JOTUN INDIA PRIVATE LIMITED vs. PSL LIMITED

2018:BHC-OS:10738-DB
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pdp
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL LODGING NO. 68 OF 2018
IN
COMPANY APPLICATION NO. 572 OF 2017
IN
COMPANY PETITION NO. 434 OF 2015
WITH
NOTICE OF MOTION NO. 218 OF 2018
(For Intervention)
WITH
NOTICE OF MOTION LODGING NO. 110 OF 2018


Jotun India Private Limited )
A company incorporated under the )
provisions of the Companies Act, 1956 )
th
502, 5 floor, Boston House, Suren Road )
Andheri (East), Mumbai 400 093, India. ) .. Appellant
(Org. Respondent)
Versus
PSL Limited )
A Company incorporated under the )
Provisions of the Companies Act, 1956 )
having its registered office at Kachigam, )
Daman, Union Territory of Daman and )
Diu – 396210 ) .. Respondent
(Org. Applicant)
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Mr. Zal Andhyarujina a/w Ms. Akansha Agarwal, Ms. Silpa Nair, Ms.
Lizun Wangdi, Mr. Akshay Aurora I/by Trilegal for appellant.
Mr. Janak Dwarkadas, Sr. Advocate with Ms. Ankita Singhania, Mr. Amir
Arsiwala, Mr. Omprakash Jha, Ragha Shekhar I/by The Law Point for the
respondent.
Mr. Nikhil Rajani with Ms. Jyoti Sanap I/by V. Deshpande & Co. for the
applicants/intervener in NMA/218/2018.
CORAM : NARESH H. PATIL &
G. S. KULKARNI, JJ.
RESERVED ON : MAY 03, 2018
PRONOUNCED ON : JULY 26, 2018
JUDGMENT [Per Naresh H. Patil, J.] :
1. Admit . Heard finally by consent of the parties.
2. This appeal is directed against the order dated 5/1/2018 passed
by the learned Single Judge (Coram: K. R. Shriram,J.) in Company
Application No. 572 of 2017 in Company Petition No. 434 of 2015.
3. The appellant is original respondent in Company Application
No. 572 of 2017 and original petitioner in Company Petition No. 434 of
2015, which came to be filed on 10/3/2015 under Sections 433 and 434 of
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the Companies Act, 1956 (for short the Act of 1956 ). The respondent
herein is original applicant in Company Application No. 572 of 2017 and
original respondent in Company Petition No. 434 of 2015.
4. The appellant claimed an outstanding amount of Rs.7.25 crores
with interest in respect of unpaid invoices for the goods supplied by the
appellant in favour of the respondent. The respondent – Corporate Debtor
made a reference to Board of Industrial and Financial Reconstruction (for
short BIFR ). On 1/12/2016 the Sick Industrial Companies (Special
Provisions) Repeal Act, 2003 (for short the Repeal Act, 2003 ) was notified
and the Sick Industrial Companies (Special Provisions) Act, 1985 (for
short the SICA ) came to be repealed. Simultaneously, the Insolvency and
Bankruptcy Code, 2016 (for short the IBC, 2016) was brought into force on
28/5/2016. Under the provisions of Section 4(b) of the Repeal Act, 2003
(as amended by the IBC, 2016 ), a company, whose reference was pending
before the BIFR as on 1/12/2016, was entitled to file an application under
Section 10 of the IBC, 2016 within a period of 180 days from the
notification of the Repeal Act, 2003 i.e. on or before 31/5/2017. Such an
application could be filed before the National Company Law Tribunal
(NCLT) under Section 10 of the IBC, 2016. The proceedings before the
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NCLT were to be commenced in respect of the corporate insolvency
resolution process and for an order of moratorium.
5. On 9/3/2017, the Company Petition No. 434 of 2017 was
admitted by the learned Company Judge. On 29/5/2017, the respondent –
Corporate Debtor filed an application before the NCLT, Ahmedabad under
Section 10 of the IBC, 2016 being C.P. (IB) No. 37/10/NCLT/AHM/2017
(IBC Application) within a period of 180 days as prescribed by the Repeal
Act, 2003. In the said application, pendency of the Company Petition has
been disclosed. On 18/7/2017, the IBC Application was taken up for
hearing by the NCLT, Ahmedabad. The secured creditors, who were
noticed, were also heard. After hearing the parties, the matter was reserved
for orders by the NCLT. The matter was to be listed on 20/7/2017 as it was
closed for orders. On 18/7/2017, the appellant-creditor filed Company
Application (L) No. 333 of 2017 requesting for an appointment of a
provisional liquidator. The learned Company Judge, by an order dated
19/7/2017 restrained NCLT, Ahmedabad from continuing with IBC
Application. The Company Application was placed on 26/7/2017.
6. On 20/7/2017, Appeal (L) No. 280 of 2017 was fled by the
respondent-corporate debtor challenging the said order dated 19/7/2017. ,
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It is submitted that the Division Bench of this Court (Coram: Shantanu S.
Kemkar & M. S. Sonak,JJ.) by an order dated 1/8/2017 clarified that the
question of jurisdiction was kept open for determination and in that view of
the matter, the respondent-corporate debtor withdrew the said appeal. The
stay granted by the learned Single Judge is still continued due to which the
NCLT, Ahmedabad could not pass further orders.
7. On 15/9/2017, Company Application No. 572 of 2017 came to
be filed by the respondent – corporate debtor before the Company Judge
seeking vacation of order dated 19/7/2017. By an order dated 5/1/2018, the
learned Single Judge vacated the order dated 19/7/2017 by holding that
there is no bar on the NCLT, Ahmedabad from proceeding with IBC
Application of the respondent-corporate debtor. On 7/2/2018, present
appeal came to be filed by the appellant challenging the order dated
5/1/2018.
8. Before we proceed to address the issues raised by the learned
counsel appearing for the contesting parties, we may refer to certain
provisions of the enactments which are relevant for the purpose of
determination of the issues raised before us.
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RELEVANT PROVISIONS OF STATUTES :
9. Chapter III of the SICA refers to references, inquiries and
schemes. Section 18 refers to preparation and sanction of schemes. Section
20 refers to winding up of sick industrial company. The important
provision for the purposes of the present case would be Section 22 relating
to suspension of legal proceedings, contracts, etc. Section 22 (1) of the
SICA reads as under :-
“ 22. Suspension of legal proceedings, contracts, etc. -
(1) Where in respect of an industrial company, an inquiry under
section 16 is pending or any scheme referred to under section 17
is under preparation or consideration or a sanctioned scheme is
under implementation or where an appeal under section 25
relating to an industrial company is pending, then,
notwithstanding anything contained in the Companies Act, 1956
(1 of 1956), or any other law or the memorandum and articles of
association of the industrial company or any other instrument
having effect under the said Act or other law, no proceedings for
the winding up of the industrial company or for execution,
distress or the like against any of the properties of the industrial
company or for the appointment of a receiver in respect thereof
(and no suit for the recovery of money or for the enforcement of
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any security against the industrial company or of any guarantee
in respect of any loans or advance granted to the industrial
company) shall lie or be proceeded with further, except with the
consent of the Board or, as the case may be, the Appellate
Authority.”
Section 4 of the Repeal Act, 2003 refers to consequential
provisions on the dissolution of the Appellate Authority and the Board.
Section 4(b) of the Repeal Act, 2003 reads as under :-
“ 4. Consequential provisions. - On the dissolution of the
Appellate Authority and the Board, -
(a) ….....
(b) on such date as may be notified by the Central
Government in this behalf, any appeal preferred to the
Appellate Authority or any reference made or inquiry
pending to or before the Board or any proceeding of
whatever nature pending before the Appellate Authority or
the Board under the Sick Industrial Companies (Special
Provisions) Act, 1985 (1 of 1986) shall stand abated:
Provided that a company in respect of which such
appeal or reference or inquiry stands abated under this
clause may make reference to the National Company Law
Tribunal under the Insolvency and Bankruptcy Code, 2016
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within one hundred and eighty days from the
commencement of the Insolvency and Bankruptcy Code,
2016 in accordance with the provisions of the Insolvency
and Bankruptcy Code, 2016;
Provided further that no fees shall be payable for
making such reference under Insolvency and Bankruptcy
Code, 2016 by a company whose appeal or reference or
inquiry stands abated under this clause.
Chapter II of the IBC, 2016 refers to corporate insolvency
resolution process. Sections 10, 12, 14 and 22 of the IBC, 2016 read as
under:-
“ 10. Initiation of corporate insolvency resolution
process by corporate applicant. - (1) Where a corporate
debtor has committed a default, a corporate applicant
thereof may file an application for initiating corporate
insolvency resolution process with the Adjudicating
Authority.
(2) The application under sub-section (1) shall be filed
in such form, containing such particulars and in such
manner and accompanied with such fee as may be
prescribed.
(3) The corporate applicant shall, along with the
application furnish the information relating to -
(a) its books of account and such other
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documents relating to such period as may be
specified; and
(b) the resolution professional proposed to be
appointed as an interim resolution professional.
