Gujarat High Court
Official Liquidator Of Prasad Mills ... vs Bhupendra Bhagwatprasad Patel on 9 July, 2018
Equivalent citations: AIRONLINE 2018 GUJ 83
Bench: S.R.Brahmbhatt, A.G.Uraizee
C/OJA/11/2017 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/O.J.APPEAL NO. 11 of 2017
With
CIVIL APPLICATION (OJ) NO. 1 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE S.R.BRAHMBHATT
and
HONOURABLE MR.JUSTICE A.G.URAIZEE
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1 Whether Reporters of Local Papers may be allowed to see the
judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the
interpretation of the Constitution of India or any order made
thereunder ?
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OFFICIAL LIQUIDATOR OF PRASAD MILLS LTD.
Versus
BHUPENDRA BHAGWATPRASAD PATEL
======================================
Appearance:
MR RM DESAI, ADVOCATE for the Appellant
OFFICIAL LIQUIDATOR for the Appellant
MR. S. N. SOPARKAR, SR. ADVOCATE WITH MR AS VAKIL, ADVOCATE for the Opponent
Nos. 1 1.2, 2
======================================
CORAM: HONOURABLE MR.JUSTICE S.R.BRAHMBHATT
and
HONOURABLE MR.JUSTICE A.G.URAIZEE
Date : 09/07/2018
Page 1 of 45
C/OJA/11/2017 CAV JUDGMENT
CAV JUDGMENT
(PER : HONOURABLE MR.JUSTICE S.R.BRAHMBHATT)
1. Heard learned counsel for the parties.
2. The appellant - official liquidator attached to this Court appointed for company in liquidation and original petitioner in the proceedings of the O.J.Misc. Civil Application No.86 of 2017, has taken out this appeal, inter alia challenging the order dated 25th July 2017 whereby this Court dismissed the O.J. Misc. Civil Application No.86 of 2017 by observing that no ground is madeout for recalling the order dated 19th April 2017 passed in Company Petition No.264 of 2008.
3. The facts in brief as could be gathered from the memo of the appeal deserves to be set out in verbatim as under : "I. Prasad Mills Ltd., was a Company Incorporated under companies Act 1956 to carry on business of manufacturing Textiles at Raikhad, Ahmedabad.
II. Hon'ble Court vide its order dated 23rd August 1998 passed in Company Petition No.21 of 1984 was pleased to direct Prasad Mills Co. Ltd., to be wound up by and under the Supervision of the Hon'ble Court and appointed Official Liquidator attached to the Hon'ble High Court as Liquidator of Prasad Mills Ltd.
III. Liquidator took Possession of the Assets of Company in Liquidation on 22nd September, 1998.
IV. Pursuant to Directions of Hon'ble Court, the Page 2 of 45 C/OJA/11/2017 CAV JUDGMENT Official Liquidator invited bids for purchase of Leasehold interest of the company in liquidation. Shri Shaan Jhaveri in his personal capacity submitted his offer for purchase of land. The offer was for Rs.7.75 Crores.
V. Shri Jabal Lashkari & Ors. preferred Company Application No.462 of 1999 praying for Return of the Leased property and also orders restraining Official Liquidator from selling/transferring Leasehold Property. Two other Company Application Nos.33 of 2004 and 34 of 2004 were also filed. All the three applications were rejected by the Hon'ble Court on 13th October 2004.
VI. Shri Jabal Lashkari & Ors. preferred three appeals challenging Common order passed by the Hon'ble Court rejecting Company Applications.
VII. High Court by a Common Order dated 17th October 2008, dismissed all the appeals.
VIII. Against the said common order dated 17th October 2008, Shri Jabal Lashkari & Ors. preferred S.L.P. No.2928284 of 2008 in the Hon'ble Supreme Court.
IX. Industrial Development Bank of India preferred Company Application No.414 of 2007 praying that Hon'ble Court may approve action of IDBI of assignment of debt with underlying Securities in favour of Riverfront Properties Ltd. Hon'ble Court, vide its order dated 25th August 2008 ratified the action of IDBI in Page 3 of 45 C/OJA/11/2017 CAV JUDGMENT assigning the debt with underlying securities.
X. Shri Bhupendra Bhagwatprasad Patel preferred Company Application No.427 of 2008 praying therein to hold meeting of several classes of interested person to approve Scheme of Compromise and/or arrangement proposed.
XI. Hon'ble Court vide its order dated 22nd August 2008 allowed the said Company Application. Hon'ble Court was pleased to convene meetings.
XII. As directed Meetings were conveyed and Chairman appointed for the Meeting filed his report in the Hon'ble Court. As per Report of the Chairman, Riverfront Properties Ltd., claiming to be majority shareholders and as Secured Creditor pursuant to Deed of Assignment voted for the Scheme.
XIII. Meeting of statutory creditors like Income Tax Central Excise was not called for in respect of preference shareholder though Scheme was proposed, in Chairman Report it is stated that no Notice is issued to preference shareholder since no scheme is proposed.
XIV. Bhupendra Bhagwatprasad Patel presented Company Petition No.264 of 2008 for sanction and approval of Hon'ble Court to the proposed Scheme under provisions of Section 391394 of the Companies Act, 1956.
Page 4 of 45 C/OJA/11/2017 CAV JUDGMENTXV. At present two Special Leave Petitions are pending hearing in the Hon'ble Supreme Court of India. One filed by Prasad Mills Kamdar Samiti, worker union and another by Shri Ashtik Girish Patel.
XVI. Special Leave Petition filed by Shri Jabal Lashkari & Ors. and Special Leave Petition preferred by Shri Aashtik Girish Patel were listed for hearing before the Hon'ble Supreme Court of India on 16th October 2015 Hon'ble Court was pleased to pass following order : "The proceedings going on before the learned Company Judge as regards the Scheme, shall continue but the Ultimate result shall be subject to the final result of this special Leave petition. It is submitted that the petitioner has filed Co. Appl. No.34 of 2013 before the Company Judge. The learned Company Judge shall consider the same in accordance with law. It is further directed that status quo as regards the landed property shall be maintained till the final decision in this special leave petition.
S.L.P. (C) Nos.2928229284/2008, S.L.P.(C) No.2353/2014, S.L.P. (C) No.4816/2012 and S.L.P.(C) No.....CC 18727/2015 Let these matters be delinked from S.L.P.(C)."
XVII. Company Petition No.264 of 2008 was being heard. Prasad Mills Kamdar Samiti preferred an Page 5 of 45 C/OJA/11/2017 CAV JUDGMENT application to join them as Party and hear them in the petition. The petition alongwith application were being listed for hearing.
