMIST had also admitted that there is no question of pre-notice transfer of the petition for winding up and asserts that the same shall continue to remain with this Court and his application to IBC is only with regard to recovery of the amount. Such an argument is contradictory as per submissions of the respondent-State.
15. In reply to the submission of the Company that they are permitted in terms of Section 5(2) of the Rules of 2016 to file fresh application in terms of Section 7 of IBC 2016, the learned Addl. Advocate General submitted that such an argument is patently misconceived since the Rules of 2016 have been enacted under the powers conferred by the Company Act, 2013 as well as IBC 2016. Rule 3 of the Rules of 2016 provides as under:-
(11 of 26) [COP-19/2009]
3. Transfer of pending proceedings relating to cases other than Winding up.--All proceedings under the Act, including proceedings relating to arbitration, compromise, arrangements and reconstruction, other than proceedings relating to winding up on the date of coming into force of these rules shall stand transferred to the Benches of the Tribunal exercising respective territorial jurisdiction:
Provided that all those proceedings which are reserved for orders for allowing or otherwise of such proceedings shall not be transferred.
16. Thus it is submitted by the learned Addl. Advocate General that from above, it is apparent that all the proceedings which are reserved for orders shall not be transferred. Further, it is submitted that Rule 5 of the Rules of 2016, which deals with transfer of pending proceedings of winding up, would only relate to such winding up proceedings initiated within the meaning of Section 433(e) i.e. inability to pay debts which is not the question in the instant case.
17. The third submission of learned Addl. Advocate General is with regard to Rule 6 which provides the continuity of proceedings of winding up before this Court in relation to the petitions pending under Clause (a) and Clause (f) of Section 433 of the Act of 1956.
The said provisions do not relate to inability of the Company to pay its debts and as the present case also does not fall within Section 433(e), it is submitted that the present proceedings cannot be stalled or transferred on account of the wrongful action with the applicant ALCHEMIST in moving proceedings before the NCLT under IBC 2016.
18. Learned Addl. Advocate General further submitted that the reference by BIFR under Section 20(1) proceeds on the ground that "it is just and equitable that the Company should be wound up." and as per Section 20(2) of the SICA, there is a mandate to wind up the Company on the basis of opinion of the Board. Thus, (12 of 26) [COP-19/2009] the question of the petition having not been admitted or admitted would not arise in cases where the Company Court is ceased with the case of reference made under Section 20(1) by the BIFR and the proceedings before the IBC are therefore, clearly inconsistent of the Act of 1956 and the same cannot be allowed to be continued.
19. Learned Addl. Advocate General has also asserted that in the instant case, the provisions of Rule 6 of the Rules of 2016 would be applicable and therefore, the argument regarding amendment of Rule 5 bears no relevance in the instance cases. It is submitted that the case of winding up on recommendations of BIFR was covered by the provisions of Rule 6 and therefore, the same would remain with the High Court as notice under Section 26 of the Act of 1956 had already been served.
20. Continuing with the said submissions, the counsel submits that Part 2 of the IBC Code 2017 applies to the matters relating to insolvency and liquidation of corporate debtors where the minimum amount of default is Rs.One Lac. The word 'defaulter' has been defined to mean non-payment of debt. Since the cases before this Court are not relating to non-payment of debt, the IBC Code 2016 would have no application to the present case before this Court. Thus, Rule 5 would have no application.
21. It is further urged that the reliance upon provisions of second proviso to Rule 5 of the Rules of 2016 for filing a fresh application under Section 7, 8 or 9 of the Code is clearly misconceived. The second proviso applies only with regard to the matters which stand transferred under Rule 5 and because of non- compliance of first proviso, such transferred petitions stands abated. The second proviso cannot be read independent of the (13 of 26) [COP-19/2009] provisions of Rule 5 and its first proviso. The third proviso directs for continuance of the pending petitions with regard to winding up for inability to pay debt irrespective of non-service. If one petition is not transferred and remains with the High Court, the new petition shall have to be also preferred to the High Court alone. Thus, the intention of the legislature is clear that in the event of the High Court being seized with a winding up petition, the other petition before NCLT under the Code will not be filed for reasons of inability to pay debt.
