State Bank Of India vs Jai Balaji Industries Ltd. & Ors

(Arising out of Order dated 10th October, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata, in C.P. (IB) No. 767/KB/2017)

IN THE MATTER OF:

State Bank of India ...Appellant

Vs

Jai Balaji Industries Limited & Ors. ....Respondents

Present:

For Appellant: Mr. Ramji Srinivasan, Senior Advocate with Mr. Ajay

Gaggar, Mr. Robin Sirohi, Ms. Vineeta Singh Rathore,

Ms. Sylona Mohapatra, Mr. Basudeb Biswas and Mr.

Rajesh Chaubey, Advocates.

For Respondents: Mr. Ratnanko Banerjee, Senior Advocate with Ms. Richa

Sandilya and Mr. Chetan Roy, Advocates for R-2.

Mr. Upamanyu Hazarika, Senior Advocate with Mr.

Dhruv Surana, Advocate for R-3.

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

The 'State Bank of India'- ('Financial Creditor') filed an application

under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("I&B Code" 2

for short) for initiation of the 'Corporate Insolvency Resolution Process'

against 'Jai Balaji Industries Limited'- ('Corporate Debtor') alleging

existence of default in repayment of loan advanced to the 'Corporate

Debtor'.

2. 'Jai Balaji Industries Limited'- ('Corporate Debtor') challenged the

said proceedings before the Hon'ble High Court of Chattishgarh in W.P. No.

(c) 699 of 2018 wherein an interim order was passed by the Hon'ble High

Court preventing continuation of the proceedings under the 'I&B Code'.

However, the said interim order dated 14th March, 2018 was modified.

Thereafter, the Special Leave Petition against the said order of modification

was also dismissed by the Hon'ble Supreme Court by order dated 16th July,

2018.

3. Before the Hon'ble High Court, the 'Corporate Debtor' took plea that a

number of winding up petitions were pending against it. However,

subsequently the Hon'ble High Court by an order clarified that this order

passed by the Hon'ble High Court shall not be construed to stand in the

way of hearing of the application filed by the 'State Bank of India' against

the 'Corporate Debtor' under the 'I&B Code'.

4. In a petition under Section 7 (registered as C.P. (IB) No.

767/KB/2017) a number of Interlocutory Applications were filed. One of

such application was filed by 'Jai Balaji Industries Ltd. Contractor's &

Worker's Union', another by 'Lakhotia Transport Company Pvt. Ltd.', the

third application by 'Dynamic Hard Coke Manufacturing Company' etc. All

Company Appeal (AT) (Insolvency) No. 788 of 2018 3

of them took plea that due to pendency of winding up proceeding before the

Hon'ble High Court, the petition under Section 7 was not maintainable.

5. The Adjudicating Authority (National Company Law Tribunal),

Kolkata Bench, Kolkata, by impugned order dated 10th October, 2018 held

that application under Section 7 preferred by the 'Financial Creditor' was

not maintainable in view of the pendency of the winding up petition before

the Hon'ble High Court.

6. Learned counsel appearing on behalf of the Appellant- 'Financial

Creditor' submitted that no winding up order has been passed by the

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

maintainable. On the other hand, according to learned counsel for the

Respondents, the Hon'ble High Court of Calcutta having passed order of

winding up, the application under Section 7 is not maintainable.

7. From the records following facts emerges:

A winding up petition being CP No. 822 of 2014 was filed against the

'Corporate Debtor' by 'Lakhotia Transport Company Pvt. Ltd.' before the

Hon'ble High Court of Calcutta (Original Side) on 16th September, 2014.

The said petition was admitted on 17th August, 2015. Subsequently on 14th

September, 2015, the Hon'ble High Court directed to issue notice and to

publish advertisement for winding up in the newspapers. Thereafter, the

matter remained pending since long.