XVIII. Petition along with application were listed for hearing on 19th April 2017. Before Mr.Mitul Shelat, learned advocate made his submission, Mr.Apurva Vakil, learned advocate for the petitioner without intimating to the liquidator, submitted to the Court that in view of promulgation of Rules called the Companies (Transfer of Pending Proceedings) Rules 2016 Company Petition No.264 of 2008 be transferred to National Company Law Tribunal, Ahmedabad. Hon'ble Court vide its order dated 19th April 2017 was pleased to direct the registry to transfer the proceedings to National Company Law Tribunal at Ahmedabad. Being aggrieved with the order dated 19th April 2017, appellant preferred O.J.M.C.A. No.86 of 2017 praying to recall the order and pass fresh order that petition be heard by Company Court. Hon'ble Court, vide its CAV order dated 25th July 2017 was pleased to reject/review/recall the application filed by the Official Liquidator. Hence, this appeal."
4. Learned advocate for the appellant submitted that the learned Company Judge failed to appreciate that the Companies Act, 1956 read with Companies Act, 1959 still survive in view of the Companies (Removal of Difficulties) Fourth Order, 2016 dated 7th December 2016 issued by Ministry of Corporate Affairs under the provision Section 470(1) of the Companies Act, 2013. The said rule clearly indicated that the proceedings which have not been transferred from the High Courts shall be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.
Page 6 of 45 C/OJA/11/2017 CAV JUDGMENTHence, the Companies Act, 1956 is a statue book in force qua pending windingup proceedings before this Hon'ble Court.
5. It is submitted by the learned advocate for the appellant that the learned Company Judge failed to appreciate that the provision of Section 446 of the Companies Act, 1956 is wide in its scope and under the provisions of Section 446 (2), the Company Court, by virtue of a non obstante clause has the jurisdiction to entertain and dispose of an application under Section 391 proposing a scheme in respect of the company (in liquidation), whether such application has been filed before or after the order of winding up has been made.
6. It is submitted that the learned Company Judge has also failed to appreciate that the Companies Act, 1956 empowers the Company Court to consider and approve a scheme of compromise and/or arrangement proposed by way of an application moved by the Official Liquidator under the provisions of Section 391 of the Act, in the case of a company which is being wound up. This indicates that in case of a company which has been ordered to be wound up by the Company Court, a scheme proposed for its revival, would be exclusively dealt with by the Company Court itself. The said legal finding is concurred by the Hon'ble High Court of Delhi in its order dated 15th March 2017 passed in Company Application No.115 of 2016 & allied matters.
7. It is submitted that the learned Company Judge failed to appreciate that it could not have been the intention of the legislature in its infinite wisdom, to create a situation where, the scheme relating to the revival of company in liquidation, pending consideration before the Company Court would be required to be transferred to and dealt with by the National Company Law Tribunal, leading to multiplicity of proceedings with the real possibility of conflicting decisions on the Page 7 of 45 C/OJA/11/2017 CAV JUDGMENT dissolution/winding up and/or revival of the company.
8. It is further submitted that learned Company Judge failed to appreciate that even after the notification coming into force w.e.f. 15th December 2016, the company Court has jurisdiction to adjudicate applications filed under the provisions of Section 391 of the Companies Act, 1956 and that the petition under Section 391 is a proceedings in winding up for revival of company in liquidation and not an independent proceeding. The learned company Judge also failed to appreciate in its proper perspective the effect of Clause 3 of Companies (Transfer of Pending Proceedings) Rules, 2016 which provides that 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. The learned Judge has not considered the clarification letter dated 5th June 2017 issued by the Ministry of Corporate Affairs, New Delhi clarification on Rule No.3 & 7 that the Companies (Transfer of Pending Proceedings) Rules, 2016 were issued by Ministry of Corporate Affairs in exercise of powers under Section 434 of the Companies Act, 2013 as amended by Section 255 (read with schedule XI) of the Insolvency and Bankruptcy Code, 2016 to provide the stages w.r.t. transfer of such pending proceedings in respect of a company is not required to be transferred and is to continue with High Court, any ancillary/related proceedings applications under Section 391 or any other legal proceedings of any nature would continue to be with such High Court itself.
9. It is submitted that this Hon'ble court considering the clarification letter dated 5th June 2017, has already issued direction vide order dated 16th June 2017 passed in Company Application No.326 of Page 8 of 45 C/OJA/11/2017 CAV JUDGMENT 2015 to the Registry not to transfer the matter to NCLT. It is submitted that learned Company Judge failed to appreciate "expression other than proceedings relating to winding up" employed in the said clause 3, in view of the circumstances that the winding up Order is passed and the proceedings qua revival of the respondent company cannot be construed as being independent of the pending winding up proceedings.
10. It is submitted that the winding up proceedings and the proceedings qua the revival of company in liquidation are inextricably linked and that all the matters in relation to the revival of the respondent company are 'proceedings relating to winding up' inasmuch as, inter alia, the powers that the company Court would exercise in relation to the Company in liquidation under the provisions of Companies Act, 1956. It is further submitted that the learned Company Judge also failed to appreciate the fact that the proceedings seeking sanction of compromise and/or Arrangement for the revival of company in liquidation in the facts and circumstances of the case ought not to be transferred to the National Company Law Tribunal in view of the non obstante clause under the provisions of section 446(2) of Companies Act, 1956. The learned Company Judge has not appreciated the decisions cited by the present appellant.
11. It is submitted that learned Company Judge has erred in holding that the provision of order called the Companies (Removal of Difficulties) Fourth order 2016 has repealed the provision of Companies Act, 1956. The learned Company Judge has not considered that by the Companies (Removal of Difficulties) Fourth Order 2016 in the Companies Act 2013 in Section 434 in SubSection (1) in clause (c) proviso is added which provides that if the proceedings are not transferred it shall be dealt with in accordance with provision of Companies Act, 1956 and the Companies Court Rules 1959. The effect Page 9 of 45 C/OJA/11/2017 CAV JUDGMENT is that provision of Companies Act, 1956 and Companies Court Rules 1959, on pending proceeding are not repealed. The learned Company Judge has erred in holding that Section 434 (1)(c) read with Rule 3 of the Companies (Transfer of Pending Rules) 2016 makes it abundantly clearly that proceedings are to be transferred. It is further submitted that the learned Company Judge has not considered the provisions of Section 446 (2)(c) of Companies Act, 1956 which provides that Hon'ble High court has exclusive jurisdiction to decide any application made under Section 391 by or in respect of Company in Liquidation.
12. To support his contentions, learned advocate for the appellant has relied on the following decisions.
(1) Sunil Gandhi & Anr. Amarpreet Singh Oberoi & Ors. Nemika Jha;p Vineet Goel; A N Buildwell Pvt. Ltd., (in prov liqn) Vs. A N Buildwell Private Limited; Surender Kumar Hooda & Ors., reported in 2017 (141) SCL 331.
(2) Commissioner of IncomeTax Vs. Registrar of Companies and Others, reported in [2017] 202 Comp Cas 286 (Bom).
13. Learned counsel for the respondent resisted this O.J. Appeal on the following preliminary objections.
(i) Learned counsel for the respondent submitted that the appeal is preferred under section 483 of the Companies Act, 1956 and in view of the provision of Section465 of New Companies Act, 2013, this appeal is not maintainable and is required to be Page 10 of 45 C/OJA/11/2017 CAV JUDGMENT dismissed forthwith.