22. Learned Addl. Advocate General further submits that as per Section 434(1)(c) of the Companies Act, 2013, all the proceedings before the notified date were to be transferred to the NCLT which would have proceeded to deal with from the stage before their transfer. However, the IBC 2016 itself vide Section 255 provided, "The Companies Act 2013 shall be amended in the manner specified in the Eleventh Schedule." The Eleventh Schedule to IBC 2016 vide Section 34 has substituted Section 434 of the Companies Act, 2013 and the provision of Section 434(1)(c) provides for transfer of winding up petitions. But the proviso to this Section reads that "provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government."
23. Thus, it is submitted that the substituted provision of Section 434 of the Companies Act, 2013 is very much part and parcel of the IBC 2016 itself and therefore, the question of IBC 2016 overriding its own provisions does not arise and therefore Section 238 of IBC has no bearing in the matter.
(14 of 26) [COP-19/2009]
24. Learned Addl. Advocate General further submitted that applying the principle of harmonious construction would imply that a fresh petition under Section 7 of the IBC would be maintainable only in a situation when there is no winding up petition pending before the High Court or being continued to be dealt with by it and in cases where transfer has been made under Rule 5 and the same has been abated under first proviso to the said rule.
25. The law does not contemplate liquidation by two parallel forums under two different provisions of law. It is further submitted that the process of resolution in liquidation under the Scheme of IBC, being not severable, the law could not have contemplated pendency of winding up proceedings with one forum. A petition under Section 7 is ultimately a petition for liquidation and as winding up proceedings were already continuing before this Court, there was no reason that the applicant, which is party to the proceedings, to have filed a petition under IBC.
26. It is further submitted by learned Addl. Advocate General that the Company as well as the NCLT in its order has misread the provisions of Section 11 (d) of IBC. It is submitted that Section 11 excludes certain persons from making an application for initiating corporate insolvency resolution process and they are all with regard to corporate debtor. The definition of corporate debtor include corporate applicant and from the reading of provision of Section 5(5), it would be clear that it does not include financial creditor. Thus, 11(d) has no application in the instant case.
27. The argument on alternative remedy raised by the applicant ALCHEMIST has been countered by the learned Addl. Advocate General submitting, inter-alia, that the Court in the instant case has to itself decide as to whether it can proceed further or it has (15 of 26) [COP-19/2009] to stop proceedings. If there is a valid order by Tribunal, the consequence would follow but if the order of Tribunal is found to be without jurisdiction, which would be void, the Court would not be required to stop proceedings further. Thus, the only issue is as to whether the Tribunal acted within its jurisdiction which is not the case in the instant matter.
28. Learned Addl. Advocate General relies on the judgment passed by the Supreme Court in the case of State of MP Vs. Syed Qamarali: 1967 SLR 228 and submits that the law is well settled that if the order is questioned on the ground of want of jurisdiction, the law of restraint for alternative remedy would not apply. It is further submitted that it is settled position of law that if a Court or Tribunal inherently lacks jurisdiction, its orders/decrees would be nullity and therefore they can be questioned at any stage and even in collateral proceedings. It has, therefore, been prayed that the order of NCLT be declared as void ab-initio and nullity in law and the NCLT be restrained from proceedings further on the application under Section 7.
29. Before examining the issues involved in the present case, it would be appropriate to quote Provisions which are relevant for the purpose.
30. Rules 1, 5 and 6 of the Companies (Transfer of Pending Proceedings) Rules, 2016 as under:-
1. Short title and Commencement. - (1) These rules may be called the Companies (Transfer of Pending Proceedings) Rules, 2016.
(2) They shall come into force with effect from the 15th December, 2016 except rule4, which shall come into force from 1st April, 2017.
5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.--(1) All petitions relating to winding up under clause (c) of section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where (16 of 26) [COP-19/2009] 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 Part II of the Code:
Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with Rule 7, required for admission of the petition under sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal upto 15th July, 2017, failing which the petition shall stand abated:
Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under this rule and remains in the High Court and where there is another petition under clause (e) of section 433 of the Act for winding up against the same company pending as on 15th December, 2016, such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent.
6. Transfer of pending proceedings of Winding up matters on the grounds other than inability to pay debts.--All petitions filed under clauses (a) and (f) of section 433 of the Companies Act, 1956 pending before a High Court and where the petition has not been served on the respondent as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal exercising territorial jurisdiction and such petitions shall be treated as petitions under the provisions of the Companies Act, 2013 (18 of 2013).
