HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR S.B. Company Petition No. 19/2009 In Re: M/ S Jaipur Metals Electricals Ltd ----Petitioner ======= ----Respondent Connected With S.B. Civil Writs No. 4156/1998 Vinod Kumar Jain ----Petitioner Versus Jaipur Metals And Electricals ----Respondent S.B. Civil Writs No. 504/2000 Metals Elecricals Mazdoor Sa ----Petitioner Versus State Ors. ----Respondent S.B. Civil Writs No. 3950/2000 R.c.misra And Ors. ----Petitioner Versus State And Ors. ----Respondent S.B. Civil Writs No. 3963/2000 Anjani Kumar And Ors ----Petitioner Versus State And Ors ----Respondent S.B. Civil Writs No. 3964/2000 Rameshwar Prasad And Ors ----Petitioner Versus State And Ors ----Respondent S.B. Civil Writs No. 3965/2000
Transcript
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR
S.B. Company Petition No. 19/2009
In Re:M/ S Jaipur Metals Electricals Ltd
----Petitioner
=======
----Respondent
Connected With
S.B. Civil Writs No. 4156/1998
Vinod Kumar Jain
----Petitioner
Versus
Jaipur Metals And Electricals
----Respondent
S.B. Civil Writs No. 504/2000
Metals Elecricals Mazdoor Sa
----Petitioner
Versus
State Ors.
----Respondent
S.B. Civil Writs No. 3950/2000
R.c.misra And Ors.
----Petitioner
Versus
State And Ors.
----Respondent
S.B. Civil Writs No. 3963/2000
Anjani Kumar And Ors
----Petitioner
Versus
State And Ors
----Respondent
S.B. Civil Writs No. 3964/2000
Rameshwar Prasad And Ors
----Petitioner
Versus
State And Ors
----Respondent
S.B. Civil Writs No. 3965/2000
(2 of 26) [COP-19/2009]
Babu Lal And Ors
----Petitioner
Versus
State And Ors
----Respondent
S.B. Civil Writs No. 3966/2000
R M Yadav And Ors
----Petitioner
Versus
State And Ors
----Respondent
S.B. Civil Writs No. 3967/2000
Rasik Lal And Ors
----Petitioner
Versus
State And Ors
----Respondent
S.B. Civil Writs No. 3643/2007
Dr.sanjula Thanvi
----Petitioner
Versus
State Of Rajasthan And Ors
----Respondent
S.B. Civil Writs No. 13608/2008
Jaipur Metals And Electricals
----Petitioner
Versus
State Of Raj And Ors
----Respondent
S.B. Company Appeal No. 6/2009
Jme Employees Cooperative Credit Thrif
----Petitioner
Versus
M/s Dhir Dhir Assets
----Respondent
S.B. Company Appeal No. 7/2009
Jaipur Metals Electricals Ltd
----Petitioner
Versus
Dhir Dhir Asset Re-Construction Co
----Respondent
(3 of 26) [COP-19/2009]
S.B. Company Appeal No. 8/2009
State Of Raj
----Petitioner
Versus
M/s Dhir Dhir Assets Securitisation
----Respondent
S.B. Writ Review No. 43/2018
Metals Elecricals Mazdoor Sa
----Petitioner
Versus
State Ors. ----Respondent
For Petitioner(s) : Mr. SS Hora, Adv.Mr. Abhiroop Das Gupta, Adv.
For Respondent(s) : Mr. Rajendra Prasad, AAGMr. Nitin Jain, Adv.Mr. RC Joshi, Adv.Mr. PK Sharma, Adv.
HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA
Judgment / Order
REPORTABLE
Reserved on 03/05/2018
Pronounced on 01/06/2018
1. On 26/04/2018, this Court, on having received an affidavit
filed on behalf of the Interim Resolution Professional, stated to
have been appointed by the National Company Law Tribunal
(NCLT) under the Insolvency and Bankruptcy Code, 2016 (IBC),
observed as under:-“Prima facie, once the case was pending before thisCourt and the concerned applicant Alchemist wasalready party to this Court proceedings and was wellaware of the proceedings going on with regard to therevival proceedings and also had put up its proposal,at the same time the claim of workmen was alsobeing examined for which the valuation report hasbeen directed to be conducted by the OfficialLiquidator; there was no occasion for intervention byNCLT in the matter. It appears that no notice wasissued to the State Government nor workmen were
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given any opportunity before admitting the sameunder the Code of 2016.
Learned Advocate General as well as AdditionalAdvocate General state that they would like to filereply to the affidavit filed by the Interim ResolutionProfessional and pray for interim protection.
Taking into consideration the aforesaid aspect,implementation and effect of order passed by NCLTshall remain stayed and till question is decidedwhether Code of 2016 will over ride the presentproceedings, till that date, the State Governmentshall not hand over the possession of building andmaterial of of JMEL to the Interim ResolutionProfessional appointed by NCLT.
List on 3rd May, 2018.”
2. The question before this Court essentially is whether the
present proceedings can continue or whether the NCLT order
appointing the IRP could be allowed to act in terms of IBC, 2016
while the present proceedings in relation to the Company are
pending before this Court.