(ii) Learned counsel appearing for the respondent further submitted that the present OJ Appeal is also not maintainable in view of the provision of Order47 Rule7 of Civil Procedure Code as the order impugned is essentially order declining to recall or review the order passed by the Court. Therefore, any order made on recall or review if is rejected, then as per the provision of Order47 Rule7 of CPC, the appeal would not be maintainable. Learned counsel has relied upon the decision of Supreme Court in case of Shanker Motiram Nale Vs. Shiolalsing Gannusing Rajput (1994) 2 SCC 753.
(iii) Learned counsel for the respondent relying upon the provision of Section457(1)(a) of the Companies Act, 1956 contended that official liquidator could not have instituted the present O.J.Appeal proceedings without there being sanction of the Court and therefore, this appeal is not maintainable. Learned counsel for the respondent in support of this submission, placed heavy reliance upon the decision of Andhra Pradesh High Court in case of Official Liquidator, Southern Udhyans Ltd., reported in (2008) 143 Company Cases 556 and submitted that as observed by the learned Company Judge, Andhra Pradesh High Court in para10 of the judgment as per the provisions of Section457 of the Companies Act, 1956 can institute or defend suit/proceedings only Page 11 of 45 C/OJA/11/2017 CAV JUDGMENT with sanction of the Court. The official liquidator has no independent functioning. The official liquidator being an officer of the Court is an adjunct to the Court and cannot file any appeal against the order of the Court.
Learned counsel for the respondent further submitted that Andhra Pradesh High Court observed the aforesaid proposition of law based upon the decision of the Rajasthan High Court in case of Official Liquidator Vs. Golcha Properties Pvt. Ltd., (1981) Tax LR 2561.
14. Learned counsel for the respondent without prejudice to the aforesaid preliminary objections to the maintainability of the appeal contended that on merits that Companies Act, 1956 is superseded by enactment and enforcement by the Companies Act, 2013 and therefore, the matters are required to be transferred as envisages under the provision of the said act. The provision makes a room for continuing only the windingup proceedings as provided thereunder.
15. Learned counsel appearing for the respondent further submitted that the proceedings of the Company Appeal No.264 of 2008 were essentially proceedings under old provision of Sections391 to 394 only and they were for seeking sanction of this Court for reviving the Company by approving the scheme. The said proceedings can therefore, be well transferred as per the provision of New Companies Act, 2013.
16. Learned counsel for the respondent further submitted that the pendency and windingup proceedings so far as the windingup of Page 12 of 45 C/OJA/11/2017 CAV JUDGMENT the company is concerned may not get affected in any manner and they may continue with this Court. On the proceedings of Company Petition No.264 of 2008 being proceedings for seeking sanction of the Court for the scheme floated and the same are required to be transferred as per the provision of law and therefore, the order dated 9th April 2017 of the learned Company Judge transferring the proceedings was just and proper and the rejection of review or recall vide order dated 25th July 2017 also does not call for any interference.
17. Learned counsel for the respondents invited Court's attention to the provision of Rule3 of the Rules called Companies (Transfer of Pending Proceedings) Rules, 2016 and contended that transfer of all proceedings relating to arbitration, compromise, arrangement and reconstruction other than proceedings related to windingup on the date of coming into force of the rules shall stand transferred to the Benches of the Tribunal exercising respective jurisdiction. In view of this specific provision of law, the arrangement and reconstruction proceedings are essentially required to be transferred as they stood transferred on account of the enactment of the provisions and when learned Company Judge passed the order on 19th April 2017, the same was just and proper and the same is rightly been declined to be interfered with vide order dated 25th July 2017.
18. Learned counsel for the respondent, thereafter invited Court's attention to the Rule7 of the said Rules to support his contention that the record and proceedings pertaining to the aforesaid subjects were required to be transferred by High Court to the National Company Law Tribunal Benches having jurisdiction forthwith over the cases. In view of this unequivocally clear provisions of law, learned Company Judge rightly transferred the proceedings of Company Petition Page 13 of 45 C/OJA/11/2017 CAV JUDGMENT No.264 of 2008 on 19th April 2017 and the said order has rightly not been recalled or reviewed by the Company Judge as detailed reasoning have been given in the order dated 25th July 2017 which is assailed in the present O.J.Appeal.
19. Learned counsel for the respondent further submitted that Section434(1)(c) of the Companies Act, 2013 provides for transfer of pending proceedings and for such transfer the date is fixed being 15th December 2016 and hence according to the said provision of proceedings including arbitration compromise arrangement and reconstruction of windingup companies pending immediately before such State in any court or High Court shall stand transferred to the tribunal and all the proceedings are required to be transferred and the proviso to Section434(1)(c) would not be applicable to the proceedings under which the scheme of revival or resurrection is made.
20. Learned counsel for the respondent further submitted that Section 446(2)(c) of the Companies Act, 1956 in terms of the repeals of the Companies Act, 1956 stood repealed and the same also would not save the situation.
21. Heard learned counsels for the parties.
22. The following indisputable aspect emerging therefrom deserves to be setout in order to appreciate rival contentions in their proper perspective.
(i) The company in respect whereof the proceedings have been arising is called Prasad Mills Ltd., a company incorporated under the Companies Page 14 of 45 C/OJA/11/2017 CAV JUDGMENT Act, 1956. The said company was carryingon business of manufacturing textile at Ahmedabad.
(ii) The company petition being Company Petition no.21 of 1984 came to be filed seeking windingup of the company.
(iii) This Court vide its order dated 23rd August 1998 passed in Company Petition No.21 of 1984 directed Prasad Mills Ltd., to be woundup under the supervision of the Court and official liquidator attached by this Court came to be appointed as liquidator of Prasad Mills Ltd.,
(iv) The official liquidator attached to this Court took possession of the assets of the company in liquidation on 22nd September 1998.
(v) The official liquidator, in pursuance of direction of this Court invited bids for purchase of leasehold interest of the company in liquidation. A party named in the memo of the appeal submitted in his personal capacity offer for purchase of land at 7.75 crores as mentioned in the memo.
(vi) The parties mentioned in the memo filed Company Application No.462 of 1999 seeking reversal of the lease property and sought orders restraining the official liquidator from selling/transferring leasehold property of the company.
Page 15 of 45 C/OJA/11/2017 CAV JUDGMENT(vii) Two other Company Applications being Company Application Nos.33 and 34 of 2004 were also filed and all the applications came to be rejected by this Court on 13th October 2004. Giving rise to filing of appeal before the Appellate Bench, the Appellate Bench vide common order dated 17th October 2008 dismissed the appeal.
The said order of 17th October 2008 was carried into SLP No.298284 of 2008 in the Supreme Court.
