A Winding Up Petition Pending in a Court cannot act as a deterrent to initiate CIRP under IBC Code 2016- Held Bombay High Court

A Winding Up Petition Pending in a Court cannot act as a deterrent to initiate CIRP under IBC Code 2016- Held  Bombay High Court

JOTUN PRIVATE LIMITED VS PSL LIMITED

In this case, Mumbai High Court held that  Application under the Insolvency and Bankruptcy Code, 2016 (IBC) may be made even in cases where a Winding-Up petition has been admitted by a Company Court. Such an Application under the IBC, would not be permitted, only in the event that a final order of Winding-Up is passed under Section 481 of the Companies Act, 1956.

WINDING UP PETITION UNDER COMPANIES ACT

Prior to the enactment of the IBC, Jotun India Pvt Ltd. (Jotun), an Operational Creditor, had on 10 March 2015 filed a Company Petition under Sections 433 and 434 of the Companies Act, 1956, claiming an outstanding sum of Rs. 7.25 crore with interest in respect of unpaid invoices for goods supplied, and thereby sought a Winding-Up of PSL. This Company Petition was admitted on 9 March 2017. However, an Official Liquidator wasn’t appointed since all assets were secured and the Court said it would appoint one at a later stage if the need arose.

APPLICATION TO BIFR

On 19th June 2015, during the pendency of the Winding-Up however, PSL had made a reference to BIFR   under   Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). Upon enactment of the IBC, SICA was repealed and all matters pending before the BIFR stood abated. However, liberty was granted to applicant companies, to file cases afresh under the IBC.

APPLICATION UNDER IBC 2016

Accordingly, PSL filed an application before NCLT, Ahmedabad under section 10 of IBC, i.e., seeking the initiation of the Corporate Insolvency Resolution Process on itself, within the prescribed window of 180 days on 29 March 2017.

This Section 10 Application, was reserved for orders on 18th July 2017. The NCLT directed the same to be listed on 20th July, 2017.

COMPANY APPLICATION BY OPERATIONAL CREDITOR

On the same day i.e. 18 July, Jotun was quick to file a Company Application in the Bombay High Court seeking the appointment of a Provisional Liquidator. After hearing the counsels, a single Judge of the Bombay High Court (Gadkari, J.) passed an order restraining NCLT, Ahmedabad, from continuing with IBC Application filed by PSL. It is this Order that was sought to be recalled in the present case.

IN ITS JUDGMENT, THE MUMBAI HIGH COURT HELD

“winding up petitions retained by the High Court are being decided under the Companies Act, 1956 only as a transitional provision. Furthermore, this transitional provision cannot in any way affect the remedies available to a person under IBC vis-­à-­vis the company against whom a petition is filed and retained in the High Court, as the same would amount to treating IBC as if it did not exist on the statute book and would deprive persons of the benefit of the new legislation. But even in such a case, there is no express or implied bar from other creditors of such company or the corporate debtor from filing fresh proceedings under IBC.”

This verdict again corroborates the supremacy of the IBC 2016 .