(4) The Adjudicating Authority shall, within a period
of fourteen days of the receipt of the application, by an
order -
(a) admit the application, if it is complete; or
(b) reject the application, if it is incomplete:
Provided that Adjudicating Authority shall, before
rejecting an application, give a notice to the applicant to
rectify the defects in his application within seven days
from the date of receipt of such notice from the
Adjudicating Authority.
(5) The corporate insolvency resolution process shall
commence from the date of admission of the application
under sub-section (4) of this section.
12. Time-limit for completion of insolvency
resolution process. - (1) Subject to sub-section (2), the
corporate insolvency resolution process shall be
completed within a period of one hundred and eighty days
from the date of admission of the application to initiate
such process.
(2) The resolution professional shall file an application
to the Adjudicating Authority to extend the period of the
corporate insolvency resolution process beyond one
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hundred and eighty days, if instructed to do so by a
resolution passed at a meeting of the committee of
creditors by a vote of seventy-five per cent. of the voting
shares.
(3) On receipt of an application under sub-section (2), if
the Adjudicating Authority is satisfied that the subject
matter of the case is such that corporate insolvency
resolution process cannot be completed within one
hundred and eighty days, it may by order extend the
duration of such process beyond one hundred and eighty
days by such further period as it thinks fit, but not
exceeding ninety days:
Provided that any extension of the period of
corporate insolvency resolution process under this section
shall not be granted more than once.
14. Moratorium. - (1) Subject to provisions of sub-
sections (2) and (3), on the insolvency commencement
date, the Adjudicating Authority shall by order declare
moratorium for prohibiting all of the following, namely:-
(a) the institution of suits or continuation of
pending suits or proceedings against the corporate debtor
including execution of any judgment, decree or order in
any Court of law, tribunal, arbitration panel or other
authority;
(b) transferring, encumbering, alienating or
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disposing of by the corporate debtor any of its assets or
any legal right or beneficial interest therein;
(c) any action to foreclose, recover or enforce
any security interest created by the corporate debtor in
respect of its property including any action under the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (54 of 2002);
(d) the recovery of any property by an owner or
lessor where such property is occupied by or in the
possession of the corporate debtor.
(2) The supply of essential goods or services to the
corporate debtor as may be specified shall not be
terminated or suspended or interrupted during moratorium
period.
(3) The provisions of sub-section (1) shall not apply to
such transactions as may be notified by the Central
Government in consultation with any financial sector
regulator.
(4) The order of moratorium shall have effect from the
date of such order till the completion of the corporate
insolvency resolution process:
Provided that where at any time during the
corporate insolvency resolution process period, if the
Adjudicating Authority approves the resolution plan
under sub-section (1) of section 31 or passes an order for
liquidation of corporate debtor under section 33, the
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moratorium shall cease to have effect from the date of
such approval or liquidation order, as the case may be.
22. Appointment of resolution professional. - (1) The
first meeting of the committee of creditors shall be held
within seven days of the constitution of the committee of
creditors.
(2) The committee of creditors, may, in the first
meeting, by a majority vote of not less than seventy-five
percent of the voting share of the financial creditors,
either resolve to appoint the interim resolution
professional as a resolution professional or to replace the
interim resolution professional by another resolution
professional.
(3) Where the committee of creditors resolves under
sub-section (2) -
(a) to continue the interim resolution professional
as resolution professional, it shall communicate its
decision to the interim resolution professional, the
corporate debtor and the Adjudicating Authority; or
(b) to replace the interim resolution professional,
it shall file an application before the Adjudicating
Authority for the appointment of the proposed resolution
professional.
(4) The Adjudicating Authority shall forward the name
of the resolution professional proposed under clause (b) of
sub-section (3) to the Board for its confirmation and shall
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make such appointment after confirmation by the Board.
(5) Where the Board does not confirm the name of the
proposed resolution professional within ten days of the
receipt of the name of the proposed resolution
professional, the Adjudicating Authority shall, by order,
direct the interim resolution professional to continue to
function as the resolution professional until such time as
the Board confirms the appointment of the proposed
resolution professional.”
Chapter III of the IBC, 2016 refers to liquidation process.
Sections 63, 64 and 231 read as under :
“ 63. Civil Court not to have jurisdiction.- No Civil
Court or authority shall have jurisdiction to entertain any
suit or proceedings in respect of any matter on which
National Company Law Tribunal or the National Company
Law Appellate Tribunal has jurisdiction under this Code.
Civil Court not to have jurisdiction.
64. Expeditious disposal of applications.- (1) Where
an application is not disposed of or an order is not passed
within the period specified in this Code, the National
Company Law Tribunal or the National Company Law
Appellate Tribunal, as the case may be, shall record the
reasons for not doing so within the period so specified;
and the President of the National Company Law Tribunal
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or the Chairperson of the National Company Law
Appellate Tribunal , as the case may be, may, after taking
into account the reasons so recorded, extend the period
specified in the Act but not exceeding ten days.
(2) No injunction shall be granted by any Court,
tribunal or authority in respect of any action taken, or to be
taken, in pursuance of any power conferred on the
National Company Law Tribunal or the National Company
Law Appellate Tribunal under this Code.
(Emphasis supplied)
231. Bar of jurisdiction.- No civil Court shall have
jurisdiction in respect of any matter in which the
Adjudicating Authority is empowered by, or under, this
Code to pass any order and no injunction shall be granted
by any Court or other authority in respect of any action
taken or to be taken in pursuance of any order passed by
such Adjudicating Authority under this Code.”
The Notifications issued by the Ministry of Finance
(Department of Financial Services), New Delhi, dated 25/11/2016 reads as
under :
“ NOTIFICATION
S.O. 3568(E) . - In exercise of powers conferred by sub-
section (2) of section 1 of the Sick Industrial Companies
(Special Provisions) Repeal Act, 2003 (1 of 2004), the Central
st
Government hereby appoints the 1 day of December, 2016, as
the date on which the provisions of the said Act shall come into
force.
[F.No.3/2/2011-IF-II]
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R.N. DUBEY, Economic Adviser”
“ NOTIFICATION
S.O. 3569(E) . - In exercise of powers conferred by clause
(b) of section 4 of the Sick Industrial Companies (Special
Provisions) Repeal Act, 2003 (1 of 2004), the Central
st
Government hereby notifies the 1 day of December, 2016, as
the date for the purpose of clause (b) of section 4 of the said Act.
[F.No.3/2/2011-IF-II]
R.N. DUBEY, Economic Adviser”
SUBMISSIONS :
10. Mr. Zal Andhyarujina, the learned counsel appearing for the
appellant submitted that under the Act of 1956, the provisions pertaining
to liquidation / winding up of companies are provided in Chapter VII and
Sections 425 to 560 of the said Act. The present Company Petition was
filed under Section 433(e) of the Act of 1956. On 12/9/2013, the
Companies Act, 2013 (for short the Act of 2013 ) was enacted seeking to
revise and replace the Act of 1956. The corresponding winding up
provisions were enacted, but not notified to come into effect, under
Chapter XX and Sections 270 to 365 of the Act of 2013. It is submitted
that although the IBC 2016 was enacted on 28/5/2016, different sections of
the IBC 2016 were to come into force on different dates as and when
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notified by the Central Government. On 15/11/2015, Section 255 and
Schedule XI of the IBC, 2016 came into force and substituted Sections 270
to 272, 280, 326, 327, 329, 334, 336, 337, 342, 343, 347, 348, 357 and 434
of the Act of 2013 and omitted Sections 289, 304, 323 and 325 of the said
Act. Certain provisions were brought into effect on 25/12/2016. In the
light of the enactments of the IBC, 2016, the Legislature provided to give
effect to the provisions of the Act of 2013 pertaining to transfer of
proceedings. The learned counsel submitted that on 15/12/2016, the Central
Government brought into force Section 434(1)(c) of the Act of 2013 along
with the Companies (Transfer of Pending Proceedings) Rules, 2016 which,
inter alia, created a different class of company petitions filed before the
High Court under Section 433(e) of the Act of 1956 i.e. post notice. Such
petitions are referred to as the “saved petitions” , which is the subject
matter of the present appeal.
11. The appellant further submits that Section 434 of the Act of
2013 deals with the transfer of the proceedings, pending under the Act of
1956 before any District Court or High Court to the Tribunal upon its
constitution. Section 255 read with Schedule XI of the IBC 2016 amended
Section 434 of the Act of 2013 in the following manner:
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255. Amendments of Act 18 of 2013 – The Companies Act,
2013 shall be amended in the manner specified in the Eleventh
Schedule.
The Eleventh Schedule
Amendments to the Companies Act, 2013
34. For Section 434, the following section shall be substituted,
namely -
434. Transfer of certain pending proceedings -
(1) On such date as may be notified by the Central
Government in this behalf, -
(a) …...
(b) …..
(c) all proceedings under the Companies Act, 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.
(2) The Central Government may make rules consistent
with the provisions of this Act to ensure timely transfer of all
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matters, proceedings or cases pending before the Company Law
Board or the courts, to the Tribunal under this section.”
