Bombay High Court

Omkara Assets Reconstruction Private ... vs Icici Bank Limited And Anr on 3 May, 2024

Author: Abhay Ahuja

Bench: Abhay Ahuja

2024:BHC-OS:7311


                                                                              928-IA(L)-25210-2022.doc


                                  IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                      ORDINARY ORIGINAL CIVIL JURISDICTION

                                    INTERIM APPLICATION (L) NO. 25210 OF 2022
                                                      IN
                                        COMPANY PETITION NO. 317 OF 2012

                    OMKARA ASSETS RECONSTRUCTION                          )...APPLICANT

                                                  IN THE MATTER OF
                    ICICI BANK LIMITED                                    )...PETITIONER
                             V/s.
                    CLASSIC DIAMONDS (INDIA) LIMITED                      )...RESPONDENT

                    Ms.Aneesa Cheema a/w. Mr.Harsh Kesharia, Advocate for the
                    Applicant.
                    Mr.Arun Siwach, through Video Conferencing, a/w. Ms.Priyanka Mitra
                    and Mr.Karan Gandhi i/by Cyril Amarchand Mangaldas, Advocate for
                    the Petitioner in CP/317/2012.
                    Mr.Mutahhar Khan, Advocate for the Official Liquidator.
                    Ms.Nikita Yadav, Assistant Official Liquidator, present in Court.

                                                  CORAM    :      ABHAY AHUJA, J.

                                                  DATE     :      3rd MAY 2024

                    ORAL JUDGMNT :

1. This Interim Application seeks an order of this Court to transfer

the Company Petition No.317 of 2012 to the National Company Law

Tribunal (the "NCLT"), Mumbai, pursuant to 5 th proviso to Section

434(1)(c) of the Companies Act, 2013.

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2. When the matter was listed on 21 st July 2023, the Official

Liquidator was directed to file his response. Thereafter, the Official

Liquidator has filed his reply dated 12 th September 2023 submitting

that the Official Liquidator had issued statutory notices dated 2 nd

November 2017 to all concerned authorities and also issued notices

under Sections 454, 468 of the Companies Act, 1956 and notice under

Rule 130 of the Companies (Court) Rules 1959 (the "said Rules") to all

ex-directors of the company in liquidation. That, the Official Liquidator

had fixed a meeting on 9 th November 2017 with all the ex-directors for

personal interview under Rule 130 of the said Rules and another

meeting for discussion with all concerned parties regarding the

disclosure of the details of the properties owned by the company in

liquidation and to decide the modalities for taking possession of the

movable and immovable assets along with books of accounts and

records of the company in liquidation. However, only one ex-director

came for the said meeting. It is submitted that in the said meeting,

Mr.Kumar Bhansali (ex-director), Rushabh Thacker, Advocate for Kumar

Bhansali and Dinesh Bhatia, Advocate for Edelweiss Asset

Reconstruction Company Limited instructed by Manilal Kher Ambalal

and Company, Shashwat Singh (senior manager) for Invent Assets

Securitization and Reconstruction Private Limited, Mr.Manin Lalwani

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(Chartered Accountant) for ex-director, Mr.Suresh Choudhary of Canara

bank were present. That, thereafter, on 6th November 2017, the Official

Liquidator took possession of the registered office of the company,

which Mr.Khan, learned Counsel for the Official Liquidator submits has

been handed over to Edelweiss Asset Reconstruction Company Limited

pursuant to order dated 23rd January 2018 passed in Company

Application Lodging No. 606 of 2017.

3. Mr.Khan, learned Counsel for the Official Liquidator would

submit that possession of the other properties referred to in the

affidavit have already been taken over by Edelweiss Asset

Reconstruction Company Limited, as a secured creditor, pursuant to

Securitization and Reconstruction of Financial Assets and Enforcement

of Security Interest Act (SARFAESI) proceedings and that, at present,

the Official Liquidator is not in possession of any of the properties of

the company.

4. Mr.Khan would submit that the Official Liquidator has not invited

any claims from the creditors or workers as per the requirement of Rule

148 of the said Rules. Mr.Khan refers to the affidavit in reply and

submits that in view of the decision of the Hon'ble Supreme Court in

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the case of A. Navinchandra Steels Private Limited vs. SREI Euipment

Finance Ltd. & Others1 the power of this Court to transfer the petitions

pending before it, even after an order of winding up under Section 434

of the Companies Act is a discretionary power and that this Court may

exercise the same, if deemed appropriate, subject however, to the

Applicant being directed to deposit liquidation expenses/cost of the

Official Liquidator.

5. On 1st March 2024, when the matter was listed, the Counsel for

the Petitioner in the winding up petition had expressed the Petitioner's

no objection, to the proceedings being transferred to the NCLT,

however, time was sought to file reply, which was granted.

