Calcutta High Court
New Central Jute Mills Shramik Sangh & ... vs Shalimar Industries Ltd. & Ors on 1 October, 2018
Equivalent citations: AIRONLINE 2018 CAL 1536
Author: Sanjib Banerjee
Bench: Sanjib Banerjee, Abhijit Gangopadhyay
OD-3 & 4
IN THE HIGH COURT AT CALCUTTA
Civil Appellate Jurisdiction
ORIGINAL SIDE
ACO No. 121 of 2017
APO No. 544 of 2017
In
CP No. 405 of 2016
NEW CENTRAL JUTE MILLS SHRAMIK SANGH & ANR.
Versus
SHALIMAR INDUSTRIES LTD. & ORS.
&
ACO No. 126 of 2017
APO No. 545 of 2017
ACO No. 122 of 2017
In
CP No. 405 of 2016
NEW CENTRAL JUTE MILLS COMPANY LTD.
Versus
SHALIMAR INDUSTRIES LTD. & ORS.
BEFORE:
The Hon'ble JUSTICE SANJIB BANERJEE
AND
The Hon'ble JUSTICE ABHIJIT GANGOPADHYAY
Date : October 1, 2018.
Appearance
Mr. R.R. Sen, Adv.
Mr. P.K. Sarawagi, Adv.
Mr. Reetobroto Mitra, Adv.
Mr. A.P. Gomes, Adv.
Mr. Dhruba Ghosh, Sr. Adv.
Ms. Lopita Banerjee, Adv.
Mr. Paritosh Sinha, Adv.
Mr. Arindam Mandal, Adv.
Mr. Susanta Dutta, Adv.
Mr. Abhik Sarkar, Adv.
Mr. Priyankar Saha, Adv.
Ms. Ankita Upadhyay, Adv.
2
Mr. Rohit Das, Adv.
Mr. Aniruddha Bhattacharya, Adv.
Ms. Kishwar Rahman, Adv.
Mr. Ayan Banerjee, Adv.
Mr. Soumo Chaudhury, Adv.
Mr. Abhrajit Mitra, Sr. Adv.
Mr. Shaunak Mitra, Adv.
Ms. Iram Hassan, Adv.
Mr. R. C. Prusti, Adv.
Ms. Manini Kabi, Adv.
The Court : New Central Jute Mills Company Limited has gone into
liquidation pursuant to an order passed by the company Court on a creditor's
winding-up petition.
The company is in appeal, suggesting that a scheme be accepted for
the running and functioning of the company. The State of West Bengal was the
principal shareholder of the company, having more than 40% share, prior to its
liquidation and the State has taken steps to ensure that interested parties may
apply to fund the further functioning of the company (in liquidation) and take
over its debts and liabilities.
In the midst of such process, two of the secured creditors of the
company (in liquidation), IIBI Limited and IFCI Limited raise a point of order on
the basis of a recent judgment of this Court delivered on September 5, 2018 on
an appeal arising out of a petition under Sections 397 and 398 of the Companies
Act, 1956 in APO No.112 of 2017 (Prasanta Kumar Mitra vs. India Steam Laundry
(P) Limited).
3
According to such secured creditors, in view of the answer to the
third issue rendered in such judgment and the expansive manner in which the
words "all" and "including" have been interpreted at paragraph 49 of the report, it
implies that the company Court in a High Court has no further jurisdiction to
adjudicate on matters pertaining to the Companies Act, 1956 or the Companies
Act, 2013.
It appears from the order impugned before the Division Bench in the
India Steam Laundry (P) Limited case that the limited order that was passed by
the company Court was in respect of the particular petition under Section
397/398 of the 1956 Act by holding that "with effect from 15 December, 2016
this Court lost jurisdiction to hear and dispose of the present proceeding which
stands transferred to the NCLT by operation of law."
In course of the appeal in India Steam Laundry (P) Limited, the
following four issues were framed at paragraph 30 of the report:
"(a) Whether the ouster of the jurisdiction of the High Court in
relation to company matters needs to be express or the same
may be ousted by implication?
(b) Whether parties to a lis can insist on continuing their
dispute in the forum the same was initiated or have to bow
down to the wishes to the legislature for transfer of the said
jurisdiction to another forum?
(c) Whether the term "all" and "including" in Section 434(1)(c)
of the 2013 Act are expansive in nature or the same is to be
read in a restrictive manner?
(d) Whether Section 68 of the Amendment Act, 1988 continues
to subsist regardless of the coming into force of Section
4
434(1)(c) of the 2013 Act in relation to matters that were filed
in the High Court prior to coming into force of the Amendment
Act, 1988?"