12. On 7/12/2016, the Central Government notified the Companies
(Transfer of Pending Proceedings) Rules 2016 (for short the Transfer
Rules 2016 ), by which it was clarified that all petitions filed under Section
433(e) of the Act of 1956 in the High Court which had not been served
upon the respondent shall be transferred to the NCLT. On 29/6/2017, the
Central Government notified the Companies (Transfer of Pending
Proceedings) Second Amendment Rules 2017, which further amended the
Transfer Rules 2016. Rule 5 of the said Rules reads as under :-
“ 5. Transfer of pending proceedings of Winding up on the
ground of inability to pay debts .-
(1) All petitions relating to winding up of a company 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 under Rule 26 of
the Companies (Court) Rules 1959 shall be transferred to the
Bench of the Tribunal established under sub-section 4 of Section
419 of the Companies Act, 2013 exercising territorial jurisdiction
to be dealt with in accordance with Part II of the Code.
Provided that the petitioner shall submit all information,
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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
th
Tribunal up to 15 day of July, 2017, failing which the petition
shall stand abated;
Provided further that any party or parties to the petitions
th
shall, after 15 day of July, 2017, be eligible to file fresh
applications under sections 7 or 8 or 9 of the Code, as the case
may be, in accordance with the provisions of the Code;
Provided also that where a petition relating to winding up
of a company is not transferred to the Tribunal under this rule
and remains in the High Court and where there is another
petition under clause (e) of section 433 of the Act for winding up
th
against the same company pending as on 15 December, 2016,
such other petition shall not be transferred to the Tribunal, even if
the petition has not been served on the respondent.”
13. The learned counsel for the appellant submitted that the powers
of the Company Court i.e. the High Court are express in nature and in view
of the provisions of these enactments stated above, the Company Court
had jurisdiction to grant injunction against other proceeding, including
proceeding before the NCLT. Section 442 of the Act of 1956 is a
discretionary power of the High Court, wherein proceedings could be
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restrained against a company. Section 442 of the Act of 1956 reads as
under :-
“442. Power of Court to stay or restrain proceedings against
Company.
At any time after the presentation of a winding up petition
and before a winding up order has been made, the company, or
any creditor or contributory, may –
(a) where any suit or proceeding against the company is
pending in the Supreme Court or in any High Court, apply to
the Court in which the suit or proceeding is pending for a stay of
proceedings therein; and
(b) where any suit or proceeding is pending against the
company in any other court, apply to the Court having
jurisdiction to wind up the company, to restrain further
proceedings in the suit or proceeding; and the Court to which
application is so made may stay or restrain the proceedings
accordingly, on such terms as it thinks fit.”
In the submission of the learned counsel for the appellant,
Section 442 of the Act of 1956 has not been deleted. The learned counsel
submits that under Section 443(1)(c) of the Act of 1956, the Company
Court has power to issue any interim order. Relevant provisions of Section
443 of the Act of 1956 reads as under :-
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“ 443. Powers of Tribunal on hearing petition.-(1) On hearing
a winding up petition, the Tribunal may -
(a) dismiss it, with or without costs; or
(b) adjourn the hearing conditionally or
unconditionally; or
(c) make any interim order that it thinks fit; or
(d) make an order for winding up the company with or
without costs, or any other order that it thinks fit:
Provided that the Tribunal shall not refuse to make a
winding up order on the ground only that the assets of the
company have been mortgaged to an amount equal to or in
excess of those assets, or that the company has no assets.
(2) …..
(3) …..
The learned counsel submitted that whether the proceedings are
“by or against the company” as contemplated under Section 446(2) or
“against the Company” under Section 442, it is a distinction without a
difference. Winding up proceedings are representative in nature. The
Company Court has power under Section 446 to injunct other
proceedings, to be exercised when a winding up order has been made or
provisional liquidator has been appointed. The Company Court retains its
jurisdiction under the Companies Act in respect of saved petitions and it
has discretion to exercise all powers under the Companies Act, 1956.
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14. In the submission of the learned counsel for the appellant, the
IBC, 2016 does not have primacy over the Act of 1956 and Sections 14, 63,
64 and 238 of the IBC 2016 do not apply to “saved petitions”. The features
of the IBC, 2016 are distinct from the SICA. The counsel has enumerated
following distinguishing features :
(a) Under Section 15 of SICA, the Board of the Company is
mandated to make a reference to BIFR if an industrial company
becomes a sick industrial company; whereas, Section 10 of
Code does not lay down any criteria.
(b) Under Section 20 of SICA, upon failure of the
rehabilitation of the Company, the Company is referred for
winding up before the High court; whereas under the Code,
upon failure of the resolution process, the liquidation takes place
before the Adjudicating Authority/NCLT itself.
(c) Under Section 22 of SICA, the stay on other proceedings
operate immediately on filing of the reference before the BIFR
under Section 15; whereas under the Code, the moratorium takes
effect only upon admission of the application under Section 13
and 14 of the Code and therefore, requires the Adjudicating
Authority to exercise its discretion.
(d) Section 22 of SICA cannot be considered pari materia to
Section 14 of the Code. Section 22 makes express reference to
the Companies Act 1956 and winding up proceedings; whereas,
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Section 14 of the Code does not expressly stay winding up
proceedings or proceedings under the Companies Act, 1956.
(e) Upon notification of the SICA Repeal Act, the stay
granted under Section 22 of SICA abated with immediate effect
and was not continued to protect the Company for the period of
180 days.
In the submissions of the learned counsel, the learned Single
Judge failed to consider the settled law on the point and the case law cited
before him.
15. The learned counsel for the appellant, in support of his
submission, placed reliance on the judgment delivered by the learned
Single Judge of this court in the case of M/s. Ashok Commercial
1
Enterprises vs. Parekh Aluminex Limited . Para 62 of the said judgment
reads as under :-
“62. In my view, it is clear that all winding up proceedings
shall not stand transferred to the NCLT. It is clear that if the
service of the notice of the Company Petition under Rule 26 of
the Companies (Court) Rules, 1959 is not complied before the
th
15 December, 2016 such Petitions shall stand transferred to
NCLT whereas all other Company Petitions would continue to be
1 [Company Petition No. 136 of 2014 decided on 11/4/2017]
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heard and adjudicated upon only by the High Court. The
Legislative intent is thus clear that two sets of winding up
proceedings would be heard by two different forum i.e. one by
NCLT and another by the High Court depending upon the date of
th
service of Petition before or after 15 December, 2016. In my
view, there is thus, no embargo on this Court to hear this Petition
along with other companion Petitions, in view of the admitted
position that the notice under Rule 26 of the Companies (Court)
th
Rules, 1959 has been served on the respondent prior to 15
December, 2016.
The learned counsel also placed reliance on the order passed by
the learned Single Judge of this court in the Case of West Hills Realty
2
Private Ltd. vs. Neelkamal Realtors Tower Pvt. Ltd. .
16. The learned Senior Counsel Mr. Janak Dwarkadas, appearing
for the respondent, submitted that as long as post notice winding up
petition was pending, whether the same was admitted or not, the Company
Court would certainly be entitled to dispose of the same without any
impediment, including passing a final order of winding up of the company
in question. The pendency of a post notice winding up petition by itself
would not in any manner trigger the applicability of the IBC, 2016.
According to the learned counsel, the IBC, 2016 would get triggered if,
2 [Company Petition No. 331 of 2016 dated 23/12/2016]
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(a) a pre-notice winding up petition was filed and transferred
th
to the NCLT pursuant to the transfer notification dated 7
December, 2016;
(b) a fresh application was to be filed by an operational or
financial creditor under the Code;
(c) the Company itself were to file an application under
Section 10 of the Code;
(d) pursuant to repeal of SICA, and by virtue of Section 252
th
read with the 8 Schedule of the Code, a reference or
appeal which was pending before the BIFR or AAIFR
stood abated and in the period of 180 days, the same was
filed before the NCLT under the provisions of the Code.
17. It is submitted that it is only in any one of the aforesaid
instances, the IBC gets triggered and the bar under Section 64(2) of the
IBC, 2016 gets attracted. Inherent powers of the court cannot be exercised
contrary to and inconsistent with express statutory provisions. It is
submitted that a post notice winding up petition must be regarded to be in
the same position as any other petitioning creditor who had filed a winding
up petition against a company to which the provisions of Section 22 of
SICA became applicable by operation of law, regardless of the stage at
which the winding up may be. In the written submission, the respondent
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further submitted that, the fact that there was as yet no declaration made by
NCLT under the IBC, 2016, cannot be taken as a ground / justification for
exercising the power to grant an injunction restraining the Company from
invoking the provisions of Section 10 of the IBC, 2016, as the same would
be in the teeth of Section 64(2) of the IBC, 2016. If the submission of the
appellant is accepted, it would mean that in respect of a Company where
notice of a winding up petition has been served or a winding up admitted
such a company itself would be completely outside the purview of and
exempt from the applicability of the provisions of the IBC, 2016 for all
times to come. It is further submitted that such an interpretation would be
contrary to every cannon of interpretation and would in fact fall foul of the
th
notification dated 7 December, 2016 by which the pre-notice winding up
petitions were not only transferred to the NCLT, but were required to be
disposed of in accordance with the provisions of the Code as also the
th
provisions of Section 252 read with 8 Schedule of the Code, which
expressly permits a period of 180 days within which references which were
pending before BIFR/AAIFR could be applied to be referred to the NCLT
under the provisions of the Code. The interpretation sought to be
th
canvassed by the appellant creditor would render Section 252 and the 8
Schedule of the Code otiose.