3. The Additional Advocate General, appearing for the State
was heard alongwith the counsel appearing for the workmen as
well as the counsels appearing for Alchemist Asset Reconstruction
Company Ltd. The counsel for Jaipur Metals and Electrical Limited
(JMEL) was also heard.
4. Before embarking on the question above, it would be useful
to note certain orders which have been passed by this Court in the
Company Petition as well as Writ Petitions filed by the workmen.
5. In the Company Petition on 17/08/2017, arguments were
heard and order was reserved on the question whether the
Company should be wound up. While the judgment was reserved,
an application came to be filed by the State for recalling the order
dated 17/08/2017 on the ground that the State Government was
not able to present its case. It was stated that the State
(5 of 26) [COP-19/2009]
Government has decided to invite revival proposal and written
submissions were also filed by the State. This was because in SB
Civil Writ Petition No.504/2000 preferred by Jaipur Metals and
Electricals Ltd. Majdoor Sangh, this Court had asked the Advocate
General to find out the possibilities of reviving the Company as a
prayer has been made in the said writ petition for revival of the
Jaipur Metals and Electricals Ltd.. It was also stated that a
meeting was convened under the chairmanship of the Hon’ble
Industries Minister on 24/08/2017. Taking into consideration the
averments, this Court listed the case under ‘to be mentioned’
category and directed the State to advance its submissions
whereafter the case was listed several times before the Court. The
Company Petition was also placed before Hon’ble the Chief Justice
to pass orders relating to consolidation of matters which had been
taken up by the workman in writ proceedings whereafter the
Hon’ble Chief Justice directed that the writ petitions shall be listed
and heard alongwith Company Petition before the Company Judge.
6. The State Government was thereafter asked to submit a
concrete proposal alongwith the Scheme. However, the State
Government, later on submitted that they do not have any
proposal and they were in the process of seeking proposals from
the concerned parties who may come forward for putting up a
proposal for revival. The applicant Alchemist Asset Reconstruction
Company Ltd. also submitted a proposal in the meeting conducted
by the State Government. It was directed to submit the details
about various proceedings which have been undertaken in relation
to the Company. On 02/11/2017, following orders were passed by
this Court:-
(6 of 26) [COP-19/2009]
“The case was directed to be listed today. At therequest of the State Government, the case had beenput up for re-hearing. A concrete proposal is requiredto be put by the State Government with regard torevival. The said proposal alongwith scheme and thedecision of the State Government may be placedbefore this Court within two weeks hereinafter withadvance copy to the concerned parties to this petition,the concerned parties may also submit their responseto the said proposal. It is made clear that attemptshould be made to revive the company and start itsoperations and it would be always in the interest of allthat the company starts production again. However, itwould be subject to concerned parties proposal andthe manner in which they may accept the proposal ofthe State Government.
Let the pleadings in this regard be completedwithin four weeks.
Let the matter come up again on 07.12.2017. Allthe matters relates to Jaipur Metals & Electricals belisted on the said date. “
7. Another order was passed on 07/12/2017 as under:-“We have heard the learned counsels for theAlchemist Asset Reconstruction Company Ltd, theworkers of the company and the Additional AdvocateGeneral Mr.G.S.Gill. This Court finds that a minutes ofmeeting have been placed by the Additional AdvocateGeneral stated to have been held for discussingpossibility of revival of M/s. Jaipur Metals & ElectricalsLtd. Under the Chairmanship of CommissionerIndustries on 21 & 22.11.2017. Minutes of meetingdated 1.12.2017 show that the submissions of the M/sGenus Power Infrastructures Ltd, Alchemist AssetReconstruction Company Ltd and JME employeessociety have been noted. However, it appears that theState Government has not put up its submissions inthe meeting. The minutes refer to the submissionswith a view to place the same before the StateGovernment for taking a decision.
While noting the written submissions of theState Government, this Court had directed the matterto be heard a fresh its vide order dated 24.10.2017. Itwas mainly on account of State Government stating inwritten submissions therein that they have a revivalproposal. However, even as on today, no concreteproposal on behalf of the State Government has beenput up for revival. This Court would like to know a
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concrete proposal of the State Government withregard to the possibility revival of M/s. Jaipur Metals &Electricals Ltd. be placed before this Court before anyfinal decision is taken in the matter. Such proposal besubmitted along with an affidavit of the PrincipalSecretary Industries before the next date.
List again on 4.1.2018 for the said purpose.”
8. In SB Civil Writ Petition No.504/2000, Jaipur Metals &
Electricals Mazdoor Sangh Vs. State, order was passed on the
same date i.e. 07/12/2007 as under:-“This writ petition has been placed before this
Court in view of the company matter pending beforethis Court. A compliance report has been filed by theState.
Learned counsel for the petitioner submits thatthe workers by way of this writ petition have prayedand pointed out that they have 59.50% shares and20.23% shares are held by the State Government. Thecompany was locked out in 30.9.1998 and theworkmen in the present writ petition are praying forpayment of salary and their dues.
It is stated that the goods and material of valueof more than Rs.35,000,0000/- is lying in the factorypremises of J.M.E.L. The possession of the premisesare with the State Government. The salary of theworkmen which is lying due since long can be metedout to certain extend by selling of the material in thefactory premises.