(viii) The Industrial Development Bank of India preferred Company Application no.414 of 2007 seeking approval of the Court and its action of assigning its dues on the underlying security in favour of one party called Riverfront Properties Ltd.
(ix) This Court under its order dated 25th August 2008 allowed the said application and said action of IDBI not assigning the debt with underlying security.
(x) One party named in the memo of the appeal preferred Company Application No.427 of 2008 praying for holding of meeting of several classes of interested person for the proposed scheme of compromise and/or arrangement.
This could be called an institution of proceedings within the windingup proceedings as the Court's approval was sought by way of Company Page 16 of 45 C/OJA/11/2017 CAV JUDGMENT Application No.427 of 2008 for convening the meeting of several classes of interested persons and parties in respect of proposed scheme.
(xi) This Court vide its order dated 22nd August 2008 allowed the said application for convening the meeting of the interested in respect of the proposed scheme. The appellant has narrated two facts at this stage from the memo of the appeal, which needs to be reproduced at the cost of repetition as below.
XII. As directed Meetings were conveyed and Chairman appointed for the Meeting filed his report in the Hon'ble Court. As per Report of the Chairman Riverfront Properties Ltd., claiming to be majority shareholders and as Secured Creditor pursuant to Deed of Assignment voted for the Scheme.
XIII. Meeting of Statutory Creditors like Income Tax Central Excise was not called for in respect of preference Shareholder though Scheme was proposed, in Chairman Report it is stated that no Notice is issued to Preference Shareholder since No Scheme is proposed.
XV. At present Two Special Leave Petition are pending hearing in the Hon'ble Supreme Court of India. One filed by Prasad Mills Kamdar Samiti, worker union and Another Girish Patel.
XVI. Special Leave Petition filed by Shri Jabal Lashkari & Ors and Special Leave Petition preferred by Page 17 of 45 C/OJA/11/2017 CAV JUDGMENT Shri Aashtik Girish Patel were listed for hearing before the Hon'ble Supreme Court of India on 16/10/2015 Hon'ble Court was pleased to pass following order.
"The proceedings going on before the learned Company Judge as regards the Scheme, shall continue but the Ultimate result shall be subject to the final result of this special Leave Petition. It is submitted that the petitioner has filed Co. Appl. No.34 of 2013 before the Company Judge. The learned Company Judge shall consider the same in accordance with law. It is further directed that status quo as regards the landed property shall be maintained till the final decision in this special leave petition.
S.L.P.(C) Nos.2928229284/2008, S.L.P.(C) No.2353/2014, S.L.P.(C) No.4816/2012 and S.L.P.(C) No......CC 18727/2015 Let these matters be delinked from S.L.P.(C)"
The said party called Bhupendra B. Patel preferred Company Petition no.264 of 2008 in Company Application no.427 of 2008 for sanctioning and approving the proposed scheme under provision of Section391394 of the Companies Act, 1956.
The appellant has also mentioned in the memo of the appeal the following facts.
XVIII. Petition alongwith application were listed for hearing on 19th April 2017. Before Mr.Mitul Shelat Advocate made this submission, Mr.Apurva Vakil Page 18 of 45 C/OJA/11/2017 CAV JUDGMENT Advocate for the petitioner without intimating to the liquidator submitted to the Hon'ble Court that in view of promulgation of Rules called the Companies (Transfer of Pending Proceedings) Rules 2016 Company Petition 264 of 2008 be transferred to National Company Law Tribunal, Ahmedabad. Hon'ble Court vide its order dated 19th April 2017 was pleased to direct the Registry to transfer the proceedings to National Company Law Tribunal at Ahmedabad. Being aggrieved with the order dated 19th April 2017 appellant preferred O.J.M.C.A. No.86 of 2017 praying to recall the order and pass fresh order that petition be heard by Company Court. Hon'ble Court vide its CAV order dated 25th June 2017 was pleased to reject/review/recall the application filed by Official Liquidator."
23. Against the aforesaid backdrop of almost undisputed factual aspects, now let us examine the rival contentions of the learned counsel in light of the relevant provision which also needs to be setout hereinbelow for ready reference:
A. Companies (Transfer of Pending proceedings) Rules, 2016.
S.S.R.1119(E). In exercise of the powers conferred under subsections (1) and (2) of section 434 of the Companies Act, 2013 (18 of 2013) read with subsection (1) of section 239 of the insolvency and Bankruptcy Code, 2016 (31 of 2016) (hereinafter referred to as the Code), the Page 19 of 45 C/OJA/11/2017 CAV JUDGMENT Central Government hereby makes the following rules, namely:
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 rule 4, which shall come into force from 1st April, 2017.
3. Definitions (1) In these rules, unless the context otherwise requires -
(a) "Code" means the Insolvency and Bankruptcy Code, 2016 (31 of 2016);
(b) "Tribunal" means the National Company Law Tribunal constituted under section 408 of the Companies Act, 2013.
(2) Words and expressions used in these rules and not defined, but defined in the Companies Act, 1956 (1 of 1956) (herein referred to as the Act), the Companies Act, 2013 (18 of 2013) or the Companies (Court Rules, 1959 or the Code shall have the meanings respectively assigned to them in the respective Act or rules or the Code, as the case may be.
3. Transfer of pending proceedings relating to cases other than Winding up - All proceedings Page 20 of 45 C/OJA/11/2017 CAV JUDGMENT 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.
4. Pending proceeding relating to Voluntary Winding up: All applications and petitions relating to voluntary winding up of companies pending before a High Court on the date of commencement of this rule, shall continue with and dealt with by the High Court in accordance with provisions of the Act.
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 (e) of section 433 of the Act 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 as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under subsection (4) of section 419 of the Act, exercising territorial jurisdiction and Page 21 of 45 C/OJA/11/2017 CAV JUDGMENT such petitions shall be treated as applications under sections 7, 8 or 9 of the Code, as the case may be, and dealt with in accordance 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 and 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal within sixty days from date of this notification, failing which the petition shall abate.
(2) All cases where opinion has been forwarded by Board for Industrial and Financial Reconstruction for winding up of a company to a High Court and where no appeal is pending the proceedings for winding up initiated under the Act, pursuant to Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 shall continue to be dealt with by such High Court in accordance with the provisions of the Act.
6. Transfer of pending proceedings of Winding up matters on the grounds other than inability to pay debts - All petitions filed under clause (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) Page 22 of 45 C/OJA/11/2017 CAV JUDGMENT 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).
7. Transfer of Records - Pursuant to the transfer of cases as per these rules the relevant records shall also be transferred by the respective High Courts to the National Company Law Tribunal Benches having jurisdiction forthwith over the cases so transferred.
8. Fees not to be paid - Notwithstanding any thing contained in the National Company Law Tribunal Rules, 2016 no fee shall be payable in respect of any proceedings transferred to the Tribunal in accordance with these rules.
B. It is equally important to set out the relevant extract of the CAV order dated 25th July 2017 passed in Mis. Civil Application (OJ) No.86 of 2017 as under:
"5.2 The said Companies Order, 2016 is extracted herein for ready reference.