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18. The learned Senior Counsel referred to Section 252 of the IBC,
2016 and the amended Repeal Act, 2003 in the manner specified in VIIIth
Schedule of the IBC 2016. The Eighth Schedule of the IBC, 2016
provides as under :-
“ In section 4, for sub-clause (b), the following sub-clause
shall be substituted, namely -
“(b) On such date as may be notified by the Central
Government in this behalf, any appeal preferred to the Appellate
Authority or any reference made or inquiry pending to or before
the Board or any proceeding of whatever nature pending before
the Appellate Authority or the Board under the Sick Industrial
Companies (Special Provisions) Act, 1985 (1 of 1986) shall
stand abated:
Provided that a company in respect of which such appeal
or reference or inquiry stands abated under this clause may
make reference to the National Company Law Tribunal under
the Insolvency and Bankruptcy Code, 2016 within one hundred
and eighty days from the commencement of the Insolvency and
Bankruptcy Code, 2016 in accordance with the provisions of the
Insolvency and Bankruptcy Code, 2016:
Provided further that no fees shall be payable for making
such reference under Insolvency and Bankruptcy Code 2016 by
a company whose appeal or reference or inquiry stands abated
under this clause.”
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19. The effect of this substituted Section 4(b) is to confer an express
power upon the company to make a reference to the NCLT under the IBC,
2016 within 180 days of the commencement of the Code i.e. 1/12/2016,
which reference will be dealt with in accordance with provisions of the
IBC, 2016. There is no express or implied saving of any substantive
provisions of the Act of 1956 to warrant the interpretation placed by the
appellant, according to the learned counsel.
20. On the effect of Repeal, it is submitted that Section 255 read
with XI Schedule of the IBC, 2016 has amended the Companies Act,
2013. In the XI Schedule, Clause 34 (c) provides as under :-
“34. For section 434, the following section shall be substituted,
namely:-
“434. (1) On such date as may be notified by the Central
Government in this behalf, -
(a) ….
(b) ….
(c) all proceedings under the Companies Act, 1956
(1 of 1956), including proceedings relating to arbitration,
compromise arrangements and reconstruction and winding up
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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.”
21. The learned Senior Counsel appearing for the respondent, in
support of his submissions, placed reliance on the following judgments:
3
(a) Allahabad Bank vs. Canara Bank and anr. .
4
(b) M/s. Innoventive Industries Ltd. vs. ICICI Bank and anr.
5
(c) B. Gopal Das and ors. vs. Kota Straw Board (P) Ltd.
(d) Kailash Prasad Mishra and ors. vs. Medwin Laboratory P.
6

Ltd. and ors.
22. We have extensively heard the learned counsel appearing for
the parties. We have perused the record, impugned order and the
judgments cited before us.
3 [(2000) 4 SCC 406]
4 [2017 SCC OnLine SC 1025] .
5 [1972 (1) WLN 35]
.
6 [1985 SCC OnLine MP 194] .
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23. We may refer to the statement of objects and reasons of the IBC,
2016 which reads as under :-
“ STATEMENT OF OBJECTS AND REASONS
There is no single law in India that deals with insolvency
and bankruptcy. Provisions relating to insolvency and
bankruptcy for companies can be found in the Sick Industrial
Companies (Special Provisions) Act, 1985, the Recovery of
Debt Due to Banks and Financial Institutions Act, 1993, the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 and the Companies
Act, 2013. These statutes provide for creation of multiple fora
such as Board of Industrial and Financial Reconstruction
(BIFR), Debit Recovery Tribunal (DRT) and National Company
Law Tribunal (NCLT) and their respective Appellate Tribunals.
Liquidation of companies is handled by the High Courts.
Individual bankruptcy and insolvency is dealt with under the
Presidency Towns Insolvency Act, 1909, and the Provincial
Insolvency Act, 1920 and is dealt with by the Courts. The
existing framework for insolvency and bankruptcy is
inadequate, ineffective and results in undue delays in resolution,
therefore, the proposed legislation.
2. The objective of the Insolvency and Bankruptcy
Code, 2015 is to consolidate and amend the laws relating to
reorganization and insolvency resolution of corporate persons,
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partnership firms and individuals in a time bound manner for
maximization of value of assets of such persons, to promote
entrepreneurship, availability of credit and balance the interests
of all the stakeholders including alteration in the priority of
payment of government dues and to establish an Insolvency and
Bankruptcy Fund, and matters connected therewith or incidental
thereto. An effective legal framework for timely resolution of
insolvency and bankruptcy would support development of credit
markets and encourage entrepreneurship. It would also improve
Ease of Doing Business, and facilitate more investments
leading to higher economic growth and development.
3. The Code seeks to provide for designating the
NCLT and DRT as the Adjudicating Authorities for corporate
persons and firms and individuals, respectively, for resolution of
insolvency, liquidation and bankruptcy. The Code separates
commercial aspects of insolvency and bankruptcy proceedings
from judicial aspects. The Code also seeks to provide for
establishment of the Insolvency and Bankruptcy Board of India
(Board) for regulation of insolvency professionals, insolvency
professional agencies and information utilities. Till the Board is
established, the Central Government shall exercise all powers
of the Board or designate any financial sector regulator to
exercise the powers and functions of the Board. Insolvency
professionals will assist in completion of insolvency resolution,
liquidation and bankruptcy proceedings envisaged in the Code.
Information Utilities would collect, collate, authenticate and
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disseminate financial information to facilitate such proceedings.
The Code also proposes to establish a fund to be called the
Insolvency and Bankruptcy Fund of India for the purposes
specified in the Code.
4. The Code seeks to provide for amendments in the
Indian Partnership Act, 1932, the Central Excise Act, 1944,
Customs Act, 1962, Income Tax Act, 1961, the Recovery of
Debts Due to Banks and Financial Institutions Act, 1993, the
Finance Act, 1994, the Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002,
the Sick Industrial Companies (Special Provisions) Repeal Act,
2003, the Payment and Settlement Systems Act, 2007, the
Limited Liability Partnership Act, 2008 and the Companies Act,
2013.
5. The Code seeks to achieve the above objectives.”
24. The Apex Court in the case of M/s Innoventive Industries Ltd.
vs. ICICI Bank and anr. (Supra) had incorporated the statement made by
the Hon’ble Finance Minister while piloting IBC 2016 in para 15 which
reads as under:-
“ SHRI ARGUN JAITLEY: One of the differences between
your Chapter 11 and this is that in Chapter 11, the debtor
continues to be in possession. Here the creditors will be in
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possession. Now, the SICA is being phased out, and I will tell
you one of the reasons why SICA didn’t function. Under SICA,
the predominant experience has been this, and that is why a
decision was taken way back in 2002 to repeal SICA when the
original Company Law amendments were passed. Now since
they were challenged before the Supreme Court, it didn’t come
into operation. Now, the object behind SICA was revival of sick
companies. But not too many revivals took place. But what
happened in the process was that a protective wall was created
under SICA that once you enter the BIFR, nobody can recover
money from you. So, that non-performing investment became
more non-performing because the companies were not being
revived and the banks were also unable to pursue any demand as
far as those sick companies were concerned, and, therefore,
SICA runs contrary to this whole concept of exit that if a
particular management is not in a position to run a company,
then instead of the company closing down under this
management, a more liquid and a professional management
must come and then save this company. That is the whole
object. And if nobody can save it, rather than allowing it to be
squandered, the assets must be distributed -- as the Joint
Committee has decided – in accordance with the waterfall
mechanism which they have created.”

The Apex Court quoted the relevant portions of the Bankruptcy
Law Reforms Committee in para 16, which read as under:
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“As Chairman of the Committee on bankruptcy law reforms, I
have had the privilege of overseeing the design and drafting of a
new legal framework for resolving matters of insolvency and
bankruptcy. This is a matter of critical importance: India is one
of the youngest republics in the world, with a high
concentration of the most dynamic entrepreneurs. Yet these
game changers and growth drivers are crippled by an
environment that takes some of the longest times and highest
costs by world standards to resolve any problems that arise
while repaying dues on debt. This problem leads to grave
consequences: India has some of the lowest credit compared to
the size of the economy. This is a troublesome state to be in,
particularly for a young emerging economy with the
entrepreneurial dynamism of India. Such dynamism not only
needs reforms, but reforms done urgently.”
xxx xxx xxx xxx
“The limited liability company is a contract between equity
and debt. As long as debt obligations are met, equity owners
have complete control, and creditors have no say in how the
business is run. When default takes place, control is supposed to
transfer to the creditors; equity owners have no say.
