Indiabulls Housing Finance Ltd vs Shree Urban Infrastructure Ltd

Indiabulls Housing Finance Ltd. ...Appellant

Versus

Shree Ram Urban Infrastructure Ltd. ...Respondent

Present:

For Appellant : Mr. Rajiv Nayar, Senior Advocate assisted by Mr. Manik Dogra, Ms. Sonali Jaitley, Mr. Jaiyesh Bakshi, Mr. Shyam Kumar, Mr. Palash Singhal and Ms. Sanya Kapoor, Advocates

ORDER

30.05.2018 The appellant - 'Indiabulls Housing Finance Ltd.' preferred an

application under Section 7 of the Insolvency and Bankruptcy Code, 2016

(hereinafter referred to as the 'I&B Code') for initiation of 'Corporate Insolvency

Resolution Process' against 'Shree Ram Urban Infrastructure Ltd.' ('Corporate

Debtor'). The Adjudicating Authority (National Company Law Tribunal), Mumbai

Bench by impugned order dated 18th May, 2018 dismissed the application as not

maintainable in view of the fact that the winding up proceeding against the

'Corporate Debtor' has already been initiated by the Hon'ble High Court of

Bombay.

2. The question arises for consideration in this appeal is whether an

application under Section 7 of the 'I&B Code' is maintainable when winding up

proceeding against the 'Corporate Debtor' has already been initiated. 2

3. Similar issue fell for consideration before this Appellate Tribunal in

'Innoventive Industries Limited vs. Kumar Motors Private Limited' - Company

Appeal (AT) (Insolvency) No. 181 of 2017. In the said appeal by judgment dated

9th February, 2018 held that :

"17. Similar issue fell for consideration before this

Appellate Tribunal in "M/s. Unigreen Global Private

Limited Vs. Punjab National Bank & Ors.─ Company

Appeal (AT) (Insolvency) No. 81 of 2017" dated 1st

December, 2017, though, that was the case relating to

application by 'Corporate Applicant' under Section 10 of

the 'I&B Code' but this Appellate Tribunal noticed the

relevant provisions and observed:

"28. In a case where a winding up proceedings has

already been initiated against a Corporate Debtor by the

Hon'ble High Court or Tribunal or liquidation order has

been passed in respect of Corporate Debtor, no

application under Section 10 can be filed by the Corporate

Applicant in view of ineligibility under Section 11(d) of

I & B Code, as quoted below:

"11. Persons not entitled to make application -

The following persons shall not be entitled to make an

application to initiate corporate insolvency resolution

process under this Chapter, namely:--

Company Appeal (AT) (Insolvency) No. 252 of 2018 3

(a) a corporate debtor undergoing a corporate

insolvency resolution process; or

(b) a corporate debtor having completed corporate

insolvency resolution process twelve months preceding

the date of making of the application; or

(c) a corporate debtor or a financial creditor who has

violated any of the terms of resolution plan which was

approved twelve months before the date of making of an

application under this Chapter; or

(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 corporate applicant in respect

of such corporate debtor."

29. In view of the aforesaid provision where a

winding up proceeding has already been initiated under

the Companies Act, 1956 / 2013 by the Hon'ble High

Court such cases have not been transferred to National

Company Law Tribunal, pursuant to "Companies

(Transfer of Pending Proceedings) Rules, 2016", framed

by the Central Government.

30. Clause (d) of Section 11 refers to "liquidation

order", against a Corporate Debtor. The word 'winding

up' has not been mentioned therein. For the said reason

Company Appeal (AT) (Insolvency) No. 252 of 2018 4

by Section 255 read with Schedule 11 of the I & B Code,

in Section 2 of the Companies Act, 2013 for clause (23),

the following clause has been substituted:

"1. In section 2,--

(a) for clause (23), the following clause shall be

substituted, namely:--

xxx xxx xxx

"(23) "Company Liquidator" means a person appointed

by the Tribunal as the Company Liquidator in accordance

with the provisions of section 275 for the winding up of a

company under this Act";

(b) after clause (94) , the following clause shall be

inserted, namely:--

"(94A) "winding up" means winding up under this Act

or

liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable."

31. By aforesaid amendment, the legislatures have

made it clear that the word "winding up" mentioned in the

Companies Act, 2013 is synonymous to the word

"liquidation" as mentioned in the I & B Code.

32. In view of the provisions aforesaid, we hold that,

if any winding up proceeding has been initiated against

the Corporate Debtor by the Hon'ble High Court or

Company Appeal (AT) (Insolvency) No. 252 of 2018 5

Tribunal or liquidation order has been passed, in such

case the application under Section 10 is not maintainable.

However, mere pendency of a petition for winding up,

where no order of winding up or order of liquidation has

been passed, cannot be ground to reject the application

under Section 10."

18. It is true that the Appellant is not covered by

Section 11 of the 'I&B Code', we are of the view that the

ratio laid down in "M/s. Unigreen Global Private

Limited Vs. Punjab National Bank & Ors." is also

applicable to the 'Financial Creditor'/'Operational Creditor'

for the reasons recorded below. The clause (d) of Section

11 is also applicable in respect to 'Corporate Debtor' in

respect of whom a liquidation order has been made.

19. The question as raised in this appeal fell for

consideration before this Appellate Tribunal in "Forech

India Pvt. Ltd. Vs. Edelweiss Assets Reconstruction

Company Ltd. & Anr. ─ Company Appeal (AT)

(Insolvency) No. 202 of 2017", wherein this Appellate

Tribunal by judgment dated 23rd November, 2017 held as

follows:

"7. There is no provision under the I & B Code

which stipulate that if a 'winding up' or 'liquidation'

proceeding has been initiated against the Corporate

Company Appeal (AT) (Insolvency) No. 252 of 2018 6

Debtor, the petition under Section 7 or Section 9

against the said Corporate Debtor is not

maintainable.

8. However, if a 'Corporate Insolvency Resolution'

has started or on failure, if liquidation proceeding has

been initiated against the Corporate Debtor, the

question of entertaining another application under

Section 7 or Section 9 against the same very

'Corporate Debtor' does not arise, as it is open to the

'Financial Creditor' and the 'Operational Creditor' to

make claim before the Insolvency Resolution

Professional/Official Liquidator.

9. Similarly, one may argue that in case

where 'winding up' proceeding has been ordered by

the Hon'ble High Court and thus stands initiated,

where is the question of filing an application under

section 7 or 9 or initiation of Corporate Insolvency

Resolution Process, which, on failure ultimately

culminates into liquidation proceedings (winding up

proceedings)? The argument can be that once second

stage i.e. liquidation (winding up) proceedings has

already initiated, the question of reverting back to the

first stage of 'Corporate Insolvency Resolution

Process' or preparation of Resolution plan does not

Company Appeal (AT) (Insolvency) No. 252 of 2018 7

arise. One can appreciate such stand which can be

decided in an appropriate case, but such issue being

not involved in the present case, we are not deciding

the issue aforesaid. It is left open to be decided in

other appropriate case."

4. In the present case, admittedly the High Court of Bombay has already been

ordered for winding up respondent-'Corporate Debtor', which is the second stage

of the proceeding. For the said reason, we hold that initiation of 'Corporate

Insolvency Resolution Process' which is the first stage of resolution process

against the same 'Corporate Debtor' does not arise.

5. In view of the aforesaid finding, we are not inclined to interfere with the

impugned order. In absence of any merit, the appeal is dismissed. However, in

the facts and circumstances of the case, there shall be no order as to cost.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member (Judicial)

/ns/gc

Company Appeal (AT) (Insolvency) No. 252 of 2018