State Bank Of India vs Topworth Steels & Power Pvt. Ltd

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Company Appeal(AT)(Insolvency) No. 790 of 2018 IN THE MATTER OF: State Bank of India ...Appellant Vs Topworth Steels and Power Pvt. Ltd. ....Respondent Present: For Appellant: Mr. P.V. Dinesh and Mr. Ashwini Kumar Singh, Advocates

For Respondent: Present but did not mark appearance

ORDER

19.08.2019 A petition for winding up under Section 433(e) and 434 of the

Companies Act, 1956 was filed against Topworth Steels and Power Pvt. Ltd.

('Corporate Debtor') in which the Hon'ble Bombay High Court appointed

Provisional Liquidator for liquidation of the Company. While the matter was

pending before the Hon'ble Bombay High Court, the Appellant -State Bank of

India ('Financial Creditor') filed an application under Section 7 of Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as IBC) against Topworth Steels

and Power Pvt. Ltd. The Adjudicating Authority (National Company Law

Tribunal), Mumbai Bench, Mumbai by impugned order dated 16.11.2018

dismissed the application as not maintainable in view of pendency of winding up

petition before the Hon'ble Bombay High Court against the 'Corporate Debtor'.

He referred to the decision of this Appellate Tribunal in "Arise India Limited Vs.

TCI Freight" [Company Appeal(AT)(Insolvency) No. 153 of 2018] without giving

any reason, the Division Bench of this Appellate Tribunal dismissed similar

appeal on 03.05.2018 with the following observation: Company Appeal(AT)(Insolvency) No. 790 of 2018 Page 1 of 4

"Where the 'Provisional Liquidator' has been appointed,

the question of initiation of 'Corporate Insolvency

Resolution Process' under Section 9 of the Insolvency and

Bankruptcy Code, 2016, against the same 'Corporate

Debtor' does not arise. For the said reason, we are not

inclined to interfere with the impugned order and dismiss

the appeal. No cost."

2. It appears that aforesaid decision was given by the Division Bench of this

Appellate Tribunal based on a decision of 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 held

that the Application under Section 7 was not maintainable in view of initiation

of winding up proceeding by the Hon'ble High Court of Delhi. Against the decision

of this Appellate Tribunal, Forech India Pvt. Ltd. moved before the Hon'ble

Supreme Court in Civil Appeal No. 818 of 2018 (2019 SCC online SC 87) (Forech

India Ltd. Vs. Edelweiss Assets Reconstruction Co. Ltd.) whereby the Hon'ble

Supreme Court by a judgment dated 22.01.2019 observed and held:

...

"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:

Company Appeal(AT)(Insolvency) No. 790 of 2018 Page 2 of 4

"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 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."

....

3. Learned Counsel appearing on behalf of Respondent-'Corporate Debtor'

accepts applicability of the decision of Hon'ble Supreme Court in 'Forech India

Company Appeal(AT)(Insolvency) No. 790 of 2018 Page 3 of 4 Ltd. Vs. Edelweiss Assets Reconstruction Co. Ltd.' (supra) and therefore we hold

that the application under Section 7 was maintainable irrespective of pendency

of the petition before the Hon'ble Bombay High Court (now pending in NCLT,

Mumbai).

4. For the reasons aforesaid, we set aside the impugned order dated

16.11.2018 and remit the case to the Adjudicating Authority (National Company

Law Tribunal), Mumbai to admit the application under Section 7 after notice to

the Respondent and pass appropriate order including the order of 'Moratorium'

under Section 14 of IBC. If such order of 'Moratorium' is passed, the proceeding

Transferred under Section 434 of Companies Act, 2013 pending before NCLT

Mumbai shall remain stayed till 'Resolution Process' is complete.

5. It will be also open to the 'Creditors' including the Applicant of the

Company Petition 114 of 2016 to file claim before the Resolution Professional on

admission of the Application under Section 7 of IBC which may be decided in

accordance with law irrespective of pendency of transferred petition before the

NCLT, Mumbai.

[Justice S.J. Mukhopadhaya] Chairperson

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

(Kanthi Narahari) Member(Technical) Akc/Sk

Company Appeal(AT)(Insolvency) No. 790 of 2018 Page 4 of 4