M/S Barnala Steel Industries ... vs Bank Of Baroda And 2 Others
2018 Latest Caselaw 50 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

Court No. - 40
 

 
Case :- WRIT - C No. - 14085 of 2018
 

 
Petitioner :- M/S Barnala Steel Industries Private Limited
 
Respondent :- Bank Of Baroda And 2 Others
 
Counsel for Petitioner :- Arvind Nath Verma
 
Counsel for Respondent :- Anadi Krishna Narayana
 

 
Hon'ble Amreshwar Pratap Sahi,J.

Hon'ble Shashi Kant,J.

Heard Sri Arvind Verma, learned counsel for the petitioner and Sri Sandeep Kumar Singh, learned counsel for the respondent-bank.

While advancing his submissions a two fold argument has been made by Sri Verma, firstly, that the Reserve Bank of India guidelines have to be adhered to, keeping in view the fact that there is a possibility of a One Time Settlement, the second argument is that the bank itself has been approached and vide letter dated 12.04.2018, the bank has intimated the petitioner to substantially improve its offer amount for considering the liquidation of the contractual dues which may be accepted by the bank, a copy of the said letter have been placed before the Court.

The basic challenge raised in the writ petition is to the proceedings undertaken by the bank under the Recovery of Debts due to Bank and Financial Institutions Act, 1993 as well as, the proceedings which are engaging the attention of Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016. From the facts disclosed in the writ petition, it is evident that the National Company Law Tribunal had fixed 16.04.2018 for proceeding which according to the petitioner has now been adjourned for today i.e. 18.04.2018. The contention in paragraph no.42 of the petition is as follows:

"That although there may not be a bar in the Bank proceeding under the RDDB&FI Act, 1993 or code, 2016, but when the One Time Settlement proposal is under active consideration, permitting simultaneous proceedings against the borrower would proper nor possible for the Bank to proceed to recover the amount from the borrower."

We may point out that the Apex Court considering the validity of the Insolvency Code 2016 has been pleased to trace out the entire purpose of the said enactment and has made observations indicating that the Code is a complete Code. The said judgment is reported in AIR 2017 SC 4084 M/s Innoventive Industries Ltd. Vs. ICICI Bank and another. Apart from this the Apex Court has also cautioned the High Court from interfering in such matters in the latest order passed on 25.01.2018 in the case of Shivam Water Treaters Pvt. Ltd. Vs. Union of India and another in S.L.P. No.1740 of 2018.

A Division Bench of the Madras High Court in the case of M/s Anandram Developers Private Vs. The National Company Law Tribunal, decided on 17.11.2017 somewhat faced with a similar situation, where the matter was pending before the Company Law Tribunal along with Original Application filed by the financial institution before the Debt Recovery Tribunal where a negotiation of One Time Settlement was also tabled, after noticing the Apex Court decision in the case of M/s Innoventive Industries Ltd. (Supra) observed as follows :

"46. During the course of hearing of the instant writ petition, submission has been made by the learned counsel for the petitioners that a counter affidavit has been filed, to the application under Section 7 of the Code, before the NCLT, opposing the admissibility of the application filed by the 2nd respondent. When admission of the application filed, under Section 7 of the Code, is opposed before the Tribunal, we do not want to record any finding, as to whether, notice is required under Section 7(5)(a), except to observe that the Hon'ble Supreme Court, in M/s.Innoventive Industries Ltd.,'s case (cited supra), has held that Insolvency and Bankruptcy Code, 2016, is a comprehensive code.

47. Moment, an application is admitted, under Section 7 of the Insolvency and Bankruptcy Code, 2016, a detailed procedure is set out in the Insolvency and Bankruptcy Code, 2016 and Rules and Regulations have framed. In the light of the decision of the Hon'ble Supreme Court, in M/s.Innoventive Industries Ltd.,'s case (cited supra), which has thread analysed the code, the contention that the rights of the Company and its Directors, as well as the share holders, would be stripped of the moment, an application, under Section 7 of the Code, is admitted and that therefore, the whole proceedings by NCLT, require to be stalled, cannot be accepted.

48. Further contention of the petitioners that the action of the 2nd respondent in approaching the NCLT, would amount to forum shopping, also cannot be countenanced, for the reason, Insolvency and Bankruptcy Code, 2016, has been enacted, consolidating various enactments, such as, Sick Industrial Companies (Special Provisions) Act, 1985; the Recovery of Debts Due to the Banks and Financial Institutions Act, 1993; the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; Companies Act, 2003; Insolvency and Bankruptcy law and other laws.

49. As per Section 238 of the Insolvency and Bankruptcy Code, 2016, provisions of the Code shall have the effect, notwithstanding anything inconsistent therewith, contained in any other law, for the time being in force or any instrument, has effect, by virtue of such power. As per Sub-Section (4) of Section 60 of the Code, the National Company Law Tribunal is vested with all the powers of the Debts Recovery Tribunal, as contemplated under Part II of the Code, for the purpose of sub-Section (2) of Section 60 of the Code and therefore, it is for the NCLT to consider, all the materials, and pass appropriate orders.

50. Code enables a financial creditor to make an application, under Section 7 of the Code, if the adjudicating authority is satisfied that default has not occurred or the application is complete and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application. Contention of the learned counsel that applications are mechanically admitted, cannot be accepted. Contention that approach of the 2nd respondent to NCLT, amounts to forum shopping is not tenable, as the Code enables filing of an application, notwithstanding the pendency of any proceedings, under the SARFAESI Act, 2002. When the code has not been stayed, the process envisaged in the code, has to be continued, and cannot be restrained.

51. In view of the above discussion and decisions, we are not inclined to entertain the writ petitions and the same are dismissed. No costs. Consequently, connected Miscellaneous Petitions are closed."

A learned Single Judge in the case of Sanjeev Shriya and Ors. Vs. State Bank of India and Ors. 2017(9) ADJ, 723 delivered on 06.09.2017 has expressed a view that the proceedings and order under the Insolvency and Bankruptcy Code 106 by the Company Law Tribunal would prevail even though relief was considered on the peculiar facts of that case. The judgment in the case of M/s Innoventive Industries Ltd. Vs. ICICI Bank and Anr. (Supra) delivered on 31.08.2017 does not appear to have been noticed in the said judgment.

Learned counsel for the petitioner has relied on the Division Bench judgment in Writ Petition No.8377 of 2012 in M/s Shyam Ice & Cold Storage (P) Ltd and others Vs. M/s Syndicate Bank and another decided on 29.02.2012. In view of what has been stated above the aforesaid judgment does not come to the aid of the petitioner before this Court.

In the background in which the relief of One Time Settlement is sought to be claimed, this Court is not here under Article 226 of the Constitution of India to enforce any settlement either offered or sought to be modified between the bank and the petitioner. As a matter of fact after coming into the force of Insolvency Code of 2016, the channel of litigation, in so far as, such defaulters are concerned as been altered and there is no occasion for this Court to interfere at this stage, keeping in view the fact that the matter is already engaging the attention of the National Company Law Tribunal.

We are, therefore, not inclined to entertain this petition without prejudice to the rights of the petitioner to negotiate any settlement or seek any such remedy in accordance with law.

The writ petition is consigned to records.

Order Date :- 18.4.2018

R./