Sriram Compounds Pvt. Ltd vs Shiva Drums Pvt. Ltd. & Ors

Sriram Compounds Pvt. Ltd. ...Appellant

Vs.

Shiva Drums Pvt. Ltd. & Ors. ...Respondents

Present: For Appellant: - Mr. H.K. Chaturvedi with Mr. Sagar Chaturvedi, Advocates.

For Respondents: - None.

ORDER

05.03.2018─ This appeal has been preferred by Appellant- Sriram

Compounds Pvt. Ltd. against order dated 26th July, 2017 along with the

petition for condonation of delay on the ground that the Appellant earlier

wrongly moved before the Hon'ble Delhi High Court. Prayer has been

made to exclude the period when the matter was pending before the

Hon'ble High Court of Delhi.

2. Apart from the fact that this Appellate Tribunal has already held

that the provisions of 'Limitation Act, 1963' are not applicable to the

application for 'Corporate Insolvency Resolution Process' under

Company Appeal (AT) (Insolvency) No. 46 of 2018 2

Insolvency and Bankruptcy Code, 2016, even then if the period as

claimed is excluded for the purpose of condonation of delay, the appeal

cannot be allowed for the grounds mentioned below.

3. The Appellant preferred the application under Sections 433 (e), 434

(1) (a) & (b) and 439 of the Companies Act, 1956 before the Hon'ble Delhi

High Court for winding up of Shiva Drums Pvt. Ltd. ('Corporate Debtor').

The case was transferred from the Hon'ble High Court to the 'Adjudicating

Authority' pursuant to Rule 5 of "the Companies (Transfer of Pending

Proceedings) Rules, 2016" framed by the Central Government, Ministry

of Corporate Affairs in exercise of powers conferred by 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 Code'.

4. The aforesaid Rule 5 was amended on 29th June, 2017 by

"Companies (Transfer of Pending proceedings) second Amendment Rules,

2017", which reads as follows:

"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

Company Appeal (AT) (Insolvency) No. 46 of 2018 3

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

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 stand abated.

Provided further that any part or parties to

the petitions shall, after the 15th day of July,

2017, be eligible to file fresh applications under

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

Company Appeal (AT) (Insolvency) No. 46 of 2018 4

be, in accordance with the provisions of the

Code:

Provided also that where a petition relation

to win ding 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 against the same company pending

as on 15th December, 2016, such other petition

shall not be transferred to the Tribunal, even if

the petition has not been served on the

respondent."

5. As per Rule 5, after transfer of the case, the Appellant was required

to serve notice under sub-section (1) of Section 8 of the 'I&B Code' and to

submit all information in terms of Form 5 of the Insolvency and

Bankruptcy (Application to Adjudicating Authority) Rules, 2016. But no

notice under sub-section (1) of Section 8 of the 'I&B Code' was issued by

the Appellant, nor necessary information were furnished as per Rule 5.

In this background, the Adjudicating Authority dismissed the application.

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

"M/s. Sabari Inn Pvt. Ltd. Vs. M/s. Rameesh Associates Pvt. Ltd.─

Company Appeal (AT) (Insolvency) No. 46 of 2018 5

Company Appeal (AT) (Insolvency) No. 117 of 2017", wherein this

Appellate Tribunal by its judgment dated 17th November, 2017 held as

follows:-

"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.

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

Company Appeal (AT) (Insolvency) No. 46 of 2018 6

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. Clause (a) and (b) of sub-rule (1) of Rule 5 of

the 'Adjudicating Authority Rules' provides the format

in which the demand notice/invoice demanding

payment in respect of unpaid 'Operational Debt' is to

be issued by 'Operational Creditor'. As per Rule 5(1) (a)

& (b), the following person (s) are authorised to act on

behalf of operational creditor, as apparent from the last

portion of Form-3 and 4 which reads as follows: -

"6. The undersigned request you to unconditionally repay the unpaid operational debt (in default) in full within ten days from the receipt of this letter failing which we shall initiate a corporate insolvency resolution process in respect of [name of corporate debtor].

Yours sincerely,

Signature of person authorised to act on behalf of the operational creditor

Name in block letters

Company Appeal (AT) (Insolvency) No. 46 of 2018 7

Position with or in relation to the operational creditor

Address of person signing

"

16. 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 II- particulars of corporate debtor

Part III- particulars of the proposed interim resolution

professional (if proposed)

Part IV- 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 II Copies of all documents referred to in this

application.

Annex III Copy of the relevant accounts from the

banks/financial institutions maintaining accounts of

the operational creditor confirming that there is no

Company Appeal (AT) (Insolvency) No. 46 of 2018 8

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.

Annex VI Proof that the specified application fee has

been paid."

17. Admittedly, no notice was issued under sub-

section (1) of Section 8 of the 'I&B Code'. In terms with

Rule 5, other informations were also not placed before

the Adjudicating Authority.

18. 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

Company Appeal (AT) (Insolvency) No. 46 of 2018 9

Transfer Rules, the application under Sections 433 and

434 of the Companies Act, 1956 stands abated."

7. Learned counsel appearing on behalf of the Appellant placed

reliance on Hon'ble Supreme Court decision in " L. Chandra Kumar Etc.

Etc. Vs. The Union of India and Ors. Etc. Etc. (1997) 2 S.C.R 1186"

and submitted that the Hon'ble High Court has given certain findings

which is binding on the Tribunal. In the present case, we do not feel

necessity to deal with such arguments based on judgment in "L.

Chandra Kumar Etc. Etc. (Supra)" as the application being incomplete

in more than one aspect and the Appellant having not completed the

same within the time frame as stipulated by Rule 5, the application

preferred by Appellant stood abated.

8. For the reasons aforesaid, we are not inclined to interfere with the

impugned order dated 26th July, 2017 passed by the Adjudicating

Authority, Principal Bench, New Delhi. However, the order passed by the

Adjudicating Authority will not come in the way of Appellant to issue

notice under sub-section (1) of Section 8 of the 'I&B Code' to the

'Corporate Debtor', and to file an application under Section 9 of the 'I&B

Code', if there is a debt and default by the 'Corporate Debtor'. In such

case, the Adjudicating Authority may decide the application uninfluenced

by the impugned Order dated 26th July, 2017 and the judgment passed

by this Appellate Tribunal. The appeal is dismissed with aforesaid

Company Appeal (AT) (Insolvency) No. 46 of 2018 10

observation. 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) Ar/uk

Company Appeal (AT) (Insolvency) No. 46 of 2018