This is not how companies in India work today. For many
decades, creditors have had low power when faced with default.
Promoters stay in control of the company even after default.
Only one element of a bankruptcy framework has been put into
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place: to a limited extent, banks are able to repossess fixed
assets which were pledged with them.
While the existing framework for secured credit has given
rights to banks, some of the most important lenders in society
are not banks. They are the dispersed mass of households and
financial firms who buy corporate bonds. The lack of power in
the hands of a bondholder has been one (though not the only)
reason why the corporate bond market has not worked. This, in
turn, has far reaching ramifications such as the difficulties of
infrastructure financing.
Under these conditions, the recovery rates obtained in India
are among the lowest in the world. When default takes place,
broadly speaking, lenders seem to recover 20% of the value of
debt, on an NPV basis.
When creditors know that they have weak rights resulting
in a low recovery rate, they are averse to lend. Hence, lending in
India is concentrated in a few large companies that have a low
probability of failure. Further, secured credit dominates, as
creditors rights are partially present only in this case. Lenders
have an emphasis on secured credit. In this case, credit analysis
is relatively easy: It only requires taking a view on the market
value of the collateral. As a consequence, credit analysis as a
sophisticated analysis of the business prospects of a firm has
shriveled.
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Both these phenomena are unsatisfactory. In many settings,
debt is an efficient tool for corporate finance; there needs to be
much more debt in the financing of Indian firms. E.g. long-
dated corporate bonds are essential for most infrastructure
projects. The lack of lending without collateral, and the lack of
lending based on the prospects of the firm, has emphasised debt
financing of asset-heavy industries. However, some of the most
important industries for India's rapid growth are those which are
more labour intensive. These industries have been starved of
credit.”
xxx xxx xxx xxx
“ The key economic question in the bankruptcy process-
When a firm (referred to as the corporate debtor in the draft
law) defaults, the question arises about what is to be done.
Many possibilities can be envisioned. One possibility is to take
the firm into liquidation. Another possibility is to negotiate a
debt restructuring, where the creditors accept a reduction of
debt on an NPV basis, and hope that the negotiated value
exceeds the liquidation value. Another possibility is to sell the
firm as a going concern and use the proceeds to pay creditors.
Many hybrid structures of these broad categories can be
envisioned.
The Committee believes that there is only one correct
forum for evaluating such possibilities, and making a decision:
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a creditors committee, where all financial creditors have votes
in proportion to the magnitude of debt that they hold. In the
past, laws in India have brought arms of the government
(legislature, executive or judiciary) into this question. This has
been strictly avoided by the Committee. The appropriate
disposition of a defaulting firm is a business decision, and only
the creditors should make it.”
xxx xxx xxx xxx
“ Speed is of essence
Speed is of essence for the working of the bankruptcy code,
for two reasons. First, while the ‘calm period’ can help keep an
organisation afloat, without the full clarity of ownership and
control, significant decisions cannot be made. Without effective
leadership, the firm will tend to atrophy and fail. The longer the
delay, the more likely it is that liquidation will be the only
answer. Second, the liquidation value tends to go down with
time as many assets suffer from a high economic rate of
depreciation.
From the viewpoint of creditors, a good realisation can
generally be obtained if the firm is sold as a going concern.
Hence, when delays induce liquidation, there is value
destruction. Further, even in liquidation, the realisation is lower
when there are delays. Hence, delays cause value destruction.
Thus, achieving a high recovery rate is primarily about
identifying and combating the sources of delay.”
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xxx xxx xxx xxx
“ The role that insolvency and bankruptcy plays in debt
financing - Creditors put money into debt investments today in
return for the promise of fixed future cash flows. But the returns
expected on these investments are still uncertain because at the
time of repayment, the seller (debtor) may make repayments as
promised, or he may default and does not make the payment.
When this happens, the debtor is considered insolvent. Other
than cases of outright fraud, the debtor may be insolvent
because of
• Financial failure – a persistent mismatch between
payments by the enterprise and receivables into the enterprise,
even though the business model is generating revenues, or
• Business failure – which is a breakdown in the business
model of the enterprise, and it is unable to generate sufficient
revenues to meet payments.
Often, an enterprise may be a successful business model
while still failing to repay its creditors. A sound bankruptcy
process is one that helps creditors and debtors realise and agree
on whether the entity is facing financial failure and business
failure. This is important to allow both parties to realise the
maximum value of the business in the insolvency.”
xxx xxx xxx xxx
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“Control of a company is not divine right. When a firm
defaults on its debt, control of the company should shift to the
creditors. In the absence of swift and decisive mechanisms for
achieving this, management teams and shareholders retain
control after default. Bankruptcy law must address this.”
xxx xxx xxx xxx
“ Objectives
The Committee set the following as objectives desired from
implementing a new Code to resolve insolvency and
bankruptcy:
1. Low time to resolution.
2. Low loss in recovery.
3. Higher levels of debt financing across a wide variety of
debt instruments.
The performance of the new Code in implementation will
be based on measures of the above outcomes.”
In paras 27, 31 and 33, the Apex Court observed in respect of
scheme of the IBC, 2016 as under:-
27. The scheme of the Code is to ensure that when a default
takes place, in the sense that a debt becomes due and is not
paid, the insolvency resolution process begins. Default is
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defined in Section 3(12) in very wide terms as meaning non-
payment of a debt once it becomes due and payable, which
includes non-payment of even part thereof or an installment
amount. For the meaning of “debt”, we have to go to Section
3(11), which in turn tells us that a debt means a liability of
obligation in respect of a “claim” and for the meaning of
“claim”, we have to go back to Section 3(6) which defines
“claim” to mean a right to payment even if it is disputed. The
Code gets triggered the moment default is of rupees one lakh or
more (Section 4). The corporate insolvency resolution process
may be triggered by the corporate debtor itself or a financial
creditor or operational creditor. A distinction is made by the
Code between debts owed to financial creditors and operational
creditors. A financial creditor has been defined under Section
5(7) as a person to whom a financial debt is owed and a finan-
cial debt is defined in Section 5(8) to mean a debt which is
disbursed against consideration for the time value of money. As
opposed to this, an operational creditor means a person to
whom an operational debt is owed and an operational debt
under Section 5(21) means a claim in respect of provision of
goods or services.
31. The rest of the insolvency resolution process is also very
important. The entire process is to be completed within a period
of 180 days from the date of admission of the application under
Section 12 and can only be extended beyond 180 days for a
further period of not exceeding 90 days if the committee of
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creditors by a voting of 75% of voting shares so decides. It can
be seen that time is of essence in seeing whether the corporate
body can be put back on its feet, so as to stave off liquidation.
33. Under Section 30, any person who is interested in putting
the corporate body back on its feet may submit a resolution plan
to the resolution professional, which is prepared on the basis of
an information memorandum. This plan must provide for
payment of insolvency resolution process costs, management of
the affairs of the corporate debtor after approval of the plan, and
implementation and supervision of the plan. It is only when
such plan is approved by a vote of not less than 75% of the
voting share of the financial creditors and the adjudicating
authority is satisfied that the plan, as approved, meets the
statutory requirements mentioned in Section 30, that it
ultimately approves such plan, which is then binding on the
corporate debtor as well as its employees, members, creditors,
guarantors and other stakeholders. Importantly, and this is a
major departure from previous legislation on the subject, the
moment the adjudicating authority approves the resolution plan,
the moratorium order passed by the authority under Section 14
shall cease to have effect. The scheme of the Code, therefore, is
to make an attempt, by divesting the erstwhile management of
its powers and vesting it in a professional agency, to continue
the business of the corporate body as a going concern until a
resolution plan is drawn up, in which event the management is
handed over under the plan so that the corporate body is able to
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pay back its debts and get back on its feet. All this is to be done
within a period of 6 months with a maximum extension of
another 90 days or else the chopper comes down and the liq-
uidation process begins.
25. In the case of Allahabad Bank vs. Canara Bank and anr. (Supra),
in paras 13, 33, 34 and 50, the Apex Court observed as under :-
“13. From the aforesaid contentions, the following points arise
for consideration:
(1) Whether in respect of proceedings under the RDB Act at the
stage of adjudication for the money due to the Banks or
financial institutions and at the stage of execution for recovery
of monies under the RDB Act, the Tribunal and the Recovery
Officers are conferred exclusive jurisdiction in their respective
spheres?
(2) Whether for initiation of various proceedings by the Banks
and financial institutions under the RDB Act, leave of the
Company Court is necessary under Section 537 before a
winding up order is passed against the Company or before
provisional liquidator is appointed under section 446(1) and
whether the Company Court can pass orders of stay of
proceedings before the Tribunal, in exercise of powers under
section 442?
(3) Whether after a winding up order is passed under Section
446 (1) of the Companies Act or a provisional liquidator is
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appointed, whether the Company Court can stay proceedings
under the RDB Act, transfer them to itself and also decide
questions of liability, execution, and priority under section 446
(2) and (3) read with sections 529, 529A and 530 etc. of the
Companies Act or whether these questions are all within the
exclusive jurisdiction of the Tribunal?