Taking into consideration, the submissions of thecounsel for the petitioner-workmen, it is directed thatthe State Government shall submit an evaluationreport relating to the entire material which is lying inthe factory premises and also for the said purpose. Idirect the Official Liquidator to act provisionallyattached to this Court and conduct along with theOfficers of the State Government the said evaluationthorough evaluation experts and submit the report tothis Court on 4.1.2018. So that further decisionreferring to release of salary dues for the workers maybe taken by this Court, accordingly.
List again on 4.1.2018.”
9. All the parties, who had stake in the matter, had put up their
proposal and the OL also submitted his report relating to
valuation.
(8 of 26) [COP-19/2009]
10. While the aforesaid proceedings were going on, the NCLT has
passed an order under Section 7 on 13/04/2018 whereby the
NCLT, relying upon an affidavit filed by the financial creditor
Alchemist Asset Reconstruction Company Ltd., affirming that till
date neither any liquidation nor any admission order has been
passed in the winding up proceedings and noting that no
provisional liquidator or OL has been appointed, the NCLT has
proceeded to pass an order appointing IRP and also has proceeded
to declare moratorium in terms of Section 14 of the IBC, 2016.
11. In the aforesaid background, learned counsel appearing for
Alchemist Asset Reconstruction Company Ltd. submits that the
Alchemist Asset Reconstruction Company Ltd. was entitled to
approach the NCLT despite pendency of the present winding up
proceedings. It is submitted that it is not a case of transfer of
proceedings but is rather a case of fresh initiation of CIRP
proceedings before the NCLT. It is submitted that there is no bar
for initiating fresh petition before the NCLT despite pendency of
the present winding up proceedings. It is submitted that the
Companies (Transfer of Pending proceedings) Rules, 2016 would
not be applicable as it was not a case of transfer of proceedings. It
is submitted that on 29/06/2017, the existing Rule 5 was
substituted and the embargo created on petitions arising out of
the references made by BIFR was refuted and in terms of Rule 5
proviso 2 all parties were entitled to file fresh applications under
the applicable provisions of IBC, 2016. It is submitted that there is
no rule which prevents the institution of fresh petitions before the
NCLT under IBC, 2016 and it is asserted that it is a legitimate
exercise which has statutory right which deserves to be permitted
to be continued. It is further submitted that there is no power
(9 of 26) [COP-19/2009]
available with this Court to grant injunction in view of provisions of
IBC, 2016 and the High Court would come within ambit of
definition of Court for the said purpose. In terms of Section 238 of
IBC, 2016, the provisions of IBC would override all other laws
notwithstanding inconsistent therewith contained in any other law
for the time being in force. Learned counsel relies on the
judgment passed by the Supreme Court in the case of
Innoventive Industries Ltd. Vs. ICICI & Anr.:2018(1) SCC
407. It is further submitted that IBC, 2016 provides a mechanism
to consider claims of all employees in terms of Regulation 9 of the
IBBI (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016.
12. Learned counsel also submits that effect of the moratorium
will apply. However, he submits that it is only applicable for the
limited time during which the proceedings can be continued i.e.
six months with an extension period of another 90 days and
thereafter, the case in the High Court can continue. It is further
stated that as the NCLT has already passed an order, the same
can only be a subject matter of challenge before the NCLAT by any
party which is aggrieved of the same and relies on the law laid
down by the Apex Court in the case of Authorized Officer, State
Bank of Travancore Vs. Mathew KC: 2018(3) SCC 85 as well
as other judgments to the same effect. The submission is that the
Alchemist Asset Reconstruction Company Ltd. is required to be
declared as a financial creditor and as the State Government has
affirmed that it does not have any revival plan of its own, the
State Government would have no locus in the matter to oppose
the proceedings undertaken by the applicant before the IBC.
(10 of 26) [COP-19/2009]
13. Per-contra, Mr. Rajendra Prasad, learned Additional Advocate
General appearing for the State has opposed the entire action
taken by Alchemist Asset Reconstruction Company Ltd. (for short,
‘ALCHEMIST’) before the IBC. It has been stated that the
Company Petition was registered on 26/09/2002 after the
recommendations of BIFR and notices had already been served on
all the parties including the applicant-Company namely;
ALCHEMIST. After the judgment had been reserved, because other
writ petitions were also clubbed, an order was passed in the
annexed writ petition i.e. SB Civil Writ Petition No.504/2000
directing the OL to act provisionally and thus, it is submitted that
a Provisional Liquidator was already acting and has also performed
the work of valuation of the property of Jaipur Metals and has
submitted its report. Thus, the OL is actively involved in the
proceedings before this Court.
14. Learned Additional Advocate General also submitted that the
applicant ALCHEMIST had also admitted that there is no question
of pre-notice transfer of the petition for winding up and asserts
that the same shall continue to remain with this Court and his
application to IBC is only with regard to recovery of the amount.
Such an argument is contradictory as per submissions of the
respondent-State.