1. Short title and commencement. (1) This Order may be called the Companies (Removal of Difficulties) Fourth Order, 2016.
(2) It shall come into force with effect from the 15th December, 2016.
2. In the Companies Act, 2013, in Section 434, Page 23 of 45 C/OJA/11/2017 CAV JUDGMENT in subsection (1), in clause (c), after the proviso, the following provisos shall be inserted, namely:
"Provided further that only such proceedings relating to cases other than windingup, for which orders for allowing or otherwise of the proceedings are not reserved by the High Courts shall be transferred to the Tribunal: Provided further that
(i) all proceedings under the Companies Act, 1956 other than the cases relating to winding up of companies that are reserved for orders for allowing or otherwise such proceedings; or
(ii) the proceedings relating to winding up of companies which have not been transferred from the High Courts;
shall be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959."
24. Thus, the aforesaid factual aspects and the provision of relevant rules and orders setout herein above would indicate that the entire controversy is in respect of whether the Company Court retains the jurisdiction over the Company Application filed under the provision of Section391 of the Companies Act, 1956 in respect of the company in liquidation after the advent of the New Companies Act, 2013 and the notification made thereunder dated 15th December 2016.
25. The respondents herein above, apart from raising preliminary objections on merits have submitted that the provision of Sections391 to 394 are independent provision and proceedings initiated thereunder in the nature of application for revival, compromise or bringing about settlement would required to be treated as independent Page 24 of 45 C/OJA/11/2017 CAV JUDGMENT proceedings and as such they are required to be governed by the provision of New Companies Act and Rules made thereunder. And in accordance with Rule3 of the Companies (Transfer of Pending Proceedings) Rules, 2016, the application being Company Application no.264 of 2008 was required to be transferred and has been correctly transferred by the learned Company Court and does not require any interference under the appellate jurisdiction.
26. The counsel for the respondent submitted that the catena of decisions of this Court as well as Supreme Court contains proposition of law that irrespective of the windingup proceedings or the stage of winding up of the company the scheme of revival settlement of compromise in respect of the company preferred under Section391 would be maintainable as these proceedings have been treated as substantive proceedings and as such the provision of Rule3 of the Transfer Rules would govern the application being Company Application no.264 of 2008 and other allied applications and they have correctly been transferred by the Company Judge.
27. As against the aforesaid contention of learned counsel for the respondent, the counsel for the appellant has placed heavy reliance upon the aspect that the windingup proceedings once initiated and when the Company Court has appointed official liquidator attached to the Court, any proceedings related to that company would always be under the auspice of the Company Court. This proposition is warranted on account of the clear provision of Section446 of the Companies Act, 1956. The language employed in provision of Section446 unequivocally indicate that the Company Court shall have jurisdiction to entertain and dispose of any application made under Section - 391 in respect of the company in question. The windingup provisions have been saved by Page 25 of 45 C/OJA/11/2017 CAV JUDGMENT the repealing act and so are saved the relevant provisions of the Company Act and therefore, on this count it was submitted that the learned Company Court was not justified in ordering transfer of proceedings of Company Application no.264 of 2008 and other allied matters.
28. The decision cited at the bar on behalf of the appellant especially the one rendered by the Delhi high Court in case of A.N.Buildwell (Supra) appears to be on the very point as the facts are almost similar therefore, it would be most appropriate at this stage to setout relevant excerpts of the observations of the Delhi High Court for appreciating the contention of learned counsel for the parties.
29. The relevant paragraphs of Delhi High Court in case of Sunil Gandhi & Anr. Amarpreet Singh Oberoi & Ors: Nemika Jha; Vineet Goel; A.N. Buildwell Pvt. Ltd. (In Prov. Liqun.) Vs. A.N. Buildwell Private Limited; Surender Kumar Hooda & Ors. reported in 2017 (141) SCL 331, are reproduced hereinbelow for ready reference:
"4. The issue that arises for consideration is whether the Company Court has the exclusive jurisdiction to adjudicate applications instituted under the provisions of Section 391 of the Companies Act, 1956, in relation to the revival of a Respondent Company in provisional liquidation, subsequent upon coming into force of the subject notification, w.e.f. 15.12.2016.
24. The Hon'ble High Court of Judicature at Bombay recently in West Hills Realty Private Limited whilst observing that the court was conscious of the controversy which would commonly arise in number of petitions pending before the Court in view of the subject notification, rendered the following observations :Page 26 of 45 C/OJA/11/2017 CAV JUDGMENT
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 will continue to be dealt with by this Court and the applicable provisions will be the provisions of 1956 Act."
25. In KSL & Industries the Hon'ble Supreme Court observed as under:
"51. We might add that this conclusion has been guided by what is considered to be one of the most crucial principles of interpretation viz. giving effect to the intention of the legislature. The difficulty arose in this case mainly due to the absence of specific words denoting the intention of Parliament to cover applications for recovery of debts under the RDDB Act while enacting Section 22 of SICA. As observed earlier, the obvious reason for this absence is the fact that SICA was enacted earlier. It is the duty of this Court to consider SICA, after the enactment of the RDDB Act to ascertain the true intent and purpose of providing that no proceedings for execution or distraints or suits shall lie or be proceeded with. Undoubtedly, in the narrower sense an application for the recovery of debt can be giving a restricted meaning i.e. a proceeding which commences on filing and terminates at the judgment. However, there is no need to give such a restricted meaning, since the true purpose of an application for recovery is to proceed to the logical end of Page 27 of 45 C/OJA/11/2017 CAV JUDGMENT execution and recovery itself, that is by way of execution and distraint. We thus have no hesitation in coming to the conclusion that Section 22 clearly covers and interdicts such an application for recovery made under the provisions of the RDDB Act. We might remind ourselves of the oft quoted statement of the principles of contextual construction laid down by this Court in RBI v. Peerless General Finance and Investment Co. Ltd.
[MANU/SC/0073/1987 : (1987) 1 SCC 424 : AIR 1987 SC 1023], wherein this Court has observed: (SCC p. 450, para
33) "33. Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation.Page 28 of 45 C/OJA/11/2017 CAV JUDGMENT
Statutes have to be construed so that every word has a place and everything is in its place."
27. On a conspectus of the above decisions, the following legal position emerges:
"(i) That the expression 'proceedings relating to winding up' is of the widest amplitude and content.
(ii) The expression 'relating to' which is used synonymously with the expression 'pertaining to' is an expression of expansion and not of contraction.
(iii) The expression 'relating to the winding up' is much wider and much more expansive than the expression 'arising out of'.