Company Appeal (AT) (Insolvency) No. 788 of 2018 4

8. After about three years, on 7th June, 2018, when the matter was

taken up, learned Single Judge noticed the following facts and observed:

".....................It is the case of the petitioner in

this application that by an order dated August 17,

2015 a learned Single Judge of this Court

admitted this winding-up application filed by itself

against the company. By the said order the

company was, however, granted an opportunity to

pay the principal sum of Rs.3,87,49,003/-

(Rupees Three Crore Eighty Seven Lakh Forty

Nine Thousand and Three only) together with

interest at the rate of 8 per cent, per annum from

February 11, 2014 and costs assessed at 2,000

GMs within a fortnight, failing which the winding-

up application would be advertised in the

newspapers. The company carried the said order

dated August 17, 2015 in appeal, being ACO

No.146 of 2015, APOT No.419 of 2015, CP

No.822/2014, before the Division Bench of this

Court. By an order dated September 4, 2015 the

Division Bench of this Court directed the company

to deposit Rs. 50,00,000/- (Rupees Fifty Lac only)

within September 11, 2015 as a condition for

obtaining stay of operation of the order dated

Company Appeal (AT) (Insolvency) No. 788 of 2018 5

August 17, 2015 passed by the learned Single

Judge. The company, however, did not deposit the

said amount as directed by the Division Bench

and the petitioner caused advertisement of the

winding-up application in newspapers. Thereafter,

the company filed an application, CA 133 of 2017

before a learned Single Judge of this Court

praying for, inter alia, stay of further proceedings

of the winding-up application and the order dated

August 17, 2015. By a consent order dated April

17, 2017 a learned Single Judge of this Court

disposed of the said application CA 133 of 2017.

In terms of the said consent order dated

August 17, 2017 the company was to pay

Rs.3,77,88,569/- (Rupees Three Crore Seventy

Seven Lakh Eighty Eight Thousand Five Hundred

Sixty Nine Only) to the petitioner. The said consent

order further provided that out of the said

Rs.7,88,562/- (Rupees Seven Lakh Eighty Eight

Thousand Five Hundred Sixty Two Only) the

company would pay Rs.3,77,88,569/- (Rupees

Three Crore Seventy Seven Lakh Eighty Eight

Thousand Five Hundred Sixty Nine Only) to the

petitioner at the time of passing of the said order

Company Appeal (AT) (Insolvency) No. 788 of 2018 6

and the balance sum of Rs.3,70,00,000/- (Rupees

Three Crore Seventy Lakh Only) would be payable

by the company to the petitioner in monthly

instalments of Rs.12,00,000/- (Rupees Twelve

Lakh Only) each, starting on and from May 2,

2017 and, thereafter, on or before 7th day of each

succeeding month. As per the said consent order,

subject to payment of the monthly instalments by

the company to the petitioner, the winding-up

proceeding would remain adjourned sine die but

in case of default in payment of two consecutive

instalments, the petitioner would be entitled to

proceed with this winding-up application as

before.

According to the petitioner, in terms of the

said consent order dated April 17, 2017, the

company paid Rs.7,88,562/- (Rupees Seven Lakh

Eighty Eight Thousand Five Hundred Sixty Two

Only) and the monthly instalments of

Rs.12,00,000/- (Rupees Twelve Lakh Only) each,

up to the month of November 2017 and,

thereafter, it failed to pay any of the balance

monthly instalments. It was vehemently

submitted that since the company has failed to

Company Appeal (AT) (Insolvency) No. 788 of 2018 7

pay the balance monthly instalments from the

month of December 2017 amounting to

Rs.2,86,00,000/- (Rupees Two Crore Eighty Six

Lakh Only) in terms of the said consent order

dated April 17, 2017 the petitioner is entitled not

only to proceed with the winding-up application

but also to obtain the final order of winding-up of

the company.

As mentioned earlier in spite of service of

this application, none appears on behalf of the

company to dispute the averments made by the

petitioner in this application.

In view of the above facts urged by the

petitioner, which remain uncontroverted, it is

evident that the company is involved

circumstances and it is unable to pay its debt

under Section 433(e) of the Companies Act,1956.

Thus, this Court has no option but to allow this

winding up application. Accordingly, there shall

be an order in terms of prayers (a) to (g) of the

Judge's Summons.

The Official Liquidator is directed to

forthwith take possession of all the assets and

Company Appeal (AT) (Insolvency) No. 788 of 2018 8

properties of the company lying at its registered

office its factories, together with its business and

affairs.

Urgent certified website copies of this order,

if applied for, be made available to the parties

subject to compliance with all requisite

formalities."