15. In reply to the submission of the Company that they are
permitted in terms of Section 5(2) of the Rules of 2016 to file
fresh application in terms of Section 7 of IBC 2016, the learned
Addl. Advocate General submitted that such an argument is
patently misconceived since the Rules of 2016 have been enacted
under the powers conferred by the Company Act, 2013 as well as
IBC 2016. Rule 3 of the Rules of 2016 provides as under:-
(11 of 26) [COP-19/2009]
3. Transfer of pending proceedings relating tocases other than Winding up.—All proceedingsunder the Act, including proceedings relating toarbitration, compromise, arrangements andreconstruction, other than proceedings relating towinding up on the date of coming into force of theserules shall stand transferred to the Benches of theTribunal exercising respective territorial jurisdiction:Provided that all those proceedings which arereserved for orders for allowing or otherwise of suchproceedings shall not be transferred.
16. Thus it is submitted by the learned Addl. Advocate General
that from above, it is apparent that all the proceedings which are
reserved for orders shall not be transferred. Further, it is
submitted that Rule 5 of the Rules of 2016, which deals with
transfer of pending proceedings of winding up, would only relate
to such winding up proceedings initiated within the meaning of
Section 433(e) i.e. inability to pay debts which is not the question
in the instant case.
17. The third submission of learned Addl. Advocate General is
with regard to Rule 6 which provides the continuity of proceedings
of winding up before this Court in relation to the petitions pending
under Clause (a) and Clause (f) of Section 433 of the Act of 1956.
The said provisions do not relate to inability of the Company to
pay its debts and as the present case also does not fall within
Section 433(e), it is submitted that the present proceedings
cannot be stalled or transferred on account of the wrongful action
with the applicant ALCHEMIST in moving proceedings before the
NCLT under IBC 2016.
18. Learned Addl. Advocate General further submitted that the
reference by BIFR under Section 20(1) proceeds on the ground
that “it is just and equitable that the Company should be wound
up.” and as per Section 20(2) of the SICA, there is a mandate to
wind up the Company on the basis of opinion of the Board. Thus,
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the question of the petition having not been admitted or admitted
would not arise in cases where the Company Court is ceased with
the case of reference made under Section 20(1) by the BIFR and
the proceedings before the IBC are therefore, clearly inconsistent
of the Act of 1956 and the same cannot be allowed to be
continued.
19. Learned Addl. Advocate General has also asserted that in the
instant case, the provisions of Rule 6 of the Rules of 2016 would
be applicable and therefore, the argument regarding amendment
of Rule 5 bears no relevance in the instance cases. It is submitted
that the case of winding up on recommendations of BIFR was
covered by the provisions of Rule 6 and therefore, the same would
remain with the High Court as notice under Section 26 of the Act
of 1956 had already been served.
20. Continuing with the said submissions, the counsel submits
that Part 2 of the IBC Code 2017 applies to the matters relating to
insolvency and liquidation of corporate debtors where the
minimum amount of default is Rs.One Lac. The word ‘defaulter’
has been defined to mean non-payment of debt. Since the cases
before this Court are not relating to non-payment of debt, the IBC
Code 2016 would have no application to the present case before
this Court. Thus, Rule 5 would have no application.
21. It is further urged that the reliance upon provisions of
second proviso to Rule 5 of the Rules of 2016 for filing a fresh
application under Section 7, 8 or 9 of the Code is clearly
misconceived. The second proviso applies only with regard to the
matters which stand transferred under Rule 5 and because of non-
compliance of first proviso, such transferred petitions stands
abated. The second proviso cannot be read independent of the
(13 of 26) [COP-19/2009]
provisions of Rule 5 and its first proviso. The third proviso directs
for continuance of the pending petitions with regard to winding up
for inability to pay debt irrespective of non-service. If one petition
is not transferred and remains with the High Court, the new
petition shall have to be also preferred to the High Court alone.
Thus, the intention of the legislature is clear that in the event of
the High Court being seized with a winding up petition, the other
petition before NCLT under the Code will not be filed for reasons of
inability to pay debt.
22. Learned Addl. Advocate General further submits that as per
Section 434(1)(c) of the Companies Act, 2013, all the proceedings
before the notified date were to be transferred to the NCLT which
would have proceeded to deal with from the stage before their
transfer. However, the IBC 2016 itself vide Section 255 provided,
“The Companies Act 2013 shall be amended in the manner
specified in the Eleventh Schedule.” The Eleventh Schedule to IBC
2016 vide Section 34 has substituted Section 434 of the
Companies Act, 2013 and the provision of Section 434(1)(c)
provides for transfer of winding up petitions. But the proviso to
this Section reads that “provided that only such proceedings
relating to the winding up of companies shall be transferred to
the Tribunal that are at a stage as may be prescribed by the
Central Government.”
23. Thus, it is submitted that the substituted provision of Section
434 of the Companies Act, 2013 is very much part and parcel of
the IBC 2016 itself and therefore, the question of IBC 2016
overriding its own provisions does not arise and therefore Section
238 of IBC has no bearing in the matter.
(14 of 26) [COP-19/2009]
24. Learned Addl. Advocate General further submitted that
applying the principle of harmonious construction would imply that
a fresh petition under Section 7 of the IBC would be maintainable
only in a situation when there is no winding up petition pending
before the High Court or being continued to be dealt with by it and
in cases where transfer has been made under Rule 5 and the same
has been abated under first proviso to the said rule.
