Vandana Industries Ltd vs Il & Fs Financial Services Ltd. & Anr

Vandana Industries Ltd. ...Appellant

Versus

IL & FS Financial Services Ltd. & Anr. ...Respondent

Present:

For Appellant : Mr. Alok Dhir, Ms. Varsha Banerjee, Mr. Kunal, Godhwani, Advocates

For Respondent 1 : Mr. Bishwajit Dubey, Mr. Shatrajit Banerji, Advocates

Mr. A.K. Mehta, Liquidator

ORDER

01.2.2019 This appeal has been preferred by Appellant Vandana

Industries Limited, a shareholder of Vandana Udyog Limited ('Corporate

Debtor') against order dated 25.06.2016, whereby and whereunder, the

Adjudicating Authority (National Company Law Tribunal), Mumbai Bench,

Mumbai passed order of liquidation under Section 33(2) of the Insolvency

and Bankruptcy Code, 2016 ("I&B Code" for short) and issued certain orders

and directions to the Liquidator.

2. The brief fact of the case is that an application u/s 10 of the 'I&B Code'

was filed by Vandana Udyog Limited ('Corporate Debtor') through the Board of Directors showing one of IL & FS Financial Services Limited as one of the

'Financial Creditor' in respect of whom the alleged default was committed.

The said application u/s 10 was admitted on 21.06.2017 and the matter

proceeded. Subsequently, the order of liquidation has been passed on

25.06.2018.

3. Learned Counsel appearing on behalf of the Appellant- 'Vandana

Industries Limited' submitted that one of the shareholders has no knowledge

that the Board of Directors has decided to move application u/s 10 of the

'I&B Code'. He has also no knowledge that such an application was

admitted on 21st June, 2017. It is only after the order of liquidation was

passed, the shareholder of 'Vandana Industries Limited' has come to know

of the same.

4. Learned Counsel appearing on behalf of Appellant submitted that no

prior approval of shareholders was taken in Extra Ordinary General Meeting

of the 'Corporate Debtor'. The Board of Directors, without jurisdiction, filed

an application u/s 10 without such approval from the meeting of the

shareholders in its Extraordinary General Meeting.

5. Reliance has been placed on Article 129 of the Articles of Association.

6. It is contended that the Board of Directors has no jurisdiction to take

decision for liquidation or file application u/s 10 and thereby application

filed u/s 10 was not maintainable.

7. In "Gaja Trustee Company Private Limited & Ors. Vs. Haldia Coke

and Chemicals Private Limited -Company Appeal (AT) (Insolvency) No.

137 of 2017" this Appellate Tribunal by judgement dated 19.07.2018 held

that application u/s 10 cannot be filed by the Board of Directors of a

Company without prior approval of the shareholders in its Extraordinary

General Meeting / Annual General Meeting (AGM).

8. Learned Counsel for the Appellant further submitted that there is only

one 'Financial Creditor' with whom the matter had been settled. This is also

accepted by Mr. Vishwajeet Dubey, Counsel on behalf of the IL & FS

Financial Services Limited ('Financial Creditor'). He submits that in case

of default, the 'Financial Creditor' is allowed to trigger Corporate Insolvency

Resolution Process against the 'Corporate Debtor' and to sue the person who

signed the agreement.

9. Mr. Adesh Mehta, 'Resolution Professional' / 'Liquidator' appears in

person. He submits that he has filed the details of fees and Corporate

Insolvency Resolution Process cost which comes to about Rs. 12.18 lacs

payable in his favour.

10. Learned Counsel for the Appellant submits that the Appellant and

'Corporate Debtor' will pay such amount to the 'Resolution Professional' /

'Liquidator'.

11. In the present case, as we find that the application u/s 10 filed by

the Board of Directors was not maintainable, we hold that initiation of Corporate Insolvency Resolution Process by order dated 21.06.2017 has

been shown void. For the same very reason such matter could not have

been proceeded. We hold that the impugned order of liquidation dated

25.06.2018 is illegal. The said order is accordingly set aside.

12. The parties having settled the matter, no further order is required to

be passed except to state that the 'Corporate Debtor',

Directors/Shareholders will be bound by the terms of settlement.

13. Taking into consideration the stand taken by the 'Resolution

Professional' / Liquidator and learned counsel for the Appellant, we direct

the Appellant to pay the sum of Rs. 12.18 lacs in favour of Mr. Adesh Mehta,

the 'Resolution Professional' / 'Liquidator' within two weeks from the date of

receipt of the copy of this order.

14. In effect, order (s) passed by Ld. 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 taken by the 'Resolution Professional', including the advertisement

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

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

Respondent under Section 10 of the ''I&B Code' is dismissed. The Adjudicating

Authority will now close the proceeding. The 'Corporate Debtor' is released from

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

of Directors from immediate effect.

15. The appeal is allowed with the aforesaid direction. No cost.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member (Judicial)

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