Bombay High Court
Urban Infrstructure Trustees Limited vs Bhavik Bhimjiyani And 4 Ors on 10 December, 2018
Author: G.S.Kulkarni
Bench: G.S.Kulkarni
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
Commercial Arbitration Application No.14 OF 2016
Urban Infrastructure Trustees Ltd. ...Applicant
Versus
Bhavik Bhimjiyani & Ors. ...Respondents
with
Chamber Summons (L) no.1775 of 2018
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Mr.Dinyar Madon with Cyrus Ardeshir, Mumtaz Bandukwala, Ruchita
Krishnan I/b. Junnarkar & Associates, for the Applicant.
Mr.Saket Mone, Vishesh Kalra, Subit Chakrabarti and Ms.Neha Joshi
I/b.Vidhi Partners, for Respondent No.1 and 5.
Mr.T.N.Subramaniyam, Sr.Counsel with Ms.Pallavi Nimkar, Ms.Shamira
Naik I/b. AAK Legal, for Respondent No.2.
Mr.Rahul Gaikwad I/b. Gravitas Legal, for Liquidator.
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CORAM: G.S.KULKARNI, J.
DATED: 10th December, 2018
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P.C.:
1. Heard Mr.Madon, learned Senior Counsel for the applicant, Mr.Saket Mone, learned Counsel for respondent nos.1 and 5, Mr.T.N.Subramaniyam, learned Senior Counsel for respondent no.2 and Mr.Rahul Gaikwad, learned Counsel for the Liquidator. Mr.Madon, ::: Uploaded on - 13/12/2018 ::: Downloaded on - 26/12/2018 23:25:52 ::: pvr 2 11carap14-16=chscdl1775-18.doc learned Senior Counsel for the applicant states that respondent nos.3 and 4 are already served and the affidavit of service to that effect will be filed on or before 14 December 2018.
2. Respondent no.5 is directed to be wound up by the order passed by the National Company Law Tribunal dated 20 August 2018.
3. By this chamber summons, the applicant- the original applicant in the application under Section 11 of the Act prays for an amendment to the Section 11 application in terms of the 'schedule', which is to substitute respondent No.5-Nilkanth Township and Construction Private Limited to "Nilkanth Township and Construction Private Limited (In Liquidation)". This in view of the said order passed by the National Company Law Tribunal.
4. The learned Counsel for respondent nos.1 and 2 have opposed the chamber summons, primarily on the ground of provisions of Section 33(5) of the Insolvency and Bankruptcy Code,2016 (for short the "IBC"). Section 33(5) of the IBC reads thus:-
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"33.Initiation of liquidation.
... ... ... ..
(5) Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor:
Provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the Adjudicating Authority,
5. The learned Counsel for respondent no.1 would submit that the word "instituted" as used in sub-section (5) of Section 33(1) would also mean continuation of the proceedings. In that regard he has referred to the note on clauses in relation to the said provision.
6. The learned Counsel for the applicant has also referred to the provisions of Section 35(1)(k) of the IBC which reads thus:-
35. Powers and duties of liquidator.
(1) Subject to the directions of the Adjudicating Authority, the liquidator shall have the following powers and duties, namely: -
(a) ..... ... .
(k) to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the corporate debtor;
7. Mr.Rahul Gaikwad, appearing for the official Liquidator submits that the Official Liquidator has stepped into the shoes of the Board of Directors in pursuance of the orders passed by the National ::: Uploaded on - 13/12/2018 ::: Downloaded on - 26/12/2018 23:25:52 ::: pvr 4 11carap14-16=chscdl1775-18.doc Company Law Tribunal and is accordingly empowered to pursue the present proceedings. Mr.Gaikwad refers to the provisions of Section 35(1) of IBC. The Court's attention is drawn to the order dated 20 August 2018 passed by the National Company Law Tribunal more particularly paragraphs 6 which reads thus:-
"6. In view of the reasons aforementioned, this Bench being satisfied of the application moved by the Resolution Professional for approval of the liquidation order against this company to liquidate it, this Bench hereby orders as follows:
a. This Bench hereby orders the Corporate Debtor to be liquidated in the manner as laid down in the Chapter by issuing a Public Notice stating that the Corporate Debtor is in liquidation with a direction to the Liquidator to send this order to RoC under which this company has been registered.