25. The law does not contemplate liquidation by two parallel
forums under two different provisions of law. It is further
submitted that the process of resolution in liquidation under the
Scheme of IBC, being not severable, the law could not have
contemplated pendency of winding up proceedings with one
forum. A petition under Section 7 is ultimately a petition for
liquidation and as winding up proceedings were already continuing
before this Court, there was no reason that the applicant, which is
party to the proceedings, to have filed a petition under IBC.
26. It is further submitted by learned Addl. Advocate General
that the Company as well as the NCLT in its order has misread the
provisions of Section 11 (d) of IBC. It is submitted that Section 11
excludes certain persons from making an application for initiating
corporate insolvency resolution process and they are all with
regard to corporate debtor. The definition of corporate debtor
include corporate applicant and from the reading of provision of
Section 5(5), it would be clear that it does not include financial
creditor. Thus, 11(d) has no application in the instant case.
27. The argument on alternative remedy raised by the applicant
ALCHEMIST has been countered by the learned Addl. Advocate
General submitting, inter-alia, that the Court in the instant case
has to itself decide as to whether it can proceed further or it has
(15 of 26) [COP-19/2009]
to stop proceedings. If there is a valid order by Tribunal, the
consequence would follow but if the order of Tribunal is found to
be without jurisdiction, which would be void, the Court would not
be required to stop proceedings further. Thus, the only issue is as
to whether the Tribunal acted within its jurisdiction which is not
the case in the instant matter.
28. Learned Addl. Advocate General relies on the judgment
passed by the Supreme Court in the case of State of MP Vs. Syed
Qamarali: 1967 SLR 228 and submits that the law is well settled
that if the order is questioned on the ground of want of
jurisdiction, the law of restraint for alternative remedy would not
apply. It is further submitted that it is settled position of law that if
a Court or Tribunal inherently lacks jurisdiction, its orders/decrees
would be nullity and therefore they can be questioned at any
stage and even in collateral proceedings. It has, therefore, been
prayed that the order of NCLT be declared as void ab-initio and
nullity in law and the NCLT be restrained from proceedings further
on the application under Section 7.
29. Before examining the issues involved in the present case, it
would be appropriate to quote Provisions which are relevant for
the purpose.
30. Rules 1, 5 and 6 of the Companies (Transfer of Pending
Proceedings) Rules, 2016 as under:-1. Short title and Commencement. - (1) Theserules may be called the Companies (Transfer ofPending Proceedings) Rules, 2016. (2) They shall come into force with effect from the15th December, 2016 except rule4, which shall comeinto force from 1st April, 2017.5. Transfer of pending proceedings of Windingup on the ground of inability to pay debts.—(1)All petitions relating to winding up under clause (c) ofsection 433 of the Act on the ground of inability topay its debts pending before a High Court, and where
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the petition has not been served on the respondentunder rule 26 of the Companies (Court) Rules, 1959shall be transferred to the Bench of the Tribunalestablished under sub-section (4) of section 419 ofthe Companies Act, 2013 exercising territorialjurisdiction to be dealt with Part II of the Code:
Provided that the petitioner shall submit allinformation, other than information forming part ofthe records transferred in accordance with Rule 7,required for admission of the petition under sections7, 8 or 9 of the Code, as the case may be, includingdetails of the proposed insolvency professional to theTribunal upto 15th July, 2017, failing which thepetition shall stand abated: Provided also that where a petition relating to windingup of a company is not transferred to the Tribunalunder this rule and remains in the High Court andwhere there is another petition under clause (e) ofsection 433 of the Act for winding up against thesame company pending as on 15th December, 2016,such other petition shall not be transferred to theTribunal, even if the petition has not been served onthe respondent. 6. Transfer of pending proceedings of Windingup matters on the grounds other than inabilityto pay debts.—All petitions filed under clauses (a)and (f) of section 433 of the Companies Act, 1956pending before a High Court and where the petitionhas not been served on the respondent as requiredunder rule 26 of the Companies (Court) Rules, 1959shall be transferred to the Bench of the Tribunalexercising territorial jurisdiction and such petitionsshall be treated as petitions under the provisions ofthe Companies Act, 2013 (18 of 2013).