The first issue was answered at paragraph 31 to the effect that the
ouster of the jurisdiction of the High Court in relation to company matters may
not be express and may be implied. In respect of the second issue, the answer is
found at paragraph 36 of the report: that the parties to a lis cannot insist on
continuing the dispute in the forum where it was initiated, notwithstanding any
amendment transferring such class of proceedings to another forum.
The third issue, which is relevant for the present purpose, was
answered thus at paragraph 49 of the report:
"In the light of the discussion above, I come to the irrefutable
conclusion that "including" in Section 434(1)(c) is extensive
and expansive and not restrictive in nature. Ergo, Section
434(1)(c) of the 2013 Act that states "all proceedings under the
Companies Act 2013 including proceedings relating to..."
would include all matters, without any exception, pending
before the District Courts and High Court and all such matters
would have to be transferred to the NCLT."
Though the fourth issue may not be relevant for the present purpose,
however, for the purpose of completeness, it is recorded that the fourth issue was
answered at paragraph 57 of the report by holding that Section 68 of the
Amending Act of 1988 stood repealed by implication.
5
In addition, to the discussion on the several issues and the
conclusions expressed on them, there is a summary of the answers pertaining to
the four issues captured at paragraph 59 of the report:
"59. In summary, the four main issues are answered as
follows:
(a) Whether the ouster of the jurisdiction of the High Court
in relation to company matters needs to be express or the
same may be ousted by implication?
The jurisdiction of the High Court in company matters being a
special jurisdiction conferred by the 1956 Act, and not being a
civil jurisdiction under the Code of Civil Procedure, 1908, the
same can always be ousted by the amendment of the
enactment that conferred the said jurisdiction. Hence, no
express repealing is required and the same can be repealed by
implication.
(b) Whether parties to a lis can insist on continuing their
dispute in the forum the same was initiated or have to bow
down to the wishes to the legislature for transfer of the said
jurisdiction to another forum?
Change of forum is not a choice of parties, but is the choice of
the legislature. The parties cannot contend that they have a
vested right to continue in the forum the lis was initiated. The
legislature can always change the forum. Forum is a matter of
procedure and change of the same does not result in change of
substantive rights of parties.
(c) Whether the term "all" and "including" in Section
434(1)(c) of the 2013 Act are expansive in nature or the same
is to be read in a restrictive manner?
The term 'íncluding' in Section 434(1)(c) of the 2013 Act is
extensive and expansive and not restrictive in nature.
6
Accordingly, Section 434(1)(c) of the 2013 Act that states "all
proceedings under the Companies Act, 1956 including
proceedings relating to ...." would include all matters, without
any exception, pending before the District Courts and High
Court and all such matters would have to be transferred to the
NCLT.
(d) Whether Section 68 of the Amendment Act, 1988
continues to subsist regardless of the coming into force of
Section 434(1)(c) of the 2013 Act in relation to matters that
were filed in the High Court prior to coming into force of the
Amendment Act, 1988?
The moment a new enactment comes into the statutory books,
dealing with the same subject matter and specifically dealing
with the same issue, and the transitional provision becomes
inconsistent with the new enactment, the transitional
provision has to go due to repugnancy. As held in (c) above,
Section 434(1)(c) deals with all proceedings under the 1956
Act. Therefore, there is a clear inconsistency between the said
provision and Section 68 of the Amendment Act, 1988.
Consequentially, since the transitional provision is
inconsistent with the new provision, it is impliedly repealed."
Again, it is the answer to issue (c) as recorded in paragraph 59 of the
report that is at the heart of the present discussion. The aforesaid secured
creditors of the present company (in liquidation) seem to suggest that by the wide
words used in the answer to issue (c) at paragraph 59 of the report, there is
almost no business that the company Court has in adjudicating any matter
pertaining to a company.
7
The management of the company (in liquidation) and a private
creditor by the name of Siddha Griha Nirman Private Limited have also
participated in the discussion, particularly, the impact of the judgment in India
Steam Laundry (P) Limited on the present proceedings. The parties refer first to
Section 434 of the Companies Act, 2013 as amended in 2016. The parties next
refer to a notification published by the Union Ministry of Corporate Affairs on
December 7, 2016 in accordance with the then sole proviso to Section 434(1)(c) of
the Act of 2013.
It appears that shortly before the conclusion of the hearing in India
Steam Laundry (P) Limited, an Ordinance was promulgated by the publication
made in the Official Gazette on June 6, 2018, inter alia, amending Section 434 of
the Act of 2013 by incorporating a second proviso to clause (c) of sub-section (1)
thereof. It does not appear that such Ordinance was brought to the notice of the
Division Bench in course of the India Steam Laundry (P) Limited matter. The
Ordinance has now transformed into an Act of Parliament and published in the
Official Gazette on August 17, 2018. Section 39 of the Act is the reflection of
Section 39 of the Ordinance that preceded it.
