Unimark Remedies Ltd vs Ashok Alco Chem Ltd

21.07.2017 This appeal has been preferred by the appellant

against two orders dated 24th February, 2017 and 4th April, 2017

passed by the Learned Adjudicating Authority (National Company Law

Tribunal), Mumbai Bench, Mumbai. By the first order dated 24th

February, 2017, Learned Adjudicating Authority dismissed the

petition preferred by the appellant and by the subsequent order dated

4th April, 2017, Learned Adjudicating Authority refused to recall the

earlier order dismissing the appeal.

2. Respondent herein preferred an application under clause (e) of

Section 433 of the Companies Act, 1956 before the Bombay High

Court. Pursuant to Rule 5 of "The Companies (Transfer of Pending

Proceedings) Rules, 2016" notified on 7th December, 2016 by the Central Government, the case was transferred from the Bombay High

Court to Learned Adjudicating Authority (National Company Law

Tribunal), Mumbai Bench, Mumbai. Rule 5 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 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 H 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 3

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."

3. Learned Adjudicating Authority treated the petition under

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

referred to as 'I&B Code') admitted the application and ordered

moratoriam.

4. The Appellate Tribunal by its order passed today (21st July,

2017) in Company Appeal (AT) (Insolvency) No. 8 of 2017 - Rubina

Chadha and Another Vs. AMR Infrastructure Ltd., doubted the validity

of the Notification dated 7th December, 2016 issued by the Central

Government and doubted the power of the Central Government to

frame Rules under Section 239 of the I&B Code to transfer the cases

under Section 433 of the Companies Act, 1956 while exercising its power conferred under sub-sections (1) and (2) of Section 434 of the

Companies Act, 2013. While dealing with the case of Rubina Chadha

and another today, Shri Sanjay Shorey, Joint Director (Legal), Ministry

of Corporate Affairs, Government of India appeared and brought to the

notice of the Appellate Tribunal a Notification dated 29th June, 2017

issued by the Central Government 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 Code framing

the Companies (Transfer of Pending Proceedings) Second Amendment

Rule, 2017, whereby Rule 5 circulated vide Notification dated 7th

December, 2016 has been substituted by new Rule 5, which reads as

follows:

"5. Transfer ofpending proceedings of Winding up

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

petitions relating to winding up of a company 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 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 Companies Act, 2013 exercising

territorial jurisdiction to be dealt with in accordance

with Part 11 of the Code:

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Provided that the petitioner shall submit all

information, other than information forming pan 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 upto 15th day of July, 2017, failing

which the petition shall stand abated:

Provided further that any party 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 be, in

accordance with the provisions of the Code:

Provided also that where a petition relating to

winding 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."

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5. As the earlier Rule 5 now stand substituted by the amended

Rule 5 vide Notification dated 29th June, 2017, we are of the opinion

that the Tribunal should re-consider the matter in terms of the

substituted Rule 5, in view of the fact that earlier Rule 5 was doubted

by the Appellate Tribunal and the Central Government accepting the

same, issued substituted Rule 5 vide Notification dated 29th June,

2017.

6. We are also of the prima facie view that the petition under

Section 433(e) of the Companies Act, 1956 on transfer under sub-

sections (1) and (2) of Section 434 of the Companies Act, 2013 cannot

be treated to be an application under Sections 7, 9 or 10 of the I&B

Code, as sub-section (1) of Section 239 of the I&B Code relates to

framing of rules by the Central Government with regard to the I&B

Code to the extent empowered therein and the Central Government

has not been empowered to transfer the cases under the said provision

except under Section 434 of the Companies Act, 2013.

7. For the reasons aforesaid, we set aside the impugned orders

dated 24th February, 2017 and 4th April, 2017 passed by the Learned

Adjudicating Authority (National Company Law Tribunal), Mumbai

Bench, Mumbai.

8. As it is informed that the parties have settled the claim amicably,

we have not remitted the case to Adjudicating Authority to admit the application, after hearing the parties. If any amount is due to Interim

Resolution Professional, the appellants will pay the cost as may be

determined by the Tribunal.

9. The appeal stands disposed of with the aforesaid observations

and directions. However, on the facts and circumstances of the case,

there shall be no order as to costs.

[Justice S.J. Mukhopadhaya I Chairperson

[Balvinder Singh] Member (Technical)

/ng/