(iv) That the argument, that subsequent to the subject notification coming into force on 15.12.2016, an application under section 391of the Companies Act, 1956, would stand transferred to the NCLT automatically, even in the circumstance that a winding up petition against the same company has been admitted by the company court, is fallacious, and nothing stands in the way of the Company Court from exercising jurisdiction and considering, a revival scheme proposed in relation to a company ordered to be wound up. The Company Court has powers vested in it under the Companies Act, 1956 to accept a scheme for revival of a company including a company that is being wound Page 29 of 45 C/OJA/11/2017 CAV JUDGMENT up until the ultimate step is taken or before the assets are disposed of, pursuant to liquidation
(v) Section 446 of the Companies Act, 1956 is wide in its scope and under the provisions of section 446(2), the Company Court, by virtue of a non obstante clause has the jurisdiction to entertain and dispose of an application under section 391 proposing a scheme in respect of the company, whether such application has been filed before or after the order of winding up has been made.
(vi) The scheme of the Companies Act, 1956 empowers the Company Court to consider and approve a scheme of compromise and/or arrangement proposed by way of an application moved by the liquidator under the provisions of section 391 of the Act, in the case of a company which is being wound up. This manifestly indicates that in case of a company which has been ordered to be wound up by the Company Court, a scheme proposed for its revival, would be exclusively dealt with by the Company Court itself.
(vii) All pending proceedings in relation to the revival of a Company in provisional liquidation, as in the present case, will continue to be dealt with by the Company Court under the applicable provisions of the Companies Act, 1956 including Section 446 of the Companies Act, 1956.
(viii) The expression employed in clause 3 of the subject notification, 'other than proceedings relating to winding up' would Page 30 of 45 C/OJA/11/2017 CAV JUDGMENT operate as an exception to the subject notification. The rules of interpretation qua an exception require a strict construction in terms of the legislative intention. However, once the ambiguity or doubt about the applicability has been lifted, then the exception has to be given a wide and liberal construction."
28. Coming to the solitary submission made on behalf of the petitioners, in relation to the legislative intent qua the proceedings relating to revival of the Respondent Company, it would be pertinent to observe as follows:
"i. The winding up petition has been admitted and Provisional Liquidator has been appointed in terms of the order of this Court dated 08.03.2016.
ii. Pursuant to the order dated 08.03.2016, the Official Liquidator has complied with the directions contained in the said order and taken over the possession of the assets, books, records etc., of the Respondent Company in provisional liquidation.
iii. Applications being Company Application No. 2615 of 2016 and Company Application (Main) 115 of 2016, for revival of the Respondent Company have been pending adjudication before this Court, prior to coming into effect of the subject notification.
iv. A bare reading of the subject notification itself and in particular Clause 5 thereof, shows that where the respondent has been served, the Page 31 of 45 C/OJA/11/2017 CAV JUDGMENT proceedings shall be retained by the Company Court and would not be transferred to the National Company Law Tribunal.
v. Most significantly, the proceedings that are subject to transfer, within the meaning of the subject notification, would be independent proceedings relating to arbitration, compromise, arrangement and reconstruction, other than proceedings relating to winding up under the Companies Act, 1956.
vi. In the proceedings relating to winding up, as in the present case, applications under the provisions of section 391 of the Companies Act, 1956, for the revival of the company in provisional liquidation, would constitute an exception, and would a fortiori fall outside the purview of independent proceedings which ought to be transferred to the National Company Law Tribunal, under clause 3 of the subject notification."
29. It would also be pertinent to observe that even otherwise, nothing that has been brought to the notice of this Court that requires proceedings in relation to a company that has been admitted to be wound up, and revival applications in relation thereto, to be transferred to the National Company Law Tribunal. In my view, it could not have been the intention of the Legislature in its infinite wisdom, to create a situation where, the scheme relating to the revival of company in provisional liquidation, pending consideration before the Company Court would be required to be transferred to and dealt with by the National Company Law Tribunal; leading to multiplicity of Page 32 of 45 C/OJA/11/2017 CAV JUDGMENT proceedings with the real possibility of conflicting decisions on the dissolution/winding up and/or revival of the respondent company.
30. The issue before the Delhi High Court as could be seen from the extracted paragraph no.4 of the judgment would indicate that the said issue in the present appeal is similar to that of the one before the Delhi High Court. The Delhi High Court has in fact laid emphasis upon the phrase "other than proceedings related to windingup" occurring in Rule3 of the Transfer Rules and interpretation laid on such similar provisions by the Supreme Court in various statutes. The Delhi High Court has referred to the judgment of the Bombay High Court in case of West Hills Realty Pvt. Ltd., and set out the relevant paragraph therefrom.
The Delhi High Court has referred to the observation of supreme Court in case of Renu Sagar Power Company for the scope of expression "arising out and relating to" the Supreme court has held that the expression such as "arising out of" or again "in respect of" or "in connection with" or "in relation to" or "in consequence of" or "concerning" or "relating to" are the terms of widest amplitude and includes even question as to the existence, validity and effect of the arbitration agreement. These observations of the Supreme Court were referred to by the Delhi High Court for appreciating the phrase "relating to" occurring in Rule3 of the aforesaid transfer rules.
Another judgment of the Supreme Court in case of Mansukhlal Dhanraj Jain reported in 1995 2 SCC 665 has been referred to by the Delhi High Court and paragraph nos.11, 14, 15, 16, 17 thereof have been setout for indicating difference between the expression 'relating to the recovery of possession' on one hand and phraseology for 'recovery of possession of immovable property'. In that case, Section41 Page 33 of 45 C/OJA/11/2017 CAV JUDGMENT (1) of the Small Causes Court had contained the word relating to and the relevant paragraph of that judgment deserves to be setout hereinbelow also for ready reference.
"....... However, on the clear language of the section, in our view, it cannot be said that these suits are not relating to the possession of the immovable property. It is pertinent to note that section41(1) does not employ the words 'suits and proceedings for recovery of possession of immovable property' there is a good deal of difference between the words "relating to" the recovery of possession on the one hand and the terminology "for recovery of possession of any immovable property. The words 'relating to' are of wide import and can take in their sweep any suit in which the grievance is made that the defendant is threatening to illegally recover possession from the plaintifflicensee.
The Supreme Court suit for protecting such possession of immovable property against the alleged illegal attempts on the part of the defendant to forcibly recover such possession from the plaintiff, can clearly get covered by the wide sweep of words "relating to recovery of possession" as employed by Section 41(1). In this connection, we may refer to Blacks' Law Dictionary Super Deluxe 5th Edition. At page 1158 of the dictionary the term 'relate' is defined as under : "to stand in some relation; to have bearing or concern; to Page 34 of 45 C/OJA/11/2017 CAV JUDGMENT pertain; refer; to bring into association with or connection with; 'with to';"
Thus, the aforesaid decisions were referred to by the Delhi High Court to indicate the purport and purview of the phrase "relating to windingup" occurring in Rule3 and has come to the conclusion that the said words are of greater and wider amplitude and deserves to be interpreted accordingly.