As a consequence of the amendment to Section 434 of the Act of
2013, first in 2016 and now in 2018, Section 434(1)(c), which is relevant for the
present purpose, reads as follows:
"434. Transfer of certain pending proceedings - (1) On such
date as may be notified by the Central Government in this
behalf,-
(a)...
8
(b)...
(c) all proceedings under the Companies Act, 1956 (1 of 1956),
including proceedings relating to arbitration, compromise,
arrangements and reconstruction and winding up of
companies, pending immediately before such date before any
District Court or High Court, shall stand transferred to the
Tribunal and the Tribunal may proceed to deal with such
proceedings from the stage before their transfer:
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.
Provided further that any party or parties to any
proceedings relating to the winding up of companies pending
before any Court immediately before the commencement of the
Insolvency and Bankruptcy Code (Amendment) Ordinance,
2018, may file an application for transfer of such proceedings
and the Court may by order transfer such proceedings to the
Tribunal and the proceedings so transferred shall be dealt with
by the Tribunal as an application for initiation of corporate
insolvency resolution process under the Insolvency and
Bankruptcy Code, 2016."
In terms of the first proviso to Section 434(1)(c) of the Act of 2013,
the notification of December 7, 2016 provides as follows in its third clause:
"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
9
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."
In addition, clause 5 of such notification of December 7, 2016
provides as follows:
"5. Transfer of pending proceedings of Winding up on the
ground of inability to pay debts.- (1) All petitions relating to
winding up 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 sub-section (4) of section 419 of the Act, exercising territorial jurisdiction and 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 or 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, 10 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."
Thus, for the purpose of the issue that has been raised herein, it is evident, on a reading of Section 434(1)(c) of the Act of 2013 with clause 5(1) of the Notification of December 7, 2016 that it is only where a petition for winding-up instituted under Section 433 (e) of the Act of 1956 has not been served on the company, will such winding-up petition stand transferred to the relevant Bench of the Tribunal.
In the present case, the creditor's winding-up petition resulted in an order of winding-up being passed on June 14, 2016. Thus, as at December 7, 2016, there was no question of transfer of the winding-up proceedings to any Tribunal.
The appeal that has been carried from an order passed in the winding-up proceedings is not contemplated under the Act of 2013 or any notification issued thereunder to stand transferred to any tribunal. In any event, it can scarcely be expected that an order passed by a High Court would be carried by way of an appeal to any tribunal.
In this context, it may be apposite to record qua the judgment in India Steam Laundry that the ratio decidendi in a judgment is exactly what the judgment decides in the context of the issues before it and not what the 11 judgment may imply to say. It may be profitable to notice the oft-quoted passage from a judgment reported at (1901) AC 495 (Quinn v. Leathem):
"Now, ... there are two observations of a general character which I wish to make, and one is to repeat what I have very often said before, that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical code, whereas every lawyer must acknowledge that the law is not always logical at all."
Without going into the legality of the answers rendered in India Steam Laundry, it is apparent that the issues therein pertained only to a petition that was pending in this Court under Sections 397 and 398 of the Companies Act, 1956. It may be of some relevance that proceedings under for oppression and mismanagement could not have been instituted in this Court after the 1988 Amendment to the Act was given effect to at the end of May, 1991. The matter in India Steam Laundry was one of those odd cases that remained pending in this Court despite this Court having lost its jurisdiction pertaining to petitions for oppression and mismanagement in a company in 1991. The decision and the 12 dictum in India Steam Laundry must, therefore, be confined to a case of oppression and mismanagement instituted in this Court prior to the 1988 Amendment coming into effect in 1991. The dictum has no bearing on other company proceedings, far less any impact on proceedings that have been saved and are required to be continued in the High Courts pursuant to the first proviso to Section 434(1)(c) of the Act and as prescribed by the Central Government by the notification of December 7, 2016. The only alteration to such position now is that any party to the pending proceedings in this Court has a right to apply for the transfer of the proceedings to the relevant tribunal.
The objection taken by IIBI Limited and IFCI Limited as to the maintainability of the present appeal is, thus, overruled.
These matters pertaining to New Central Jute Mills Company Limited (in liquidation) will now appear one week after the puja vacation.
(SANJIB BANERJEE, J.) (ABHIJIT GANGOPADHYAY, J.) bp./kc.