6. Today, when the matter is called out, the reply dated 2 nd May

2024 has been tendered across the bar on behalf of the Petitioner and

Mr.Siwach, learned Counsel for the Petitioner, submits that since the

Official Liquidator has not invited any claims from the creditors or

workers of the company in liquidation, the transfer of proceedings to

the NCLT would ensure speedier resolution of the corporate insolvency

resolution process while also allowing for a more technical

consideration of issues and that further proceedings before the NCLT

1 Civil Appeal Nos.4230-4234 of 2020 decided on 1st March 2021

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allows for the creditors to be active and final determinants of how the

insolvency resolution process would take place. Learned Counsel

would submit that since the power to transfer is discretionary under

Section 434 of the Companies Act, this Court may pass appropriate

orders.

7. In the case of A. Navinchandra Steels Private Limited vs. SREI

Euipment Finance Ltd. & Others (supra) the Hon'ble Supreme Court

relying upon the decision in the case of Kaledonia Jute & Fibres (P) Ltd.

vs. Axis Nirman & Industries Ltd. 2 and Action Ispat and Power Private

Limited vs. Shyam Metalics and Energy Limited 3 observed that even

post admission of the winding up petition, and even after the Official

Liquidator has become custodia legis and taken over the company's

assets, but so long as no actual sales of the immovable or movable

properties have taken place, nothing irreversible is done which would

warrant a Company Court staying its hands on a transfer application

and that it is only where the winding up proceedings have reached a

stage where it would be irreversible making it impossible to set the

clock back, that the Company Court must proceed with the winding up

instead of transferring the proceedings to the NCLT. The Hon'ble

2 (2021) 2 SCC 403 3 (2021 2 Supreme Court Cases 641

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Supreme Court has observed that as long as nothing irreversible is done

which would warrant a Company Court staying its hand on a transfer

application made to it by a creditor or any other party to the

proceeding, the Company Court can go ahead and transfer the said

proceedings to the NCLT. Paragraphs 23 and 24 of the decision in the

case of A. Navinchandra Steels Private Limited vs. SREI Euipment

Finance Ltd. & Others (supra) usefully quoted as under:

"23. In Kaledonia Jute and Fibres Pvt. Ltd. v. Axis Nirman and Industries Ltd., 2020 SCC OnLine SC 943 ["Kaledonia"], this Court decided as to whether a winding up proceeding in the Company Court could be transferred despite the fact that the winding up order had been passed and then been kept in abeyance. This Court, in paragraph 25 held: (SCC p.413) "25. Apart from providing for the transfer of certain types of winding up proceedings by operation of law, Section 434(1)(c) also gives a choice to the parties to those proceedings to seek a transfer of such proceedings to the NCLT. This is under the fifth proviso to Clause (c)."

The Court then went on to hold that in a winding up proceeding that has been admitted, since all creditors would be parties to such proceeding in rem, a secured creditor being such a party could, therefore, move the Company Court under the fifth proviso to Section 434(1)(c) of the Companies Act, 2013 to transfer the aforesaid proceeding to the NCLT to be tried as a proceeding under Section 7 or Section 9, as the case may be.

24. In Action Ispat & Power Pvt. Ltd. vs. Shyam, Metalics & Energy Ltd., (2021) 2 SCC 641, this Court was faced with a proceeding in which a winding up petition had been admitted by the High Court and then transferred to the NCLT to be tried as a proceeding under the IBC. After referring to the judgments in Jaipur Metals (supra), Forech (supra), and Kaledonia (supra), and after setting out various Sections dealing with winding up of companies under the Companies Act, 2013, this Court then

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held: (Action Ispat Case, SCC pp. 659 & 663-64, paras 14 and

25) "14. What becomes clear upon a reading of the three judgments of this Court is the following:

14.1. So far as transfer of winding up proceedings is concerned, the Code began tentatively by leaving proceedings relating to winding up of companies to be transferred to NCLT at a stage as may be prescribed by the Central Government.

14.2 This was done by the Transfer Rules, 2016 [Companies (Transfer of Pending Proceedings) Rules, 2016] which came into force with effect from 15.12.2016.

Rules 5 and 6 referred to three types of proceedings. Only those proceedings which are at the stage of pre-service of notice of the winding up petition stand compulsorily transferred to the NCLT.

14.3 The result therefore was that post notice and pre- admission of winding up petitions, parallel proceedings would continue under both statutes, leading to a most unsatisfactory state of affairs. This led to the introduction of the 5th proviso to section 434(1)(c) which, as has been correctly pointed out in Kaledonia [Kaledonia Jute & Fibres Pvt. Ltd. v. Axis Nirman & Industries Ltd., 2020 SCC OnLine SC 943], is not restricted to any particular stage of a winding up proceeding.