(4) Whether, in case it is decided that the distribution of monies
is to be done only by the Tribunal, the provisions of section 73
CPC and sub- sections (1) and (2) of section 529, section 530
of the Companies Court (sic Act) also apply - apart from
section 529A - to the proceedings before the Tribunal under the
RDB Act?
(5) Whether in view of provisions in section 19(2) and 19(19)
as introduced by Ordinance 1/2000, the Tribunal can permit the
appellant Bank alone to appropriate the entire sale proceeds
realised by the appellant except to the limited extent restricted
by section 529A? Can the secured creditors like the Canara
Bank claim under section 19(19) any part of the realisations
made by the Recovery Officer and is there any difference
between cases where the secured creditor opts to stand outside
the winding up and where he goes before the Company Court?
(6) What is the relief to be granted on the facts of the case since
the Recovery Officer has now sold some properties of the
company and the monies are lying partly in the Tribunal or
partly in this Court?
33. It is true that it has been held in several judgments of this
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Court that there is a special purpose behind the provisions in
Sections 442, 446 and 537 of the Companies Act, 1956. it has
been, in fact, so stated by the Federal court in Governor
General in Council v. Shiromani Sugar Mils Ltd. under the Old
Companies Act, 1913. Similarly, this Court in Sudarsan Chits
(I) Ltd. v. O. Sukumaran Pillai observed that – not satisfied
with Sections 442 and 537 and also with Section 446(1) (which
was similar to Section 171 of the Old Companies Act, 1913), -
Parliament enacted the Companies (Amendment) Act, 1960
and brought in the present sub-sections (2) and (3) into Section
446. This Court pointed out that instead of allowing claims to
be proceeded with against these companies in various civil
courts, Parliament declared that wherever winding-up
proceedings were pending or when an order of winding up was
passed, it was necessary to save the company “from this prolix
and expensive litigation and to accelerate the disposal of
winding-up proceedings”, and “a cheap and summary remedy”
was devised by conferring jurisdiction on the Company Court
to entertain suits and proceedings in respect of claims for and
against the company. That being the object behind enacting
Section 446(2), it was held (at SCC p. 661, para 8) that the
Companies Act “must receive such construction at the hands of
the court as would advance the object and at any rate not thwart
it” (emphasis supplied). In other words, the principle of
purposive interpretation was, as contended by the respondent's
counsel, applied while construing these provisions of the
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Companies Act. This principle was applied by some High
Courts to hold that provisions of the Companies Act can be
invoked against the Tribunal.
34. While it is true that the principle of purposive
interpretation has been applied by the Supreme Court in favour
jurisdiction and powers of the Company Court in Sudarsan
Chits (I) Ltd. case, and other cases the said principle, in our
view, cannot be invoked in the present case against the Debts
Recovery Tribunal in view of the superior purpose of the RDB
Act and the special provisions contained therein. In our
opinion, the very same principle mentioned above equally
applies to the Tribunal / Recovery Officer under the RDB Act,
1993 because the purpose of the said Act is something more
important than the purpose of Sections 442, 446 and 537 of the
Companies Act. It was intended that there should be a speedy
and summary remedy for recovery of thousands of crores which
were due to the banks and to financial institutions, so that the
delays occurring in winding-up proceedings could be avoided.
50. For the aforesaid reasons, we hold that at the stage of
adjudication under section 17 and execution of the certificate
under section 25 etc. the provisions of the RDB Act, 1993
confer exclusive jurisdiction in the Tribunal and the Recovery
Officer in respect of debts payable to Banks and financial
institutions and there can be no interference by the Company
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Court under section 442 read with section 537 or under Section
446 of the Companies Act, 1956. In respect of the monies
realised under the RDB Act, the question of priorities among
the Banks and financial institutions and other creditors can be
decided only by the Tribunal under the RDB Act and in
accordance with section 19(19) read with section 529A of the
Companies Act and in no other manner. The provisions of the
RDB Act,1993 are to the above extent inconsistent with the
provisions of the Companies Act, 1956 and the latter Act has to
yield to the provisions of the former. This position holds good
during the pendency of the winding up petition against the
debtor-company and also after a winding up order is passed. No
leave of the Company Court is necessary for initiating or
continuing the proceedings under the RDB Act, 1993. Points 2
and 3 are decided accordingly in favour of the appellant and
against the respondents.
26. For appreciating the issues raised before us, it is necessary to
give regards to the Preamble and the Statement of Objects and Reasons of
the IBC, 2016.
The vital issue raised before this court is as to whether the
Company Court could injunct the NCLT in saved petitions wherein
notice of winding up was issued? Amongst various issues and the
consequences which were demonstrated by the learned counsel appearing
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for the appellant, the foremost is that in case the NCLT is allowed to go
ahead with the proceedings filed before it, then the purpose of winding up
proceedings would get frustrated. There is a definite purpose behind the
legislature creating two classes of petitions, one saved petitions and other
petitions pending before the NCLT, according to the learned counsel for
the appellant. Therefore, in the category of saved petitions, the outcome
shall be winding up of the company in accordance with the Companies
Act. Allowing NCLT to proceed, would delay winding up proceeding and
would further frustrate the cause of filing of company petition which may
cause loss, hardship and prejudice to the appellant herein. Considering the
various provisions of the Repeal Act 2003, IBC, 2016, Scheduled attached
to the IBC, 2016, Central Government Rules issued from time to time and
the notifications and more precisely the statement of objects and reasons of
the IBC, 2016, we are not convinced to accept the proposition propounded
by the learned counsel appearing for the appellant. IBC, 2016 is framed
with a purpose to make sincere efforts for revival of the company. The
scheme under the IBC, 2016 is to revive the Company within the
stipulated time frame of 180 days and in case the efforts fail then the
outcome is to take necessary steps under the provisions of IBC, 2016 for
initiation of liquidation process in accordance with Chapter III of the IBC,
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2016. Under the scheme of IBC, 2016, in case a resolution plan fails,
ultimate outcome is liquidation of the company. These provisions will have
to be considered keeping in view the purpose of enactment of the IBC,
2016. We must reiterate the observations of the Bankruptcy Law Reforms
Committee wherein it was observed that, “Control of a company is not
devine right. When a firm defaults on its debt, control of the company
should shift to the creditors”. The Committee further stated that the
objectives desired from implementing the new Code to resolve insolvency
and bankruptcy is, (a) low time to resolution, (b) low loss in recovery and
(c) higher levels of debt financing across a wide variety of debt
instruments. The Committee had further observed that for many decades,
creditors have had low power when faced with default. Promoters stay in
control of the company even after default. The recovery rates obtained in
India are among the lowest in the world when default takes place, broadly
speaking, lenders seems to recover 20% of the value of debt, on an NPV
basis. The Committee further observed that lending in India is
concentrated in a few large companies that have a low probability of
failure. The Committee observed in respect of speed being essence as
under :-
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“Speed is of essence for the working of the bankruptcy code, for
two reasons. First, while the ‘calm period’ can help keep an
organisation afloat, without the full clarity of ownership and
control, significant decisions cannot be made. Without effective
leadership, the firm will tend to atrophy and fail. The longer the
delay, the more likely it is that liquidation will be the only
answer. Second, the liquidation value tends to go down with
time as many assets suffer from a high economic rate of
depreciation”.

The Apex Court in the case of M/s. Innoventive Industries Ltd.
vs. ICIC Bank & Anr. (Supra) observed in para 11 as under:
“11. …..According to us, once an insolvency professional is
appointed to manage the company, the erstwhile directors who
are no longer in management, obviously cannot maintain an
appeal on behalf of the company. In the present case, the
company is the sole appellant. This being the case, the present
appeal is obviously not maintainable. However, we are not
inclined to dismiss the appeal on this score alone. Having heard
both the learned counsel at some length, and because this is the
very first application that has been moved under the Code, we
thought it necessary to deliver a detailed judgment so that all
Courts and Tribunals may take notice of a paradigm shift in the
law. Entrenched managements are no longer allowed to
continue in management if they cannot pay their debts.”
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27. The issue raised is that these principles stated above may be
made efficaciously applicable to petitions which are not saved but as
regards saved petitions are concerned, provisions of the Act and the Rules
therein alone shall govern. We are not convinced to accept the said
proposition.
28. The learned Single Judge had a comparative analysis of SICA
and IBC, 2016. The learned Single Judge observed in para 85 of the
impugned order as under :-
“85. In view of the above since the IBC is admittedly a
successor statute to SICA, and Section 64(2) of IBC being pari-
materia to Section 22 of SICA, the argument that the Company
Court has the power to injunct proceedings before under NCLT
in cases of pending winding up petitions is entirely misplaced
and contrary to legislative intent.”