31. Certain provisions of the IBC 2016 need to be quoted :-
7. Initiation of corporate insolvency resolution process by financial creditor. :-
(1) A financial creditor either by itself or jointly with other financial creditors may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.
Explanation.--For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor. (2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed. (3) The financial creditor shall, along with the application furnish--
(a) record of the default recorded with the information utility or such other record or evidence of default as may be specified;
(17 of 26) [COP-19/2009]
(b) the name of the resolution professional proposed to act as an interim resolution professional; and
(c) any other information as may be specified by the Board.
(4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub- section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3).
(5) Where the Adjudicating Authority is satisfied that-
(a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or
(b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application:
or -
Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub- section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority. (6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5).
(7) The Adjudicating Authority shall communicate--
(a) the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor;
(b) the order under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejection of such application, as the case may be.
11. Persons not entitled to make application :
The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process under this Chapter, namely:--
(a)...
(b)...
(c)...
(d) a corporate debtor in respect of whom a liquidation order has been made.
14. Moratorium :- (1) Subject to provisions of sub-
sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:--
(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
(18 of 26) [COP-19/2009]
(b) transferring, encumbering, alienating or disposing of 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.
(2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.
(3) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
(4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process:
Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.
30. Submission of resolution plan :- (1) A resolution applicant may submit a resolution plan to the resolution professional prepared on the basis of the information memorandum.
(2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan--
(a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the repayment of other debts of the corporate debtor;
(b) provides for the repayment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under section 53;
(c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan;
(d) the implementation and supervision of the resolution plan;
(e) does not contravene any of the provisions of the law for the time being in force;
(19 of 26) [COP-19/2009]
(f) conforms to such other requirements as may be specified by the Board.
(3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub- section (2).
(4) The committee of creditors may approve a resolution plan by a vote of not less than seventy five per cent of voting share of the financial creditors. (5) The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered:
Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor.
(6) The resolution professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority.
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."
32. Having noted aforesaid, this Court finds that the Company Petition has been registered on the basis of the recommendations made by the BIFR under Section 20. Thus, the avenues for trying to revive the Company were all tapped by the BIFR before it referred the case to this Court for recommending for winding it up. This Court has also attempted earlier to revive the Company and even the State Government invited proposals from various stake holders with the purpose to revive the Company. However, all attempts virtually failed.
33. In the meanwhile, the erstwhile workmen of the Company, which has remained non-functional for last more than 25 years, are claiming their dues. They have also prayed that the Company may be revived and they may be taken back on duty or paid their compensations.
(20 of 26) [COP-19/2009] 34. Taking into consideration all the aspects, this Court
appointed the OL attached to this Court as a Provisional Liquidator to conduct valuation of the goods lying in the factory premises. The valuation was conducted and the valuation report has also been placed for perusal.
35. It is noted that the applicant ALCHEMIST invoked provisions of IBC and also put up their proposal for revival. This Court is inclined to accept the submissions as noted by the learned Additional Advocate General and finds that in terms of Rules of 2016, the pending proceedings before this Court for winding up are not in relation to Section 433(e) of the Act of 1956 but is a petition under Clause (a) and (f) of Section 433 of the Act of 1956. Thus, Rule 5 of the Rules of 2016 would not apply.
36. As notices have already been served under Rule 26 of the Companies (Court) Rules, 1959 and all the parties are present before the Court and even a Provisional Liquidator was appointed, the present proceedings before this Court would not be transferable under Rule 6 of the Rules of 2016. In terms of Rule 5 proviso 3, since the winding up petition is pending before this High Court, no fresh application could have been filed under the IBC 2016 and the application moved under Section 7 by the respondent is held to be an abuse of the process of the Court and contrary to law. If any other interpretation is taken, it would result into multiplicity of the proceedings and would defeat the very purpose of framing of Rules of 2016. Even at the stage when the Companies Act of 2013 came into force, the pending cases before the High Court relating to winding up were not transferred to the NCLT and after coming into force of the IBC 2016, the basic rule of not having multiplicity of the proceedings shall continue to be the (21 of 26) [COP-19/2009] guiding principle. It would be a dangerous situation if the applicant ALCHEMIST is allowed to proceed before IBC while the other creditors are before this Court and say after six months that is the maximum period during which the proceedings can continue under the IBC, this Court also appoints an OL to examine the claims of other parties. However, as the present petition is not a petition by creditors alone and is a case referred to this Court under Section 20(1) of the erstwhile SICA Act, the order passed by the NCLT relating to only one creditor treating the present petition as the petition under Section 433(e) is wholly misconceived. A look at third proviso to Rule 5 also clarifies the picture further as it specifically provides that if there another petition required to be filed under Section 433(e), the same would continue with the High Court and would not be transferred. Thus, the basis as noted above, continues that there ought not be multiplicity of the proceedings.