14.4 Therefore, what follows as a matter of law is that even post admission of a winding up petition, and after the appointment of a Company Liquidator to take over the assets of a company sought to be wound up, discretion is vested in the Company Court to transfer such petition to the NCLT. The question that arises before us in this case is how is such discretion to be exercised?"

xxx xxx xxx

25. Given the aforesaid scheme of winding up under Chapter XX of the Companies Act, 2013, it is clear that several stages are contemplated, with the Tribunal retaining the power to control the proceedings in a winding up petition even after it is admitted. Thus, in a winding up proceeding where the petition has not been served in terms of Rule 26 of the Companies (Court) Rules, 1959 at a pre-admission stage,

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given the beneficial result of the application of the Code, such winding up proceeding is compulsorily transferable to the NCLT to be resolved under the Code. Even post issue of notice and pre-admission, the same result would ensue. However, post admission of a winding up petition and after the assets of the company sought to be wound up become in custodia legis and are taken over by the Company Liquidator, section 290 of the Companies Act, 2013 would indicate that the Company Liquidator may carry on the business of the company, so far as may be necessary, for the beneficial winding up of the company, and may even sell the company as a going concern. So long as no actual sales of the immovable or movable properties have taken place, nothing irreversible is done which would warrant a Company Court staying its hands on a transfer application made to it by a creditor or any party to the proceedings. It is only where the winding up proceedings have reached a stage where it would be irreversible, making it impossible to set the clock back that the Company Court must proceed with the winding up, instead of transferring the proceedings to the NCLT to now be decided in accordance with the provisions of the Code. Whether this stage is reached would depend upon the facts and circumstances of each case."

8. In view of 5th proviso to Section 434(1)(c), any party or parties

to any proceedings relating to the winding up of company pending

before any Court may file an application for transfer such proceedings

and the Court may, by order, transfer such proceedings to the Tribunal

which was then to be dealt with by the Tribunal as an application for

initiation of corporate insolvency resolution process under the

Insolvency and Bankruptcy Code, 2016. It is observed from the

affidavit filed on behalf of the Official Liquidator and the submissions

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made by the learned Counsel that the Official Liquidator had handed

over possession of the registered office of the company, which was the

only property of which the Official Liquidator had taken possession, to

Edelweiss Asset Reconstruction Company Limited, pursuant to order

dated 23rd January 2018 passed in Company Application Lodging No.

606 of 2017, and that, as on the date of this application, is not in

possession of any of the properties of the company and the properties

of the company are in possession of the Applicant-creditor, who,

statedly, is an assignee of Edelweiss Asset Reconstruction Company

Limited. That, no notice inviting claims of creditors/workers etc. under

Rule 148 of the said Rules has been published. That, in the facts, no

steps have been taken by the Official Liquidator which can be said to be

irreversible, such that the winding up proceedings have to be

proceeded with by this Court. It is only where the winding up

proceedings have reached the stage where it would be irreversible,

making it impossible to set the clock back, that the Company Court

must proceed with the winding up instead of transferring the

proceedings to NCLT to be decided in accordance with the provisions of

the Insolvency and Bankruptcy Code, 2016. In the facts of this case, in

my view, there is, therefore, no question of any such irreversible stage

having reached. Moreover, as submitted by Mr.Siwach for the Petitioner

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in the winding up petition, that since the Official Liquidator has not

invited any claims from the creditors or workers of the company in

liquidation, the transfer of proceedings to the NCLT would ensure

speedier resolution of the corporate insolvency resolution process while

also allowing for a more technical consideration of issues and that

further proceedings before the NCLT allows for the creditors to be

active and final determinants of how the insolvency resolution process

would take place. This Court had also expressed apprehensions in

respect of the claims of the workmen as the Official Liquidator had not

invited any claims in respect of the creditors/workmen as per the

requirement of Rule 148 of the said Rules. Mr.Khan for the Official

Liquidator and Ms.Cheema for the Applicant have clarified that Section

53(1)(b) read with Section 15(1)(c) read with Regulations 6(2)(c) and

12(1) of the Insolvency and Bankruptcy Code, 2016 (the "IBC") would

take care of the same. Therefore, in my view, exercise of power under

the 5th proviso to Section 434(1)(c) would be appropriate.

9. Mr.Khan has submitted that this Court keep in mind the

liquidation expenses and costs of the Official Liquidator before passing

any order.

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10. Ergo, this Court is of the view that, subject to deposit of costs of

Rs.3 lacs by the Applicant with the Official Liquidator towards

liquidation costs/expenses, Company Petition No.317 of 2012 be

transferred to the NCLT, Mumbai, having jurisdiction under the

Insolvency and Bankruptcy Code, 2016, to be decided in accordance

with the provisions of the Insolvency and Bankruptcy Code, 2016.

11. Subject to deposit of costs of Rs.3 lakhs by the Applicant with

the office of the Official Liquidator, within a period of four weeks, the

Application is allowed in terms of prayer clause (a), which reads thus :

"(a) Pass an order transferring the present company petition no. 317 of 2012 to the Hon'ble National Company Law Tribunal, Mumbai having the jurisdiction to entertain the matter under Insolvency & Bankruptcy Code, 2016."

12. Subject to the above, the order of admission dated 28 th

September 2017 is recalled/revoked.

13. The Company Petition shall be treated by the NCLT as an

application for initiation of the Corporate Insolvency Resolution Process

under the Insolvency and Bankruptcy Code, 2016.

14. Till such time the NCLT, Mumbai initiates the Corporate

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Insolvency Resolution Process, the company/its directors shall not sell,

alienate, encumber, part with possession or create any third party rights

or interest in respect of any of the movable/immovable/fix assets of the

company or the monies lying in the bank accounts of the company.

15. All concerned to act on an authenticated copy of this order.