Mosmetrostroy (Fze) vs Basf India Ltd. & Anr

MosmetroStroy (FZE) ...Appellant

Vs.

BASF India Ltd. & Anr. .Respondents

Present: For Appellant: - Ms. Shalini Kaul, Advocate.

For Respondents:- Mr. Rajendra Beniwal, Advocate for Respondent no. 1.

ORDER

28.11.2017- The Appellant-Corporate Debtor' has challenged the orders

dated 1st September 2017 and 29th September 2017 passed by the

Adjudicating Authority (National Company Law Tribunal), Chennai,

whereby and whereunder the application preferred by the Respondent-

M/ s. BASF India Ltd. ('Operational Creditor) under Sections 433 and 434

of the Companies Act, 1956 has been treated to be an application under

Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter

referred to as "I&B Code") read with Rule 6 of the Insolvency and

Bankruptcy (Application to Adjudicating Authority) Rules, 2016

(hereinafter referred to as "Adjudicating Authority Rules, 2016"), the

order of admission and Moratorium has been passed, name of 'Interim

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Resolution Professional' has been called for from the 'Insolvency and

Bankruptcy Board of India' (hereinafter referred to as "Board") with

further prohibitory orders in terms of 'I&B Code'.

2. Learned counsel for the Appellant-Corporate Debtor' submitted

that before treating the application as under Section 9 of the 'I&B Code',

Respondent has not complied with the provisions of the 'I&B Code'. No

notice under sub-section (1) of Section 8 was issued in Form-3 or 4 and

the application has been admitted though the Appellant is denying the

existence of the alleged debt.

3. On notice learned counsel for the Respondents has appeared but

has not disputed the statement made in the appeal.

4. The brief facts of the case is that the Appellant-'Corporate Debtor'

used to purchase chemicals against invoices from the Respondent

'Operational Creditor'. According to Appellant, pursuant to the contracts,

the entire amount payable by the 'Corporate Debtor' has already been

paid and settled. Further, for various reasons including serious physical

threat to its employees in India, the 'Corporate Debtor' had to vacate its

office in mid May 2015 and left India and returned to Russia. However,

in spite of that the Respondent issued a legal notice on 19th August, 2015

and on 9th September, 2015 through a lawyer to the Appellant-'Corporate

Debtor' office at Chennai, knowing fully well that the Appellant-

Company Appeals (AT) (Insolvency) No. 229-230 of 2017 3

'Corporate Debtor' had vacated the said office premises and called upon

the Appellant to pay the outstanding sum of Rs. 1,98,75,342/-.

Thereafter, the Respondent filed a Company Petition under Sections 433

& 434 of the Companies Act, 1956 before the Hon'ble High Court of

Madras in C.P.No. 495 of 2015 claiming a sum of Rs. 1,98,75,342/- from

the Appellant-'Corporate Debtor'.

5. After constitution of the Tribunal, pursuant to the Notification No.

G.S.R. 1119(E) dated 7th December, 2016, issued by Central Government

under sub-section (1) and (2) of Section 434 of the Companies Act, 2013

read with sub-section(1) of Section 239 of the 'I&B Code', the case was

transferred to Adjudicating Authority, Chennai and re-numbered as

TCP/528/(IB)/2017.

6. It was submitted on behalf of the Appellant that the Appellant-

'Corporate Debtor' did not receive any notice of the transfer of the

proceedings from the Hon'ble High Court to the Adjudicating Authority.

The 'Corporate Debtor' learnt about the pendency of the application only

when its advocate handling other cases in the Hon'ble High Court,

Madras, chanced upon the case being listed before the Adjudicating

Authority on 21st August 2017 and he immediately entered appearance

and sought time to file reply. Accordingly, one-week time to file reply was

granted till 29th August 2017. On 29th August 2017 the 'Corporate Debtor'

filed its reply and the counsel also sought another date for arguing the

Company Appeals (AT) (Insolvency) No. 229-230 of 2017 4

same but that no such opportunity was given and the transferred

application has been treated to be an application under Section 9 of the

'I&B Code' and was admitted by impugned order dated 1st September,

2017 giving rise to the present appeal. Subsequently on 29th September

2017, the 'Interim Resolution Professional' was appointed, which order is

also challenged in the present appeals.

7. Learned counsel for the Appellant submitted that no notice under

sub-section (1) of Section 8 was issued by Respondent in Form-3 or 4

prior to treating the application as under Section 9 of the 'I&B Code' or

before the admission. The application was also not filed in the proper

format i.e. Form 5, as required under Section 9 of the 'I&B Code' read

with Rule 6 of the Adjudicating Authority Rules, 2016 in terms of which

details of record of default etc. were required to be provided.

8. The aforesaid stand taken by the Appellant has not been disputed

by the Respondent.

9. Learned counsel for the Appellant has enclosed the Central

Government notification dated 7th December, 2016 issued from the

Ministry of Corporate Affairs. By the said notification, in exercise of the

powers conferred under sub-sections (1) and (2) of Section 434 of the

Companies Act, 2013 read with sub-section (1) of Section 239 of the 'I&B

Company Appeals (AT) (Insolvency) No. 229-230 of 2017 5

Code', the Central Government framed "The Companies (Transfer of

Pending Proceedings) Rules, 2016".

10. Rule 5 relates to transfer of pending proceedings of winding up on

the ground of inability to pay debts which are to be transferred from the

Hon'ble High Court's to the respective Tribunal and reads as follows: -

11 5. Transfer of pending proceedings of Winding

up on the ground of inability to pay debts.- (1) All

petitions relating to winding up 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 as required 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 Act, exercising territorial jurisdiction and

such petitions shall be treated as applications

under sections 7, 8 or 9 of the Code, as the case

may be, and dealt with in accordance with Part

II of the Code:

Provided that the petitioner shall submit all

information, other than information forming part

Company Appeals (AT) (Insolvency) No. 229-230 of 2017 6

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 Tribunal within

sixty days from date of this notification, failing

which the petition shall abate.