38. The process as laid down under the IBC provides firstly of appointing of an IRP, who is required to conduct all information relating to assets, finances and operations of the corporate debtors. As this Court has already appointed a Provisional Liquidator, the duties as provided under Section 18 of IBC 2016, are similar to that of the OL, the power available to the OL under the Act of 1956 would take into its notice all the provisions contained under IBC 2016 which the interim resolution professional or the resolution professional would be conducting. Section 30 of the IBC 2016 lays down the requirement of submitting resolution plan which may be placed for approval before the adjudicating authority. However, these aspects have already been dealt with at the stage of BIFR and by this Court in (22 of 26) [COP-19/2009] relation to the Company. Moreover, the entire provisions of IBC 2016 are to be applied for cases where the proceedings have not been undertaken under the Act of 1956 as is apparent from the tenor of the Rules of 2016, as quoted above. The only cases which have been transferred are those where notices have not been served. Thus, the legislature clearly intended to transfer the proceedings where no action has been taken by the concerned Court whereas in the present case, the proceedings have been going on since 2002 and the present case is not of such a nature where it can be said that notices have not been issued or the steps under the Act of 1956 have not been undertaken with regard to winding up. Thus, there was no occasion for the applicant ALCHEMIST to have approached the NCLT for invoking the provision of the Rules of 2016.
39. In the case of West Hills Realty Private Ltd. Vs. Neelkamal Realtors Tower Pvt. Ltd. (Company Petition No.331 of 2016), decided on 23/12/2016, reported in (2017) 3 CompLJ 225 (Bom) by the High Court of Bombay, a similar controversy had arisen and after appreciating the various provisios and Rule 26 of the Companies (Court) Rules, 1959 as well as the provisions of the Rules of 2016, it was held as under:-
"12. In fact, if anything, the argument that Rule 26 contemplates a post-admission notice and only in the event such notice is actually served on the respondent that the petition shall stand transferred to NCLT, will lead to a peculiar situation. It will mean that those petitions, which are admitted and where notice of the petition is not served on the respondent pursuant to the order of admission, will stand transferred to NCLT and will be taken up Sat 15/15 CP 331-2016, 332- 2016.doc for admission once again by requiring the petitioners in those petitions to furnish information for admission of the petitions under Section 7, 8 or 9 of the Code, as the case may be. That would be clearly anomalous.
(23 of 26) [COP-19/2009]
13. In the premises, it follows that every winding up petition under clause (e) of Section 433 which is pending before the High Court and which is not served by the petitioner on the respondent company shall stand transferred to NCLT under Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016. If such pending petition is served by the petitioner on the respondent, the petition will continue to be dealt with by this court and the applicable provisions will be the provisions of 1956 Act.
14. As I have noticed above, these petitions, which have been served by the Petitioners on the Respondent in pursuance of the acceptance order, are to be treated as served as required under Rule 26 of the Companies (Court) Rules 1959. Accordingly, these petitions shall not be transferred to NCLT and shall continue to be dealt with by this court in accordance with the provisions of 1956 Act. "
40. Same view has also been taken by the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh: 2017(5) ALD 695 and in the case of Paharpur Colling Towers Ltd. Vs. Basal Steels and Power Pvt. Ltd., decided on 07/09/2017 wherein it has been held as under:-
"18. Question is whether the Constitution of present proceedings before this Court, in the winding up petition filed by petitioner herein can be so injuncted by the NCLT, which is a tribunal not superior to this Court?
19. . Since NCLT is not a forum superior to the High Court, it's orders cannot be construed as injuncting this Court from proceeding with a winding up proceeding in which it has clear jurisdiction to hear and decide. That is the effect of Section 41(b) of the Specific Relief Act, 1963, particularly when the IBC itself permits such continuation under the notifications issued under Sections 239 and 255 of the IBC.