31. Certain provisions of the IBC 2016 need to be quoted :- 7. Initiation of corporate insolvency resolutionprocess by financial creditor. :-(1) A financial creditor either by itself or jointly withother financial creditors may file an application forinitiating corporate insolvency resolution processagainst a corporate debtor before the AdjudicatingAuthority when a default has occurred.Explanation.—For the purposes of this sub-section, adefault includes a default in respect of a financial debtowed not only to the applicant financial creditor but toany other financial creditor of the corporate debtor. (2) The financial creditor shall make an applicationunder sub-section (1) in such form and manner andaccompanied with such fee as may be prescribed.(3) The financial creditor shall, along with theapplication furnish—(a) record of the default recorded with the informationutility or such other record or evidence of default asmay be specified;
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(b) the name of the resolution professional proposedto act as an interim resolution professional; and (c) any other information as may be specified by theBoard.(4) The Adjudicating Authority shall, within fourteendays of the receipt of the application under sub-section (2), ascertain the existence of a default fromthe records of an information utility or on the basis ofother evidence furnished by the financial creditorunder sub-section (3).(5) Where the Adjudicating Authority is satisfied that- (a) a default has occurred and the application undersub-section (2) is complete, and there is nodisciplinary proceedings pending against the proposedresolution professional, it may, by order, admit suchapplication; or (b) default has not occurred or the application undersub-section (2) is incomplete or any disciplinaryproceeding is pending against the proposed resolutionprofessional, it may, by order, reject such application:or -Provided that the Adjudicating Authority shall, beforerejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectifythe defect in his application within seven days ofreceipt of such notice from the Adjudicating Authority.(6) The corporate insolvency resolution process shallcommence from the date of admission of theapplication under sub-section (5).(7) The Adjudicating Authority shall communicate—(a) the order under clause (a) of sub-section (5) tothe financial creditor and the corporate debtor; (b) the order under clause (b) of sub-section (5) tothe financial creditor, within seven days of admission or rejection of suchapplication, as the case may be. 11. Persons not entitled to make application :The following persons shall not be entitled to make anapplication to initiate corporate insolvency resolutionprocess under this Chapter, namely:—(a)...(b)...(c)...(d) a corporate debtor in respect of whom aliquidation order has been made.14. Moratorium :- (1) Subject to provisions of sub-sections (2) and (3), on the insolvencycommencement date, the Adjudicating Authority shallby order declare moratorium for prohibiting all of thefollowing, namely:—(a) the institution of suits or continuation of pendingsuits or proceedings against the corporate debtorincluding execution of any judgment, decree or orderin any court of law, tribunal, arbitration panel or otherauthority;
(18 of 26) [COP-19/2009]
(b) transferring, encumbering, alienating or disposingof by the corporate debtor any of its assets or anylegal right or beneficial interest therein;(c) any action to foreclose, recover or enforce anysecurity interest created by the corporate debtor inrespect of its property including any action under theSecuritisation and Reconstruction of Financial Assetsand Enforcement of Security Interest Act, 2002; ( 54of 2002)(d) the recovery of any property by an owner orlessor where such property is occupied by or in thepossession of the corporate debtor.(2) The supply of essential goods or services to thecorporate debtor as may be specified shall not beterminated or suspended or interrupted duringmoratorium period.(3) The provisions of sub-section (1) shall not apply tosuch transactions as may be notified by the CentralGovernment in consultation with any financial sectorregulator.(4) The order of moratorium shall have effect fromthe date of such order till the completion of thecorporate insolvency resolution process:
Provided that where at any time during thecorporate insolvency resolution process period, if theAdjudicating Authority approves the resolution planunder sub-section (1) of section 31 or passes an orderfor liquidation of corporate debtor under section 33,the moratorium shall cease to have effect from thedate of such approval or liquidation order, as the casemay be.30. Submission of resolution plan :- (1) Aresolution applicant may submit a resolution plan tothe resolution professional prepared on the basis ofthe information memorandum.(2) The resolution professional shall examine eachresolution plan received by him to confirm that eachresolution plan—(a) provides for the payment of insolvency resolutionprocess costs in a manner specified by the Board inpriority to the repayment of other debts of thecorporate debtor;(b) provides for the repayment of the debts ofoperational creditors in such manner as may bespecified by the Board which shall not be less than theamount to be paid to the operational creditors in theevent of a liquidation of the corporate debtor undersection 53;(c) provides for the management of the affairs of theCorporate debtor after approval of the resolution plan;(d) the implementation and supervision of theresolution plan;(e) does not contravene any of the provisions of thelaw for the time being in force;
(19 of 26) [COP-19/2009]
(f) conforms to such other requirements as may bespecified by the Board.(3) The resolution professional shall present to thecommittee of creditors for its approval such resolutionplans which confirm the conditions referred to in sub-section (2).(4) The committee of creditors may approve aresolution plan by a vote of not less than seventy fiveper cent of voting share of the financial creditors.(5) The resolution applicant may attend the meetingof the committee of creditors in which the resolutionplan of the applicant is considered:Provided that the resolution applicant shall not have aright to vote at the meeting of the committee ofcreditors unless such resolution applicant is also afinancial creditor.(6) The resolution professional shall submit theresolution plan as approved by the committee ofcreditors to the Adjudicating Authority.
238. Provisions of this Code to override otherlaws :- The provisions of this Code shall have effect,notwithstanding anything inconsistent therewithcontained in any other law for the time being in forceor any instrument having effect by virtue of any suchlaw.”
32. Having noted aforesaid, this Court finds that the Company
Petition has been registered on the basis of the recommendations
made by the BIFR under Section 20. Thus, the avenues for trying
to revive the Company were all tapped by the BIFR before it
referred the case to this Court for recommending for winding it up.
This Court has also attempted earlier to revive the Company and
even the State Government invited proposals from various stake
holders with the purpose to revive the Company. However, all
attempts virtually failed.
33. In the meanwhile, the erstwhile workmen of the Company,
which has remained non-functional for last more than 25 years,
are claiming their dues. They have also prayed that the Company
may be revived and they may be taken back on duty or paid their
compensations.
(20 of 26) [COP-19/2009]
34. Taking into consideration all the aspects, this Court
appointed the OL attached to this Court as a Provisional Liquidator
to conduct valuation of the goods lying in the factory premises.