2. All cases where opinion has been

forwarded by Board for Industrial and Financial

Reconstruction, for winding up of a company to a

High Court and where no appeal is pending, the

proceedings for winding up initiated under the

Act, pursuant to section 20 of the Sick Industrial

Companies (Special Provisions) Act, 1985 shall

continue to be dealt with by such High Court in

accordance with the provisions of the Act."

11. From the aforesaid Rule 5, it is clear after transfer of the case the

Applicant (Respondent herein) was required to submit all information,

other than in formation forming part of the records transferred from the

High Court, for admission of the petition under Sections 7, 8 or 9 of the

'I&B Code', including details of the proposed 'Insolvency Professional'

within sixty days, failing which, the petition shall stand abated.

Company Appeals (AT) (Insolvency) No. 229-230 of 2017 7

12. As per Section 9 of the 'I&B Code', before admission of application

and its filing, a demand notice under sub-section (1) of Section 8 is

required to be issued on the 'Corporate Debtor', as quoted below: -

"8. Insolvency resolution by operational creditor.

- (1) An operational creditor may, on the occurrence of

a default, deliver a demand notice of unpaid

operational debtor copy of an invoice demanding

payment of the amount involved in the default to the

corporate debtor in such form and manner as may be

prescribed."

13. It is only on receipt of such notice under sub-section (1) of Section

8 of the I& B Code', the 'Corporate Debtor' may either pay the amount or

may dispute the claim in terms of sub-section (2) of Section 8 of the 'I&B

Code'.

14. Form-5 is the format for filing application under section 9, as per

which the following details are to be provided: -

"Part I- particulars of applicant

Part H- particulars of corporate debtor

Part HI- particulars of the proposed interim resolution

professional (if proposed)

Company Appeals (AT) (Insolvency) No. 229-230 of 2017 8

Part N-particulars of operational debt

Part V- particulars of operational debt [documents,

records and evidence of default]

As per the instructions, the following documents are required to be

attached:

Annex I Copy of the invoice/demand notice as in

Form 3 of the Insolvency and Bankruptcy

(Application to Adjudicating Authority) Rules,

2016 served on the Corporate debtor.

Annex H Copies of all documents referred to in this

application.

Annex HI Copy of the relevant accounts from the

banks/financial institutions maintaining

accounts of the operational creditor confirming

that there is no payment of the relevant unpaid

operational debt by the operational debtor, if

available.

Annex IV Affidavit in support of the application in

accordance with the Insolvency and Bankruptcy

(Application to Adjudicating Authority) Rules, 2016.

Annex VI Written communication by the proposed

interim resolution professional as set out in Form 2 of

the Insolvency and Bankruptcy (Application to

Adjudicating Authority) Rules, 2016.

Company Appeals (AT) (insolvency) No. 229-230 of 2017 9

Annex VI Proof that the specified application fee

has been paid."

15. Admittedly, no notice was issued under sub-section (1) of Section

8 of the 1&B Code'. In terms with Rule 5, other informations were also

not placed before the Adjudicating Authority.

16. The Respondent having failed to provide all the details as required

under Form-5 as noticed above, the application under sections 433 and

434 of the Companies Act, 1956 cannot be treated to be an application

under section 9 of the 'I&B Code' in terms of Rule 5 of Transfer Rules,

2016. In such circumstances, in view of proviso to Rule 5 of the Transfer

Rules, the application under Sections 433 and 434 of the Companies Act,

1956 stands abated.

17. For the reasons aforesaid, while we set aside the impugned orders

dated 1st September, 2017 and 21st September, 2017 passed by the

Adjudicating Authority, Chennai Bench in T.C.P No. 528/(IB)/20 17, also

declare that the application preferred by Respondent under Sections 433

and 434 of the Companies Act, 1956 stood abated.

18. However, liberty is given to the Respondent to issue fresh notice

under sub-section (1) of Section 8 of the 'I&B Code' and on receipt of

service of such notice if there is a debt and default and no dispute is

Company Appeals (AT) (Insolvency) No. 229-230 of 2017 10

raised, it will be open to the Respondent to file fresh application under

Section 9 of the 'J&B Code' after ten days of service of such notice. It may

be decided by the Adjudicating Authority uninfluenced by the Orders

dated 1st September, 2017 and 21St September, 2017 and the judgment

passed by this Appellate Tribunal.

19. In effect, order (s) passed by Adjudicating Authority appointing

'Interim Resolution Professional', declaring moratorium, freezing of

account and all other order (s) passed by Adjudicating Authority

pursuant to impugned order and action, if any, taken by the 'Interim

Resolution Professional', including the advertisement, if any, published

in the newspaper calling for applications and all such orders and actions

are declared illegal and are set aside. The application preferred by

Respondent is dismissed as abated. Learned Adjudicating Authority will

now close the proceeding. The appellant company is released from all the

rigour of law and is allowed to function independently through its Board

of Directors from immediate effect.

20. The Adjudicating Authority will fix the fee of 'Interim Resolution

Professional', if appointed, and the Appellant will pay the fees of the

Interim Resolution Professional, for the period she has functioned. The

appeal is allowed with aforesaid observation and direction. However, in

Company Appeals (AT) (Insolvency) No. 229-230 of 2017 11

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) Ar/uk

Company Appeals (AT) (Insolvency) No. 229-230 of 2017