29. A comparative analysis of provisions of SICA clearly indicates
that under the provisions of Section 22 of SICA once the proceeding was
initiated, the other proceedings pending before the different forums were
suspended. In fact, there was an injunction operating in case the
jurisdiction under SICA was invoked by a concerned party. The learned
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counsel for the appellant made efforts to persuade us that the provisions of
SICA and IBC, 2016 are not pari-materia legislations to make it
applicable to the saved petitions under the Companies Act. In our
considered view, it would not be appropriate to observe that by enacting
IBC, 2016 the legislator intended to create two classes of winding up
petitions, one pending before the Company Court (saved petitions) and
another transferred to the forum i.e. NCLT which would be governed by
the provisions of IBC, 2016. Such a distinction would go contrary to the
object and purpose of enacting IBC, 2016 by the Parliament. Due regard
must be given to the legislator's intent and the Rules and Notifications
issued from time to time in this behalf. It would not even be appropriate
to accept a proposition that Company Judge would have jurisdiction to
stay the proceedings before the NCLT in connection with the revival or
resolution proceedings while exercising jurisdiction under the saved
petitions. In case the forum under the IBC, 2016 fails to revive the
company or to successfully complete the resolution plan, then whether the
Company Court and the NCLT would go ahead simultaneously in
liquidating the company and complete the winding up proceedings. This
situation needs to be harmonized and balanced.
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CASE LAW :
30. We may refer to observations made by the Apex Court in

respect of provisions of SICA in the case of Madura Coats Limited vs.
7
Modi Rubber Limited and anr. , in paras 27 and 28, which read as under :
“27. From the above it is quite clear that different situations can
arise in the process of winding up a company under the
Companies Act but whatever be the situation, whenever a
reference is made to BIFR under Sections 15 and 16 of SICA, the
provisions of SICA would come into play and they would prevail
over the provisions of the Companies Act and proceedings under
the Companies Act must give way to proceedings under SICA.
28. In this state of the law, insofar as the present appeal is
concerned, we do not find any error in the view taken by the High
Court in concluding that the winding-up proceedings before the
Company Court cannot continue after a reference has been
registered by BIFR and an enquiry initiated under Section 16 of
SICA. The present appeal is squarely covered by the primacy
given to the provisions of SICA over the Companies Act as
delineated in Real Value, Rishabh Agro and Tata Motors.
Consequently, the High Court was right in concluding that the
provisions of Section 22 of SICA would come into play and that
the Company Court could not proceed further in the matter
pending a final decision in the reference under SICA.
7 [(2016) 7 SCC 603]
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While considering the provisions of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002, the Apex Court in the case of Marida Chemicals Ltd. & ors. vs.
8
Union of India and ors. , in para 50, observed as under:-
50. It has also been submitted that an appeal is entertainable
before the Debts Recovery Tribunal only after such measures as
provided in sub-section (4) of Section 13 are taken and Section 34
bars to entertain any proceeding in respect of a matter which the
Debts Recovery Tribunal or the Appellate Tribunal is empowered
to determine. Thus before any action or measure is taken under
sub-section (4) of Section 13, it is submitted by Mr. Salve, one of
the counsel for the respondents that there would be no bar to
approach the civil court. Therefore, it cannot be said that no
remedy is available to the borrowers. We, however, find that this
contention as advanced by Shri Salve is not correct. A full
reading of Section 34 shows that the jurisdiction of the civil court
is barred in respect of matters which a Debts Recovery Tribunal
or an Appellate Tribunal is empowered to determine in respect of
any action taken “or to be taken in pursuance of any power
conferred under this Act”. That is to say, the prohibition covers
even matters which can be taken cognizance of by the Debts
Recovery Tribunal though no measure in that direction has so far
been taken under sub-section (4) of Section 13. It is further to be
noted that the bar of jurisdiction is in respect of a proceeding
which matter may be taken to the Tribunal. Therefore, any matter
8 [(2004) 4 SCC 311]
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in respect of which an action may be taken even later on, the civil
court shall have no jurisdiction to entertain any proceeding
thereof. The bar of civil court thus applied to all such matters
which may be taken cognizance of by the Debts Recovery
Tribunal, apart from those matters in which measures have
already been taken under sub-section (4) of Section 13.
The Apex Court, while dealing with the provisions of SEBI Act,
in the case of Sahara India Real Estate Corporation Ltd. and ors. vs.
9
Securities and Exchange Board of India and anr. , in paras 64, 65 & 67,
observed as under :-
64. Both in England and India, it is well established, that the
range of functions that may be performed by a company
incorporated under the Companies Act is extremely wide. Public
companies and private companies, functioning under the
Companies Act, 2006 in England and the Companies Act, 1956 in
India, have considerable social and economic importance, but
public companies are more highly regulated than Private
companies. Private companies are not authorised to offer any
securities to the public. The FSMA in England generally deals
with issue of securities to the public, including Listing Rules, the
Prospectus Rules, and continuing obligation contained in the
Disclosure and Transparency Rules, etc. the Companies Act,
1956 in India was enacted with the object to protect the interests
of a large number of shareholders, safeguard the interests of the
9 [(2013) 1 SCC 1]
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creditors to attain the ultimate ends of social and economic policy
of the Government. Provisions have also been incorporated
making provisions for prospectus, allotment and other matters
relating to issue of shares and debentures, etc.
65. Parliament has also enacted the SEBI Act to provide for the
establishment of a Board to protect the interests of investors in
securities and to promote the development of, and to regulate the
securities market. SEBI was established in the year 1988 to
promote orderly and healthy growth of the securities, market and
for investors' protection. The SEBI Act, Rules and Regulations
also oblige the public companies to provide high degree of
protection to the investors' rights and interests through adequate,
accurate and authentic information and disclosure of information
on a continuous basis.
67. The powers and functions of SEBI are dealt with in
Chapter IV of the SEBI Act. Section 11 states that, subject to the
provisions of the Act, it shall be the duty of SEBI to protect the
interests of investors in securities and to promote the development
of and to regulate the securities market. SEBI is also duty-bound
to prohibit fraudulent and unfair trade practices relating to
securities markets, prohibiting insider trading in securities , etc.
Section 11-A authorities SEBI to regulate or prohibit issue of
prospectus, offer document or advertisement soliciting money for
issue of securities which read as follows :-
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“ 11-A Board to regulate or prohibit issue of prospectus,
offer document or advertisement soliciting money for
issue of securities.- (1) Without prejudice to the provisions
of the Companies Act, 1956 (1 of 1956), the Board may, for
the protection of investors -
(a) specify, by regulations -
(i) the matters relating to issue of capital, transfer of
securities and other matters incidental thereto; and
(ii) the manner in which such matters shall be
disclosed by the companies;
(b) by general or special orders-
(i) prohibit any company from issuing prospectus, any
offer document, or advertisement soliciting money
from the public for the issue of securities;
(ii) specify the conditions subject to which the
prospectus, such offer document or advertisement, if
not prohibited, may be issued.
(2) Without prejudice to the provisions of Section 21 of
the Securities Contracts (Regulation) Act, 1956 (42 of
1956), the Board may specify the requirements for listing
and transfer of securities and other matters incidental
thereto.”
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31. In the case of Neelkamal Realtors Suburban Pvt. Ltd. And anr. vs.
10
Union of India , the Division Bench of this court, to which one of us was
Member (Naresh H. Patil,J.), in para 49, referred to the relevant
observations made in the case of Seaford Court Estates Ltd. v. Asher [1948]
AC 291, King's Bench Division, which read as under:
“.....Whenever a statute comes up for consideration it must be
remembered that it is not within human powers to foresee the
manifold sets of facts which may arise, and, even if it were, it is
not possible to provide for them in terms free from all ambiguity.
The English language is not an instrument of mathematical
precession. Our literature would be much the poorer if it were.
This is where the draftsmen of Acts of Parliament have often
been unfairly criticized .....”
Purposive and Harmonious Interpretation:
32. There could be a situation where there are two special statutes
operating in the field or a special statute and statute generally governing
the field, which may be referred to as general law. Even if it is considered
that in respect of subject matter there are two special statutes operating, one
Companies Act and other IBC, 2016, we need to have a purposive approach
10 [2018 (1) ABR 558]
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and harmonious interpretation to the provisions of law. A harmonious and
balanced approach is required to be adopted for the purpose of interpreting
the IBC, 2016 and the jurisdictional limitations and areas operating in
respect of saved petitions before the Company Court.
33. The purpose of the IBC, 2016 and the NCLT hearing petitions
is primarily to revive the company by having a resolution method. Whereas
in the winding up petition pending before the Company Court, ultimate
approach and object is to wound up the company. Even under the IBC, if
efforts to revive the company fails, then the liquidation proceedings get
initiated under Chapter III of the IBC, 2016. Taking into consideration the
statutory scheme of the IBC, 2016, we are of the view that NCLT
constitutes a separate and distinct forum and it cannot be attributed to be a
subordinate forum to the Company Court as constituted under the
Companies Act.