The valuation was conducted and the valuation report has also
been placed for perusal.
35. It is noted that the applicant ALCHEMIST invoked provisions
of IBC and also put up their proposal for revival. This Court is
inclined to accept the submissions as noted by the learned
Additional Advocate General and finds that in terms of Rules of
2016, the pending proceedings before this Court for winding up
are not in relation to Section 433(e) of the Act of 1956 but is a
petition under Clause (a) and (f) of Section 433 of the Act of
1956. Thus, Rule 5 of the Rules of 2016 would not apply.
36. As notices have already been served under Rule 26 of the
Companies (Court) Rules, 1959 and all the parties are present
before the Court and even a Provisional Liquidator was appointed,
the present proceedings before this Court would not be
transferable under Rule 6 of the Rules of 2016. In terms of Rule 5
proviso 3, since the winding up petition is pending before this High
Court, no fresh application could have been filed under the IBC
2016 and the application moved under Section 7 by the
respondent is held to be an abuse of the process of the Court and
contrary to law. If any other interpretation is taken, it would result
into multiplicity of the proceedings and would defeat the very
purpose of framing of Rules of 2016. Even at the stage when the
Companies Act of 2013 came into force, the pending cases before
the High Court relating to winding up were not transferred to the
NCLT and after coming into force of the IBC 2016, the basic rule of
not having multiplicity of the proceedings shall continue to be the
(21 of 26) [COP-19/2009]
guiding principle. It would be a dangerous situation if the applicant
ALCHEMIST is allowed to proceed before IBC while the other
creditors are before this Court and say after six months that is the
maximum period during which the proceedings can continue under
the IBC, this Court also appoints an OL to examine the claims of
other parties. However, as the present petition is not a petition by
creditors alone and is a case referred to this Court under Section
20(1) of the erstwhile SICA Act, the order passed by the NCLT
relating to only one creditor treating the present petition as the
petition under Section 433(e) is wholly misconceived. A look at
third proviso to Rule 5 also clarifies the picture further as it
specifically provides that if there another petition required to be
filed under Section 433(e), the same would continue with the High
Court and would not be transferred. Thus, the basis as noted
above, continues that there ought not be multiplicity of the
proceedings.
38. The process as laid down under the IBC provides firstly of
appointing of an IRP, who is required to conduct all information
relating to assets, finances and operations of the corporate
debtors. As this Court has already appointed a Provisional
Liquidator, the duties as provided under Section 18 of IBC 2016,
are similar to that of the OL, the power available to the OL under
the Act of 1956 would take into its notice all the provisions
contained under IBC 2016 which the interim resolution
professional or the resolution professional would be conducting.
Section 30 of the IBC 2016 lays down the requirement of
submitting resolution plan which may be placed for approval
before the adjudicating authority. However, these aspects have
already been dealt with at the stage of BIFR and by this Court in
(22 of 26) [COP-19/2009]
relation to the Company. Moreover, the entire provisions of IBC
2016 are to be applied for cases where the proceedings have not
been undertaken under the Act of 1956 as is apparent from the
tenor of the Rules of 2016, as quoted above. The only cases which
have been transferred are those where notices have not been
served. Thus, the legislature clearly intended to transfer the
proceedings where no action has been taken by the concerned
Court whereas in the present case, the proceedings have been
going on since 2002 and the present case is not of such a nature
where it can be said that notices have not been issued or the
steps under the Act of 1956 have not been undertaken with regard
to winding up. Thus, there was no occasion for the applicant
ALCHEMIST to have approached the NCLT for invoking the
provision of the Rules of 2016.
39. In the case of West Hills Realty Private Ltd. Vs.
No.331 of 2016), decided on 23/12/2016, reported in
(2017) 3 CompLJ 225 (Bom) by the High Court of Bombay, a
similar controversy had arisen and after appreciating the various
provisios and Rule 26 of the Companies (Court) Rules, 1959 as
well as the provisions of the Rules of 2016, it was held as under:-“12. In fact, if anything, the argument that Rule 26contemplates a post-admission notice and only in theevent such notice is actually served on the respondentthat the petition shall stand transferred to NCLT, willlead to a peculiar situation. It will mean that thosepetitions, which are admitted and where notice of thepetition is not served on the respondent pursuant tothe order of admission, will stand transferred to NCLTand will be taken up Sat 15/15 CP 331-2016, 332-2016.doc for admission once again by requiring thepetitioners in those petitions to furnish information foradmission of the petitions under Section 7, 8 or 9 ofthe Code, as the case may be. That would be clearlyanomalous.