24. The principle of Comity of Courts cannot be invoked to restrain the High Court from proceeding with a winding up petition which Parliament intended the High Court alone to decide as per the notifications issued under Sections 239 and 255 of the IBC. Since this winding up petition did not get transferred to the NCLT by virtue of the notifications dated 7.12.2016 and 29.6.2017 issued under the very IBC, the NCLT cannot have any jurisdiction in regard to the petitioner or to the winding up petition and it's order cannot be interpreted to restrain this Court."
(24 of 26) [COP-19/2009]
41. In caveat to above is a judgment passed subsequently by coordinate Bench of the High Court of Bombay in the case of Jotun India Pvt. Ltd. Vs. PSL:2018(2)ABR 350 wherein the Single Judge, while noting the earlier judgments of the same Court, has taken a different view without distinguishing the earlier judgment. In the opinion of this Court, the provisions of Section 252 have not been correctly interpreted. The Court has also not taken into consideration the Rules of 2016 as amended and the effect of third proviso to Rule 5 and the provisions of Rule 6 of the Rules of 2016 have also not been examined. In the considered view of this Court, it is a judgment per incuriam The case in hand falls squarely under Rule 6 of the Rules of 2016 and as the notice under Section 26 of the Companies (Court) Rules, 1959 had already been served, the present proceedings in the High Court shall not be transferred to the NCLT
42. Another aspect in the present case is in relation to the clubbed cases filed by the workmen under Article 226 of the Constitution of India which are to be heard commonly with this Company Petition. Since such petitions cannot be transferred or even examined by the NCLT, the present application moved by the applicant Alchemist was against the provisions of the Companies Act and the Rules as well as have to be treated as non-est.
43. Further, it is also noted that this Court while examining the present Company Petition is also examining three Company Appeals whereby the order passed by the NCLT in favour of the applicant is under challenge. The NCLT has held the ALCHEMIST to be possessing 51% shares which is a subject matter of examination before this Court.
(25 of 26) [COP-19/2009]
44. Thus, the order of NCLT, while invoking the provisions under IBC 2016 is without jurisdiction and the entire proceedings of appointment of IRP is held to be non-est and liable to be ignored as per law laid down by the Apex Court in the case of Union of India and another Vs. Association of Unified Telecom Service Providers of India and others: (2011) 10 SCC 543:-
59. Thus, the Tribunal in its order dated 07.07.2006 has not just decided a dispute on the interpretation of Adjusted Gross Revenue in the license, but has decided on the validity of the definition of Adjusted Gross Revenue in the license. As we have already held, the Tribunal had no jurisdiction to decide on the validity of the terms and conditions of the license including the definition of Adjusted Gross Revenue incorporated in the license agreement. Hence, the order dated 07.07.2006 of the Tribunal in so far as it decides that revenue realized by the licensee from activities beyond the license will be excluded from Adjusted Gross Revenue dehors the definition of Adjusted Gross Revenue in the license agreement is without jurisdiction and is a nullity and the principle of res judicata will not apply.
60. In Chandrabhai K. Bhoir and Others vs. Krishna Arjun Bhoir and Others (supra) this Court relying on Chief Justice of A.P. Vs. L.V.A. Disitulu, Unon of India Vs. Pramod Gupta and National Institute of Technology Vs. Niraj Kumar Singh has held: (Krishna Arjun case, SCC p. 322, Para 26) "26..........an order passed without jurisdiction would be a nullity. It will be a coram non judice and non est in the eye of the law. Principle of res judicata would not apply to such cases".
45. Accordingly, the State Government is directed not to allow the IRP to function or take over any asset of the Company and ignore the order passed by the NCLT dated 13/04/2018.
46. The Managing Director of Jaipur Metals, who has been appointed by the State to provisionally hold the charge of the Company, has failed to bring to the notice of the NCLT the facts, as noted above. It is also noted that the concerned Managing Director did not inform the State Government about the (26 of 26) [COP-19/2009] proceedings and the likelihood of the complications which would arise on account of the same and thus, prima-facie there has been failure on his part to discharge his duties. The State Government is therefore, directed to immediately transfer the said officer and handover the charge to some other responsible officer and also initiate appropriate proceedings against the concerned Managing Director.
47. The Registry is now directed to place all the cases for disposal and further orders before the Court on 05/07/2018.
(SANJEEV PRAKASH SHARMA),J Raghu