9. The aforesaid order dated 7th June, 2018 was challenged by the 'State

Bank of India' before the Division Bench as direction was issued to windup

the Company namely-- 'Jai Balaji Industries Limited' and direction was

issued on the 'Official Liquidator' to forthwith take possession of all the

assets and properties of the company. A Division Bench of Hon'ble High

Court of Calcutta (Original Side) by judgment dated 21st June, 2018 set

aside the order dated 7th June, 2018 with following observations and

directions:

"................. The learned Senior Advocate

appearing for some of the promoters of the

company (presently in liquidation) submitted that

the said promoters have filed an application for

recalling of the order dated June 07, 2018 and to

submit a scheme for revival of the company

(presently in liquidation).

Company Appeal (AT) (Insolvency) No. 788 of 2018 9

I have considered the materials on record and

the arguments advanced on behalf of the applicant

bank and the petitioning creditor as well. In the

present case, it is a fact that when the company

(presently in liquidation) failed to deposit Rs.

50,00,000/- as directed by the Division Bench on

September 04, 2015 the petitioning creditor caused

the advertisement of the winding up application

being published in newspapers stating that

application would be heard by the Court on October

14, 2015. However, when the company (presently

in liquidation) was registered with the BIFR, by the

order dated March 22, 2016 a learned Single Judge

of this Court adjourned the hearing of the winding

up application, C.P. No. 822 of 2014 sine die. Until

the company (presently in liquidation) filed the said

application, C.A. No. 133 of 2017 the winding up

application did not appear before this Court. Even

in the said application, C.A. No. 133 of 2017 the

company (present in liquidation) claimed the

advertisement of the winding up application

published in the newspapers on September 14,

2015 to be invalid advertisement.

In the facts of the present case as discussed

above, I find that in the instant case before

Company Appeal (AT) (Insolvency) No. 788 of 2018 10

allowing the application C.A. 51 of 2018 and

passing the order dated June 07, 2018, this Court

ought to have directed publication of fresh

advertisement of the winding up application in the

newspapers and enable the secured creditors and

the other creditors of the company (presently in

liquidation) to participate in the winding up

application. In the instant case the contentions

raised by the petitioning creditor to oppose the

prayer of the applicant bank in this application do

not have any merit.

For the reasons as aforesaid, the

application, C.A. No. 165 of 2018 succeeds

and the order dated June 07, 2018 passed by

this Court in C.A. No. 51 of 2018 is recalled.

Let, C.A. No. 51 of 2018, together with the

winding up application, C.P. No. 822 of 2014

appear before this Court, under heading 'Company

Matter Adjourned', on July 09, 2018 when

appropriate direction will be passed for fresh

advertisement of the winding up application of the

petitioning creditor in the newspapers.

It is, however, made clear that since this

application is disposed of without requiring the

petitioning creditor to file its affidavit-in-opposition,

Company Appeal (AT) (Insolvency) No. 788 of 2018 11

the allegations made against it in this application,

if any, shall be deemed not to have been admitted.

With the above directions, C.A. No. 165 of

2018 stands disposed of.

There shall, however, be no order as to costs.

Urgent certified copy of this judgment, if

applied for, be made available to the parties

subject to compliance with all requisite formalities."

10. On 19th July, 2018, the Division Bench of the Hon'ble High Court of

Calcutta taking into consideration the submissions made by the State Bank

of India made following observations and directions:

".............The State Bank as secured creditor of the

company complained to the company Court that in

the light of the company petition having been

adjourned sine die, which deprived the other

creditors of the company to have their say at the

post- advertisement stage, the company Court

ought to have issued some form of notice or

advertisement before hearing the matter again. At

any rate, the State Bank contended before the

company Court, the company could not be wound

up without reference to its other creditors merely

because an advertisement may have been

Company Appeal (AT) (Insolvency) No. 788 of 2018 12

published some two or three years prior to the

company being wound-up. In short, it was the

allegation of the State Bank that a friendly creditor

had been propped up to ensure the winding-up of

the company by Court.

By the order impugned, the company Court

perceived that in the peculiar circumstances that

the petition did not appear on the returnable date

indicated in the advertisements and the matter

remained adjourned for a substantial period of

time, a fresh advertisement should have been

directed to be published before the matter was

considered at the post-advertisement stage. The

company Judge cannot be faulted for such

perception, since creditors of a company have a say

at the post-advertisement stage and the company

Judge has the discretion to not wind up the

company despite its proven indebtedness to the

petitioning-creditor if other creditors demonstrate

that the company should not be wound up. On the

point of principle, the order impugned cannot be

questioned.