(23 of 26) [COP-19/2009]
13. In the premises, it follows that every winding uppetition under clause (e) of Section 433 which ispending before the High Court and which is not servedby the petitioner on the respondent company shallstand transferred to NCLT under Rule 5 of theCompanies (Transfer of Pending Proceedings) Rules,2016. If such pending petition is served by thepetitioner on the respondent, the petition will continueto be dealt with by this court and the applicableprovisions will be the provisions of 1956 Act. 14. As I have noticed above, these petitions, whichhave been served by the Petitioners on theRespondent in pursuance of the acceptance order, areto be treated as served as required under Rule 26 ofthe Companies (Court) Rules 1959. Accordingly, thesepetitions shall not be transferred to NCLT and shallcontinue to be dealt with by this court in accordancewith the provisions of 1956 Act. “
40. Same view has also been taken by the High Court of
Judicature at Hyderabad for the State of Telangana and the State
of Andhra Pradesh: 2017(5) ALD 695 and in the case of Paharpur
Colling Towers Ltd. Vs. Basal Steels and Power Pvt. Ltd., decided
on 07/09/2017 wherein it has been held as under:-“18. Question is whether the Constitution of presentproceedings before this Court, in the winding uppetition filed by petitioner herein can be so injunctedby the NCLT, which is a tribunal not superior to thisCourt? 19. . Since NCLT is not a forum superior to the HighCourt, it's orders cannot be construed as injunctingthis Court from proceeding with a winding upproceeding in which it has clear jurisdiction to hearand decide. That is the effect of Section 41(b) of theSpecific Relief Act, 1963, particularly when the IBCitself permits such continuation under the notificationsissued under Sections 239 and 255 of the IBC. 24. The principle of Comity of Courts cannot beinvoked to restrain the High Court from proceedingwith a winding up petition which Parliament intendedthe High Court alone to decide as per the notificationsissued under Sections 239 and 255 of the IBC. Sincethis winding up petition did not get transferred to theNCLT by virtue of the notifications dated 7.12.2016and 29.6.2017 issued under the very IBC, the NCLTcannot have any jurisdiction in regard to thepetitioner or to the winding up petition and it's ordercannot be interpreted to restrain this Court.”
(24 of 26) [COP-19/2009]
41. In caveat to above is a judgment passed subsequently by
coordinate Bench of the High Court of Bombay in the case of Jotun
India Pvt. Ltd. Vs. PSL:2018(2)ABR 350 wherein the Single Judge,
while noting the earlier judgments of the same Court, has taken a
different view without distinguishing the earlier judgment. In the
opinion of this Court, the provisions of Section 252 have not been
correctly interpreted. The Court has also not taken into
consideration the Rules of 2016 as amended and the effect of third
proviso to Rule 5 and the provisions of Rule 6 of the Rules of 2016
have also not been examined. In the considered view of this
Court, it is a judgment per incuriam The case in hand falls
squarely under Rule 6 of the Rules of 2016 and as the notice
under Section 26 of the Companies (Court) Rules, 1959 had
already been served, the present proceedings in the High Court
shall not be transferred to the NCLT
42. Another aspect in the present case is in relation to the
clubbed cases filed by the workmen under Article 226 of the
Constitution of India which are to be heard commonly with this
Company Petition. Since such petitions cannot be transferred or
even examined by the NCLT, the present application moved by the
applicant Alchemist was against the provisions of the Companies
Act and the Rules as well as have to be treated as non-est.
43. Further, it is also noted that this Court while examining the
present Company Petition is also examining three Company
Appeals whereby the order passed by the NCLT in favour of the
applicant is under challenge. The NCLT has held the ALCHEMIST
to be possessing 51% shares which is a subject matter of
examination before this Court.
(25 of 26) [COP-19/2009]
44. Thus, the order of NCLT, while invoking the provisions under
IBC 2016 is without jurisdiction and the entire proceedings of
appointment of IRP is held to be non-est and liable to be ignored
as per law laid down by the Apex Court in the case of Union of
India and another Vs. Association of Unified Telecom Service
Providers of India and others: (2011) 10 SCC 543:-59. Thus, the Tribunal in its order dated 07.07.2006has not just decided a dispute on the interpretation ofAdjusted Gross Revenue in the license, but hasdecided on the validity of the definition of AdjustedGross Revenue in the license. As we have alreadyheld, the Tribunal had no jurisdiction to decide on thevalidity of the terms and conditions of the licenseincluding the definition of Adjusted Gross Revenueincorporated in the license agreement. Hence, theorder dated 07.07.2006 of the Tribunal in so far as itdecides that revenue realized by the licensee fromactivities beyond the license will be excluded fromAdjusted Gross Revenue dehors the definition ofAdjusted Gross Revenue in the license agreement iswithout jurisdiction and is a nullity and the principle ofres judicata will not apply.
60. In Chandrabhai K. Bhoir and Others vs. KrishnaArjun Bhoir and Others (supra) this Court relying onChief Justice of A.P. Vs. L.V.A. Disitulu, Unon of IndiaVs. Pramod Gupta and National Institute ofTechnology Vs. Niraj Kumar Singh has held: (KrishnaArjun case, SCC p. 322, Para 26)"26……….an order passed without jurisdiction would bea nullity. It will be a coram non judice and non est inthe eye of the law. Principle of res judicata would notapply to such cases".
45. Accordingly, the State Government is directed not to allow
the IRP to function or take over any asset of the Company and
ignore the order passed by the NCLT dated 13/04/2018.
46. The Managing Director of Jaipur Metals, who has been
appointed by the State to provisionally hold the charge of the
Company, has failed to bring to the notice of the NCLT the facts,
as noted above. It is also noted that the concerned Managing
Director did not inform the State Government about the