31. The provision of Section391 of the Companies Act, 1956 when invoked in the company which is under liquidation, the same would require the concerned Company Judge to deal with the subject matter on account of the provision of Section 446 of the Companies Act, 1956. Section446(1) (c) makes it abundantly clear that in a winding up proceedings of a company, any application or a Scheme under Section391 will have to be dealt with by the concerned Company Court as the Court has assumed jurisdiction over the company in all aspects. The Delhi High Court has therefore, referred to and extracted in the judgment itself paras33, 37 and 47 of the case called Meghal Homes (P) Ltd., reported in 2007 7 SCC 753. Those observations clearly indicate that when a company is ordered to be woundup, its assets are custodia legis and therefore, any compromise scheme or settlement scheme has to be under the auspice of the Company Court only, who has ordered the windingup and appointed official liquidator.
32. The Delhi High Court in the aforesaid case has also referred to decision of in case of Gujarat High Court in case of GSL (India) Limited Vs. Bayer ABS Ltd., in Company Application No.228 of 1998 in Company Petition no.295 of 1996 decided on 28th September 1998 for indicating the purport of the provision of Section446 of the Companies Page 35 of 45 C/OJA/11/2017 CAV JUDGMENT Act, 1956. The para60 thereof is extracted, which needs to be reproduced hereinbelow also for ready reference.
"60. Here it must be cleared that on a plain reading of two sections, viz. 442 and 446, they cannot be put to at par while considering their respective construction. Section 442 operates in much smaller field and is applicable only in respect of any suit or proceedings pending against the company in the Supreme Court or in any High Court or any other courts. It does not apply other proceedings pending elsewhere except before a court. In clear contrast, on making of a winding up order or appointment of provisional official liquidator section 446(1) applies to all such and other proceedings against the company wherever pending and operates as stay against commencement of new proceedings or progress in pending proceedings except with the leave of the court. Under section 446(2), the company Court by a non obstante clause gets jurisdiction to entertain or dispose of any suit or proceedings, or claim made by or against the company, any application under section 391 proposing a scheme in respect of the company or any question of priorities or any other question whatsoever whether of law or of fact which may relate to or arise in course of the winding up of the company, whether such suit, proceedings, claim application Page 36 of 45 C/OJA/11/2017 CAV JUDGMENT or question has arisen before or after the order of winding up has been made. Subsection (3) envisages again by a non obstante clause that apart from and in spite of any other provision in any other law for the time being in force, any suit or proceeding pending in other courts can be transferred to itself and disposed of ny it. Sub section (3) confines itself to transfer or pending proceedings in a court only. Thus, it is clear that field of operation of section 446 is much wider and though subsection (3) is confined to pending proceedings in a court, other provisions are not confined to proceedings before a court only, but extend to proceedings before any other authorities as well. In subsection (2) there is some enumeration of proceedings covered by it. Thus, the scope of interpretation in constructing two provisions cannot be identical, nor by use of expression, 'any suit or other proceedings' in two provisions by itself place one as synonym for the other. Yet reading of sections 442 and 446(3) makes it clear that if as per ratio of Kondaskar's case test of a case appropriately by Company Court is applied, the test supports the view that term 'proceeding' in both provision embraces within it both civil and criminal proceedings pending in court, because all pending case by or against company irrespective of its class are liable to be transferred and disposed of by the Company Page 37 of 45 C/OJA/11/2017 CAV JUDGMENT Court, in contrast if compared with proceedings whit are not pending or instituted in a court."
33. Thus, based upon the factual aspect and the proposition of law cited hereinabove the Delhi High Court recorded its conclusion in para27 which already been setout hereinabove. It would be very important to mention here that the present appellant has produced on record at AnnexureD Page Z4 and Z5 the communication sent by Govt. Of India, Ministry of Corporate Affairs on 5th June 2017 to the OL present appellant which needs to be setout as under : F. No.1/5/2016CLV Government of India Ministry of Corporate Affairs 5th Floor, 'A' Wing, Shastri Bhawan, Dr. R. P.Road, New Delhi, Dated : 05th June, 2017 To, Shri R. C. Mishra, Official Liquidator, Office of Official Liquidator, High Court of Gujarat, Jivabhai Chambers, Ashram Road, Navrangpura, Ahmedabad - 380 009.
Subject : Clarification on Rule No.3 & 7 of the Companies (Transfer of pending proceedings) Rules, 2016 - In the matter of M/s. Prasad Mills Limited (in liquidation) Sir, I am directed to refer to your letter No. OL/Prasad Mill/483/2017 dated 8th May, 2017 on the subject cited above. The matter has been examined in the Ministry and it has been observed that Part VII of the Companies Act, 1956 (Winding up) contains provisions which interalia provide that after the winding up order is passed by the High Court concerned, the said High Court alone has the jurisdiction to entertain, or dispose of any suit or proceeding, including any petition under section 391 of the Companies Act, Page 38 of 45 C/OJA/11/2017 CAV JUDGMENT 1956 by or against the company alongwith all related/ancillary applications/ petitions which may arise during the winding up proceedings (Section 446 of the Act may be referred to). Kind attention is also drawn to provisions of sections 447, 456, 457, 546 and other provisions of Part VII of the Companies Act, 1956.
2. The Companies (Transfer of Pending Proceedings) Rules, 2016 were issued by Ministry of Affairs in exercise of powers under section 434 of the Companies Act, 2013, as amended by section 255 (read with schedule XI) of the Insolvency and Bankruptcy Code, 2016 to provide for the stages w.r.t. transfer of such pending proceedings from High Courts to NCLT. Accordingly, in case the winding up proceedings in respect of a company is not required to to transferred and is to be continued with High Court, any ancillary/related proceedings (including w.r.t. petitions/applications under section 391) or any other legal proceedings of any nature would continue to be with such High Court itself.
3. This issues with the approval of competent authority.
Yours faithfully, Sd/ (N.K.Dua) Joint Director Tel No.23382260 This communication leaves no room for any doubt qua the intention of the rule making authority in respect of provision of Section 391 of Companies Act after the promulgation of the Companies (Transfer of Pending Proceedings) Rules, 2016. We must record here that though the appellant has in fact adverted to this document, but it seems that the same could not have been placed on record in the proceedings of O.J.M.C.A. no.86 of 2017 in Company Petition no.264 of 2008 as learned Company Judge has not adverted to this communication. It is further pertinent to note that relying upon the said communication, Company Judge of this Court in Company Application No.326 of 2015 has passed the following order.
Page 39 of 45 C/OJA/11/2017 CAV JUDGMENT"In view of the clarification issued by the Government of India, Ministry of Corporate Affairs dated 5.6.2017, the matter is not required to be transferred to NCLT."
The communication placed on record by OL received from Government of India, Ministry of Corporate Affairs dated 5th June 2017 has to be accepted as the clarification coming forward from the rule making authority and therefore, the phraseology occurring in Rule3 i.e."relating to" will have to be interpreted on the crucial principle of interpretation which gives effect to the intention of legislature as held by the Supreme Court in case of KSL Industries Ltd., Vs. Arihant Threads Limited (supra) cited by Delhi High Court and extracted paragraphs are setout hereinabove.