34. Section 63 of the IBC, 2016 injuncts a Civil Court or authority
to entertain any suit or proceedings in respect of any matter on which NCLT
has jurisdiction under the Code. Section 231 refers to bar of jurisdiction. It
states that no Civil Court shall have jurisdiction in respect of any matter in
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which the Adjudicating Authority is empowered under the Code to pass
orders and no injunction shall be granted by any court or other authority in
respect of any action taken or to be taken in pursuance of any orders passed
by such Adjudicating Authority under the Code. These provisions are
manifestly clear to indicate that a special statute has conferred jurisdiction
on the NCLT. One of the basic purpose of the IBC, 2016 is to make a
sincere effort to revive the company. Whereas in the winding up petition
pending before the Company Court the initiation and ultimate culmination
of the proceeding is to wound up the company.
35. The general legal principles of interpretation of statute state that the
general law should yield to the special law. In the context of the present statute
i.e. IBC 2016, we are of the view that the Companies Act 1956 could be treated
as general law and IBC, 2016 to be a special statute to the extent of the
provisions relating to revival or resolution of the company as per provision
under Chapter II of the IBC. Even if the Companies Act and the IBC 2016 are
considered as special statutes operating in their respective field, we are of the
view that the IBC 2016 being later enactment and in view of the statement and
objects and the purpose for which it was enacted, the provisions relating to
revival/resolution of the company incorporated under Chapter II will have to be
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given primacy over the provisions of the winding up proceeding pending before
the Company Courts which are referred as saved petitions.
36. We may refer to following judgments in support of this
interpretational aspect of the two statutes operating in the similar fields:-
(a) In the case of Allahabad Bank vs. Canara Bank and anr. (Supra), the
Apex Court in para 40, observed as under :-
“40. Alternatively, the Companies Act, 1956 and the RDB Act can
both be treated as special laws, and the principle that when there are
two special laws, the latter will normally prevail over the former if
there is a provision in the latter special Act giving it overriding effect,
can also be applied. Such a provision is there in the RDB Act, namely,
section 34. A similar situation arose in Maharashtra Tubes Ltd. Vs.
State Industrial and Investment Corporation of Maharashtra Ltd.
where there was inconsistency between two special laws, the Finance
Corporation Act, 1951 and the Sick Industries Companies (Special
Provisions) Act, 1985. The latter contained Section 32 which gave
overriding effect to its provisions and was held to prevail over the
former. It was pointed out by Ahmadi, J. that both special statutes
contained non-obstante clauses but that the
"1985 Act being a subsequent enactment, the non-obstante
clause therein would ordinarily prevail over the non-obstante
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clause in Section 46-B of the 1951 Act unless it is found that
the 1985 Act is a general statute and the 1951 Act is a special
one". (SCC p. 157, para 9)
Therefore, in view of section 34 of the RDB Act, the said Act
overrides the Companies Act, to the extent there is anything
inconsistent between the Acts.
(b) In the case of Raghunath Rai Bareja and anr. vs. Punjab National
Bank and ors. [(2007) 2 SCC 230] , the Apex Court in paras 21 and 27 observed
as under:-
“21. In the aforesaid decision this Court also upheld the view of
some of the High Courts that the Company Act is a general statute,
and hence the RDB Act which is a special Act, overrides the general
statute. In any event, in view of Section 34 of the RDB Act, the said
Act will prevail to the extent of inconsistency over the Companies
Act.
27. In this connection, it may be mentioned that Section 446(3) of
the Companies Act was omitted by the Companies (Second
Amendment) Act, 2002 and evidently the High Court has overlooked
this amendment. As a result in our opinion the High Court has no
power to transfer the execution petition to the Debts Recovery
Tribunal. At any event as held in Allahabad Bank v. Canara Bank,
Section 446 has no application once the RDB Act applies because
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Section 34 expressly gives overriding effect to the provisions of the
RDB Act. Also, the RDB Act is a special law and hence will prevail
over the general law in the Companies Act as held in Allahabad Bank
v. Canara Bank.”
(c) In the case of ICICI Bank Ltd. vs. SIDCO Leathers Ltd. And ors.
[(2006) 10 SCC 452] , the Apex Court in paras 46 and 47 observed as under:
“46. The provisions of the Companies Act may be a special statute
but if the special statute does not contain any specific provision
dealing with the contractual and other statutory rights between
different kinds of the secured creditors, the specific provisions
contained in the general statute shall prevail.
47. In Maru Ram v. Union of India this Court distinguished
between a specific provision and a special law holding that a specific
provision dealing with a particular situation would override even a
special law, which is inconsistent therewith.”
(d) In the case of Gaziabad Zila Sahakari Bank Ltd. vs. Addl. Labour
Commissioner and ors. [(2007) 11 SCC 756] , the Apex Court in para 63
observed as under :
“63. Also if we refer to the general principles of Statutory
Interpretation as discussed by G.P.Singh, in his treatise on 'Principles
of Statutory Interpretation', we can observe that, a prior general Act
may be affected by a subsequent particular or special Act if the
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subject-matter of the particular Act prior to its enforcement was being
governed by the general provisions of the earlier Act. In such a case
the operation of the particular Act may have the effect of partially
repealing the general Act, or curtailing its operation, or adding
conditions to its operation for the particular cases. The distinction
may be important at times for determining the applicability of those
provisions of the General Clauses Act, 1897, (Interpretation Act, 1889
of U.K. now Interpretation Act, 1978) which apply only in case of
repeals.
(e) In the case of Commercial Tax Officer, Rajasthan vs. Binani Cements
Limited and anr. [(2014) 8 SCC 319] , the Apex Court observed in paras 31, 34
and 36 as under :
“31. …...........
Thereby implying that though there exists an overlap between the
general and special provision, the general provision would also be
sustained and the two would co-exist.
34. It is well established that when a general law and a special law
dealing with some aspect dealt with by the general law are in
question, the rule adopted and applied is one of harmonious
construction whereby the general law, to the extent dealt with by the
special law, is impliedly repealed. This principle finds its origins in
the Latin maxim of generalia specialibus non derogant , i.e., general
law yields to special law should they operate in the same field on
same subject. (Vepa P. Sarathi, Interpretation of Statutes, 5th Ed.,
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Eastern Book Company; N. S. Bindra’s Interpretation of Statutes, 8th
Ed., The Law Book Company; Craies on Statute Law, S.G.G.Edkar,
7th Ed., Sweet & Maxwell; Justice G.P. Singh, Principles of Statutory
Interpretation, 13th Ed., LexisNexis; Craies on Legislation, Daniel
Greenberg, 9th Ed., Thomson Sweet & Maxwell, Maxwell on
Interpretation of Statutes, 12th Ed., Lexis Nexis)
36. The maxim generalia specialibus non derogant is dealt with in
Volume 44 (1) of the 4th ed. of Halsbury's Laws of England at Para
1300 as follows:
“The principle descends clearly from decisions of the House of
Lords in Seward v. Vera Cruz and the Privy Council in Barker v
Edger, and has been affirmed and put into effect on many occasions....
If Parliament has considered all the circumstances of, and made
special provision for, a particular case, the presumption is that a
subsequent enactment of a purely general character would not have
been intended to interfere with that provision; and therefore, if such
an enactment, although inconsistent in substance, is capable of
reasonable and sensible application without extending to the case in
question, it is prima facie to be construed as not so extending. The
special provision stands as an exceptional proviso upon the general.
If, however, it appears from a consideration of the general enactment
in the light of admissible circumstances that Parliament's true
intention was to establish thereby a rule of universal application, then

the special provision must give way to the general.”
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37. We have also perused the report of the Insolvency Law Committee
published by the Ministry of Corporate Affairs, Government of India, which was
placed before us.
38. In view of the afore-stated reasoning and the case laws cited, we
are of the considered opinion that the Company Court while dealing with the
winding up petitions (saved petitions) shall have no jurisdiction to stay the
proceedings before the NCLT in respect of revival or resolution issue. We
may further state that in case the forum under the IBC, 2016 i.e. NCLT fails
to revive or successfully implement the resolution plan, then the Company
Judge seized with the winding up petitions (saved petitions) would deal with
the petition in accordance with law. We are of the view that allowing both
the forums i.e. Company Court and the NCLT to go ahead with the
liquidation proceedings/winding up proceedings simultaneously would not
serve any purpose. There is likelihood of creation of confusion and
complexity. To harmonize this likely situation, we observe that the
Company Judge, in saved petitions, would exercise jurisdiction in case
revival efforts by NCLT fails.
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39. We find that the learned Single Judge approached the issue in its
proper perspective and harmoniously considered various provisions of the
relevant enactments keeping in view the object behind the special statutes.
We do not find any error or perversity in the view adopted by the learned
Single Judge.
40. The appeal is accordingly dismissed.
41. Notice of Motion Lodging No. 110 of 2018 as well as Notice of
Motion No. 218 of 2018 do not survive and are disposed of.

(G. S. KULKARNI,J.) (NARESH H. PATIL,J.)
42. After pronouncement of the Judgment, the learned counsel appearing
for the appellant prays for continuation of ad-interim relief granted earlier for a
period of four weeks. The learned counsel appearing for the respondent
opposed the said prayer. In the facts, prayer is rejected.
(G. S. KULKARNI,J.) (NARESH H. PATIL,J.)
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