Ashok Kumar Bansal vs Punjab National Bank & Anr

Ashok Kumar Bansal ....Appellant

Vs.

Punjab National Bank & Anr. ....Respondents

Present:

For Appellant: Mr. Rajiv Ranjan, Senior Advocate with Ms. Rukmini Mukherjee and Ms. Shankasi Mishra, Advocates.

For Respondents: Mr. Rajesh Rattan, Advocate for R-1.

Ms. Ruchi Sindhwani, Senior Standing Counsel for Official Liquidator with Mr. Amish Tandon, Ms. Megha and Mr. Ayush, Advocates.

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

The 'Punjab National Bank'- ('Financial Creditor') filed an

application under Section 7 of the Insolvency and Bankruptcy Code,

2016 ("I&B Code" for short) for initiation of the 'Corporate Insolvency

Resolution Process' against 'M/s. Hanung Toys and Textiles Limited'-

('Corporate Debtor'). The Adjudicating Authority (National Company Law

Tribunal), Principal Bench, New Delhi, by impugned order dated 28th

March, 2019 admitted the application.

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2. Learned counsel for the Appellant submitted that the order of

liquidation has already been passed by the Hon'ble High Court of Delhi

and 'Official Liquidator' has already been appointed and therefore, the

application under Section 7 of the 'I&B Code' was not maintainable.

3. On the other hand, according to counsel for the 'Punjab National

Bank', in spite of admission of the order of liquidation passed by the

Hon'ble High Court of Delhi, the application under Section 7 is

maintainable in absence of any bar under Section 11 of the 'I&B Code'.

4. The 3rd Respondent ('Official Liquidator') had been appointed as

the Liquidator of the 'Corporate Debtor' in Company Petition No. 518 of

2013 vide order dated 12th July, 2018 passed by the Hon'ble High Court

of Delhi. The citations to this effect were published in the Newspapers

namely--'Statesman' (English) and 'Veer Arjun' (Hindi) on 10th January,

2019. Pursuant to the aforesaid order, the 3rd Respondent took over

possession of the Factory of the Company situated at 265, Bhagwanpur

Industrial Area, Roorkee, Uttrakhand on 18th August, 2018 and 9

Security Guards for 8 hours shift duty including 1 Gunman of Manasvi

Security Agency were deployed for watch and ward of the property.

5. The possession of the Corporate Office situated at 108-109, NSEZ

Phase-II, Noida (U.P) was also taken over on 1st September, 2018 and

Security Guards having been appointed.

Company Appeal (AT) (Insolvency) No. 465 of 2019 3

6. The brief fact of the case is that the 'Corporate Debtor' availed

loan from the consortium of the 'Punjab National Bank' pursuant to an

agreement dated 16th January, 2013. Hypothecation Agreement of

Current Assets, Packing Credit Limits etc. was executed by the

'Corporate Debtor' in favour of the 'Punjab National Bank' on 9th May,

2013 and 29th March, 2014.

7. A 'Master Restructuring Agreement' was also executed by the

'Corporate Debtor' in favour of the 'Punjab National Bank' on 30th June,

2014, but the Company failed to fulfil its commitments under

'Corporate Debt Restructuring Scheme'. Therefore, the 'Corporate Debt

Restructuring Scheme' was revoked and accounts were treated as NPA

since 31st December, 2013.

8. Notice under Section 13(2) of the 'SARFAESI Act, 2002' was

served on 12th October, 2015 by the 'Punjab National Bank' on the

'Corporate Debtor' followed by Notice under Section 13(2) by the 'Bank

of Baroda' on the 'Corporate Debtor' on 17th November, 2015. 'Edelweiss

Asset Reconstruction Company' also served notice under Section 13(2)

of the 'SARFAESI Act, 2002' on 5th November, 2015. Many other Banks

members of the Consortium issued Section 13(2) Notice demanding

their NPA arrears of amount. Symbolic/ physical possession of the

mortgaged immovable properties of the Company was taken by the

'Punjab National Bank' in March, 2016.

Company Appeal (AT) (Insolvency) No. 465 of 2019 4

9. Pursuant to petition of winding up, the 'Official Liquidator' was

appointed on 12th July, 2018. The 'Official Liquidator' took the

possession from the 'Punjab National Bank' consortium of the

mortgaged property land and building at Village Lakeshwari Near

Bhagwanpur, measuring 25.82 acres, Roorkee, Haridwar, Uttarakhand

along with all the plant, machineries, stocks, goods, etc. on 18th August,

2019.