34. Thus, Delhi High Court has in detail examined 'relating to' phrase with the help of the decisions of the Supreme Court and even this Court and come to the conclusion that the Rule3 of the Transfer Rule containing the word 'relating to' would also include the proceedings under Section 391. It would be most relevant to refer to at the cost of repetition Section446(2)(C) of the Companies Act, 1956 and the legislative intent behind incorporating the exclusive jurisdiction of the company Court when the Company is under windingup proceedings to decide all the matters pertaining thereto which would obviously include any scheme etc., under Section391 of the Companies Act. The word 'relating to' occurring in Rule3 has to be therefore, construed as encompassing in its sweep the proceedings under Section391 under old Companies Act, as well as it would be not only in consonance with the scheme of retaining windingup power with the Court where the Court Page 40 of 45 C/OJA/11/2017 CAV JUDGMENT has exercise its jurisdiction, but also in consonance with the original legislative intent and the scheme of the windingup proceedings to be seen by the concerned Court with the help of the OL attached to the Court.
35. The Section 446(2)(C) of the Companies Act, 1956 contains nonobstante a clause indicating that notwithstanding contained anything in any other law for the time being in forced, the company Court in seisin of the windingup proceedings shall have exclusive jurisdiction over all the matters pertaining to and or relating to winding up. The said section appears to have been there on the statute book since 1960 and since then the legislature have not envisaged any other authority or a parallel authority dealing with a subject of windingup and therefore, from this point of view also one has to hold that Section 391 proceedings in respect of windingup company has essentially to be dealt with by the Court which has ordered windingup and hence, the phraseology 'relating to' is required to be interpreted accordingly.
36. The legislature cannot be attributed with the intention of providing two parallel remedies independent of each other where the plausibility of dramatically opposite view to be taken cannot be ruled out. Therefore, from the point of expediency, consistency and expeditiousness, the phrase 'relating to' occurring in Rule3 of the Transfer Rules has to be construed as encompassing in its sweep proceedings under Section391 also which therefore, are not required to be transferred.
37. In view of the aforesaid discussion, there remains no room for doubt that the proceedings in the form of application under Section Page 41 of 45 C/OJA/11/2017 CAV JUDGMENT 391 also if made in the windingup proceeding pending before this Court the same need not be transferred. We are unable to agree with the reasoning adopted by the learned Single Judge as mentioned in paragraph nos.5.4 and 6. The Delhi High Court decision, which is rendered after elaborate discussion of various judgments of Supreme Court on the aspect of the phraseology 'relating to' needs quite inconsonance with the provisions of law and also with the intention of the rule making authority as speltout in the clarification received by the OL in the form of letter of Government of India, Ministry of Corporate Affairs dated 5th June 2017.
38. This brings the Court to consider the preliminary objections in respect of the filing of appeal by OL without any leave from the concerned Court and maintainability of appeal challenging the order refusing to recall or review. There is of course no doubt that the judgment cited at the bar of Andhra Pradesh High Court and Rajasthan High Court do indicate that the proceedings by OL have to be initiated with sanctioned of the Company Court, but in those cases, the observations were on account of peculiar facts prevailing therein. As against this, if we read the provision of Section483, which needs to be setout as under there seems to be no specific embargo upon the OL.
"483. Appeals from orders. Appeals from [any order made or decision given before the commencement of the Companies (Second Amendment) Act, 2002], in the matter of the winding up of a company by the Court shall lie to the same Court to which, in the same manner in which, and subject to the same conditions under Page 42 of 45 C/OJA/11/2017 CAV JUDGMENT which, appeals lie from any order or decision of the Court in cases within its ordinary jurisdiction."
Thus, the plain and simple reading of Section483 does not indicate anywhere any embargo upon OL in preferring appeal within the Court i.e. intra Court appeal.
39. Though, the submission canvassed on behalf of the respondent in respect of the OL's requirement of obtaining prior sanction of the Company Court before initiating proceedings on the strength of the Section457 as well as the decision of the Andhra Pradesh High Court that OL has power with the sanctioning of the Concerned Court to carry out the functions mentioned thereunder, but the same in our opinion cannot be stretched so as to make distinction between the original company proceedings initiated in the Court wherein the company Court has passed orders and the appeal arising therefrom to be so separate a proceeding as to warrant requirement of OL obtaining sanction from the concerned Court as the intra Court appeal provided under Section483 in our view will have to be treated and viewed as if it is continuation of proceedings. We hasten to add here that this being our prima facie opinion rendered in the fundamental controversy of jurisdiction of this Court for entertaining and retaining Section391 proceedings in the windingup proceedings and this may not be treated as final opinion as it requires little more probing on the aspect.
40. Similarly, the preliminary objection qua no appeal against the order refusing recall or review is also required to be viewed in the context of the controversy in question. We hasten to add here that there Page 43 of 45 C/OJA/11/2017 CAV JUDGMENT cannot be any dispute to the proposition of law that the order made on recall or review ordinarily cannot be subject matter of appeal. But in the instant case as record indicates, the first order of 19th April 2017 was passed when the OL was not present and it does not have any discussion on merits. The subsequent order passed on 25th July 2017 contains elaborate reasoning upon the jurisdiction of this Court for retaining and entertaining the proceedings under Section391 in the course of windingup of a company. The entire controversy and the order impugned shorn of technical embellishment is essentially an order pronouncing upon the submission qua retaining of the matters and proceedings initiated under Section391 in respect to the company which has been ordered to be wound up and hence such a question can not be permitted to be saddled with the technicality of classification of either review or recall. It is essentially challenged to the pronouncement in the order qua jurisdiction of Company Court either in retaining of Section 391 proceedings, pending windingup proceedings or windingup proceedings as envisaged in law.
41. In view of the aforesaid discussion, we are of the view that the proceedings of Company Petition No.264 of 2008 and other allied matters, need not be transferred to National Company Law Tribunal, Ahmedabad and the same are required to be kept here and decided concomitant.
42. In view of the aforesaid finding and declaration, the present appeal is allowed. The order of Company Judge dated 25th July 2017 in Misc. Civil Application (OJ) No.86 of 2017 in Company Petition no.264 of 2008 & order dated 19th April 2017 passed by the Company Judge in Company Petition No.264 of 2008 and other allied matters, would not Page 44 of 45 C/OJA/11/2017 CAV JUDGMENT survive and therefore, the same are quashed and set aside.
43. In view of the order passed in the main matter i.e. O.J. Appeal No.11 of 2017, no order in Civil Application (OJ) No.1 of 2017 and the same is disposed of.
(S.R.BRAHMBHATT, J.) (A.G.URAIZEE, J.) Further order:
Learned counsel appearing for the respondent requested for stay of this order for a period of 4 weeks. We are of the considered view that when we have made clear observation in respect of the jurisdiction aspect on the matter, we are not inclined to stay the present order.
(S.R.BRAHMBHATT, J.) (A.G.URAIZEE, J.) Rathod...Page 45 of 45