b. As to appointment of Liquidator, the Resolution Professional i.e. the applicant herein is hereby directed to act as a Liquidator for the purpose of liquidation with all powers of the Board of Directors key managerial persons and the partners of the Corporate Debtor shall cease to have effect and hereby vested in the Liquidator. The personnel of the Corporate Debtor are directed to extent all co-operation to the Liquidator as may be required by him in managing the affairs of the Corporate Debtor. The Insolvency Professional appointed as Liquidator will charge fees for conduct of the liquidation proceedings in proportion tot he value of the liquidation estate assets as specified under Regulation 4 of Insolvency and Bankruptcy (Liquidation Process) Regulations,2016 and the same shall be paid to the Liquidator from the proceeds of the liquidation estate under Section 53 of the Code. c. Since this liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the Corporate Debtor without prior approval of this Adjudicating Authority save and except as mentioned in sub-section 6 of Section 33 of the Code.
d. This liquidation order shall be deemed to be notice of discharge to the officers, employees and workmen of the Corporate Debtor except to the extent of the business of the Corporate Debtor is continued during the liquidation process by the Liquidator.
e. The moratorium declared vide order dated 21.04.2017
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ceased to exist." (emphasis supplied)
5. Having heard the learned Counsel for the parties and having perused the orders passed by National Company Law Tribunal and the provisions of Section 33(5) as also the provisions of Section 35(1)(k), I am not persuaded to accept the submissions as urged on behalf of respondent nos.1 and 2. This for the reason that Section 33(5) provides that when a liquidation order has been passed, "no suit or legal proceedings shall be instituted by or against the corporate debtor". Even the proviso under the said provision says that a suit or other legal proceedings may be instituted by the liquidator, on behalf of the corporate debtor, only with prior approval of adjudicating authority (NCLT). Thus it is the institution of a proceeding which is of relevance. The present case is not a case where the Official Liquidator would be instituting the proceedings but would be pursuing the proceedings already executed. Even Section 35(1) recognizes various powers as conferred on the liquidator subject to directions of the Adjudicating Authority (NCLT). On a plain reading of this provision it can be clearly seen that the powers are substantive and which includes power to take such measures and protect the property of the corporate debtor. Sub-section (1)(k) of Section 35 ::: Uploaded on - 13/12/2018 ::: Downloaded on - 26/12/2018 23:25:53 ::: pvr 6 11carap14-16=chscdl1775-18.doc provides that the liquidator would have power to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the corporate debtor. On a conjoint reading of Section 33(5) read with Section 35(1) and more particularly 35(1)(k), I am of the opinion that there is no embargo on the Official Liquidator to be impleaded as a party to the present proceedings and for the Official Liquidator to prosecute this proceeding.
6. Accordingly, the chamber summons is required to be allowed. It is allowed in terms of prayer clause (a). Necessary amendment be carried out within a period of one week from today. Copy of the amended application be served on the parties.
7. As section 11 application is pending for last since two years, it would be necessary to hear the parties on the Section 11 application. Accordingly, list the Section 11 application for hearing on 19 December 2018.
8. Parties are directed to complete their pleadings in the meantime. Learned Advocate appearing for respondent no.1 waives ::: Uploaded on - 13/12/2018 ::: Downloaded on - 26/12/2018 23:25:53 ::: pvr 7 11carap14-16=chscdl1775-18.doc service of the amended petition on behalf of respondent no.1. Learned Counsel appearing for respondent no.2 waives service of amended petition on behalf of respondent no.2.
(G.S.KULKARNI, J.) ::: Uploaded on - 13/12/2018 ::: Downloaded on - 26/12/2018 23:25:53 :::