10. On 1st September, 2018, the 'Official Liquidator' also took the

possession from the 'Punjab National Bank' consortium of the

mortgaged property land and building at Plot No. 108 & 109, NEPZ,

Noida. It is only thereafter petition under Section 7 of the 'I&B Code'

was filed on 28th March, 2019.

11. Similar issue fell for consideration before the Hon'ble Supreme

Court in "Forech India Ltd. v. Edelweiss Assets Reconstruction Co.

Ltd.− Civil Appeal No. 818 of 2018". In the said case, the Hon'ble

Supreme Court noticed that the winding up petition was filed against

the 'Corporate Debtor' (Company) against which application under

Section 7 of the 'I&B Code' was filed subsequently and observed:

17. The resultant position in law is that, as a first

step, when the Code was enacted, only winding up

petitions, where no notice under Rule 26 of the

Companies (Court) Rules was served, were to be

Company Appeal (AT) (Insolvency) No. 465 of 2019 5

transferred to the NCLT and treated as petitions

under the Code. However, on a working of the Code,

the Government realized that parallel proceedings in

the High Courts as well as before the adjudicating

authority in the Code would stultify the objective

sought to be achieved by the Code, which is to

resuscitate the corporate debtors who are in the red.

In accordance with this objective, the Rules kept being

amended, until finally Section 434 was itself

substituted in 2018, in which a proviso was added by

which even in winding up petitions where notice has

been served and which are pending in the High

Courts, any person could apply for transfer of such

petitions to the NCLT under the Code, which would

then have to be transferred by the High Court to the

adjudicating authority and treated as an insolvency

petition under the Code. This statutory scheme has

been referred to, albeit in the context of Section 20 of

the SICA, in our judgment which is contained

in Jaipur Metals & Electricals Employees

Organization Through General Secretary Mr. Tej Ram

Meena vs. Jaipur Metals & Electricals Ltd. Through its

Managing Director &Ors., being a judgment by a

Division Bench of this Court dated 12.12.2018."

Company Appeal (AT) (Insolvency) No. 465 of 2019 6

12. The Hon'ble Supreme Court further held that under Section 11

only the 'Corporate Debtor' is not eligible to file petition under Chapter

II of the 'I&B Code'. Referring to Section 11(d), the Hon'ble Supreme

Court further observed:

21. The resultant position, therefore, is that we

agree with the learned counsel for the appellant that

the Appellate Tribunal's reasoning is not correct.

Section 11 of the Code specifies which persons are

not eligible to initiate proceedings under it. In

particular, Section 11(d) reads as follows:

"11. Persons not entitled to make

applications- The following persons shall

not be entitled to make an application to

initiate corporate insolvency resolution

process under this Chapter, namely:-

xxx xxx xxx

(d) a corporate debtor in respect of whom a

liquidation order has been made.

Explanation - For the purposes of this

section, a corporate debtor includes a

Company Appeal (AT) (Insolvency) No. 465 of 2019 7

corporate applicant in respect of such

corporate debtor."

22. This Section is of limited application and only

bars a corporate debtor from initiating a petition

under Section 10 of the Code in respect of whom a

liquidation order has been made. From a reading of

this Section, it does not follow that until a liquidation

order has been made against the corporate debtor,

an Insolvency Petition may be filed under Section

7 or Section 9 as the case may be, as has been held

by the Appellate Tribunal. Hence, any reference

to Section 11 in the context of the problem before us

is wholly irrelevant. However, we decline to interfere

with the ultimate order passed by the Appellate

Tribunal because it is clear that the financial

creditor's application which has been admitted by

the Tribunal is clearly an independent proceeding

which must be decided in accordance with the

provisions of the Code."

13. In view of the decision of the Hon'ble Supreme Court, we hold

that the application under Section 7 was maintainable and therefore, no

interference is called for.

Company Appeal (AT) (Insolvency) No. 465 of 2019 8

The appeal is dismissed with aforesaid observations. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice A.I.S. Cheema] Member (Judicial)

[Kanthi Narahari] Member (Technical)

NEW DELHI 25th November, 2019

AR

Company Appeal (AT) (Insolvency) No. 465 of 2019