However, instead of the company Judge

issuing fresh directions for advertisements

Company Appeal (AT) (Insolvency) No. 788 of 2018 13

immediately, a future date was indicated when

directions for such advertisements were to be

issued. In the meantime, the appellant herein

preferred the present appeal. The date July 9, 2018

indicated in the order impugned by the company

Court for fresh directions to be issued as to the

advertisements could not adhered to, primarily, on

account of the pendency of this appeal.

The order impugned does not call for any

interference. However, since the date for directing

fresh advertisements to be published has passed,

such directions are issued hereby. The petitioning-

creditor will cause advertisements to be published

in the same newspapers in which the original

advertisements had been published, indicating that

the company petition will appear before the

company Court on the first available working day

two weeks after the date of the publication. The

publication of the advertisements has to be

simultaneous in the newspapers on a date within

two weeks from today.

The department is directed to ensure that the

company petition appears in the list on the

returnable date.

Company Appeal (AT) (Insolvency) No. 788 of 2018 14

APO No.186 of 2018 and ACO No.22 of 2018

are disposed of.

There will be no order as to costs."

11. Learned counsel appearing on behalf of the Respondents enclosed a

copy of the advertisement published in the newspaper 'The Statesman,

Kolkata' on 24th July, 2018 wherein giving reference to the order dated 19th

July, 2018, notice has been issued to the parties for winding up the

company. It was intimated that the said petition is to be heard before the

Hon'ble Company Judge and the parties were asked to file their respective

affidavits.

12. Learned counsel appearing on behalf of the Appellant-'State Bank of

India' relied on 'The Companies (Court) Rules, 1959' and submitted that

after advertisement of the petition an order appointing 'Provisional

Liquidator' is required to be passed in Form No. 49 in terms of Rule 106(2).

It is only thereafter in terms of Rule 111, in Form No. 52, winding up order

is required to be passed. Thereafter, notice of winding up is required to be

issued. It is stated that till date no order of winding up has been passed by

the Hon'ble High Court of Calcutta. Whatever the order of winding up

earlier passed by the Hon'ble Single Judge (Company Judge) has been

recalled by the Division Bench.

13. We have noticed the rival submissions of the parties, orders passed

by the Hon'ble High Court of Calcutta and perused the records. The facts as

Company Appeal (AT) (Insolvency) No. 788 of 2018 15

narrated and the order passed by the Hon'ble High Court clearly shows

that till date the Hon'ble High Court of Calcutta has not passed any order

of winding up/liquidation of the 'Corporate Debtor'. The Adjudicating

Authority has failed to notice the aforesaid relevant orders passed by the

Hon'ble High Court of Calcutta.

14. In "Unigreen Global Private Limited v. Punjab National Bank &

Ors.− (2018) 145 SCL 272", this Appellate Tribunal held:

"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:--

(a) a corporate debtor undergoing a

corporate insolvency resolution

process; or

Company Appeal (AT) (Insolvency) No. 788 of 2018 16

(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.

Company Appeal (AT) (Insolvency) No. 788 of 2018 17

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 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."

Company Appeal (AT) (Insolvency) No. 788 of 2018 18

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."

15. In the present case, as we find that no specific order of winding

up/liquidation has been passed by the Hon'ble High Court of Calcutta and

whatever the order of admission or winding up earlier issued has been

recalled by the Division Bench, we hold that the application under Section

7 preferred by the 'State Bank of India' is maintainable.

16. In the present case, such application under Section 7 was filed on

27th December, 2017 and more than a year has passed. As it is not the case

of the 'Corporate Debtor' that no debt is payable in law or in fact and the

Adjudicating Authority has not held that application was incomplete, the

Adjudicating Authority should have admitted the application and should

have passed order of 'Moratorium', etc.

17. For the reasons aforesaid, we set aside the impugned order dated 10th

October, 2018 and remit the matter to the Adjudicating Authority, Kolkata

Bench, Kolkata with direction to admit the application under Section 7.

Before such admission, intimation to be given to the 'Corporate Debtor', but

no further hearing is required to be given to any person, this Appellate

Tribunal having heard all the parties and having held that it is a fit case for

admission.

Company Appeal (AT) (Insolvency) No. 788 of 2018 19

18. The appeal is allowed with aforesaid observations and directions. No

cost.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial)

NEW DELHI

8th February, 2019

AR

Company Appeal (AT) (Insolvency) No. 788 of 2018