Board For Industrial And ... vs Raj Hans Steel Limited
2022 Latest Caselaw 4613 Jhar

       IN THE HIGH COURT OF JHARKHAND AT RANCHI

                     Company Petition No. 5 of 1999(R)

Board for Industrial and Financial Reconstruction (B.I.F.R) ..... . Petitioner
                                  Versus
Raj Hans Steel Limited                                     ..... Respondent

CORAM: HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR

For Secured Creditor         : Mr. Ashok Kumar Sinha, Advocate
                                Ms. Susmita Lal, Advocate
For Official Liquidator      : Mr. Himanshu Kumar Mehta, Advocate
                                Mrs. Manjushree Patra, Advocate
For BICICO                    : Mr. Amit Kumar Das, Advocate
                                Mr. Saurav Kumar, Advocate
                                      -------

Order No.123 /Dated: 18th November 2022

I.A No. 8030 of 2022

Proceedings in this company petition has spread over 23 years and this matter has been listed before the Court on 122 occasions.

2. Later on, I.A No.1467 of 2022 was filed by Mr. Rajiv Sachdeva, who has stepped into the shoes of the secured creditors of M/s Rajhans Steel Limited (in short, the Company in Liquidation) seeking a direction upon the Official Liquidator to hand over possession of the Company in Liquidation to him.

3. The reason how this application for direction came to be filed has its genesis in the order dated 25th June 2010 passed in I.A No.1054 of 2010 which was filed in Company Petition No.5 of 1999(R).

4. It appears that I.A No.746 of 2010 which was filed on behalf of Anjaney Ferro Alloys Limited was rejected by the Company Court by the said order.

5. The order dated 25th June 2010 reads as under:

"71. 25.06.2010 I.A No.1054 of 2010 According to the applicant it has advanced loan to the company under liquidation sometimes in the year 1998.

Mr. Umesh Prasad Singh, learned senior counsel appearing for the ex-management submitted that no such loan is reflected in the books of the accounts of the company under liquidation and at best if the applicant has got any claim it can raise it before the Official Liquidator.

Heard.

In the circumstances, this interlocutory application is 2 Company Petition No.5 of 1999(R)

rejected with a liberty to the applicant to raise claim before the Official Liquidator, if the same is maintainable.

I.A No. 1054 of 2010 stands disposed of.

I.A. Nos. 30, 1039, 2021 of 2010 and I.A No.746 of 2010 In I.A Nos.30, 1039, 2021 of 2010, have been filed by the Ex-director of the management of the company under liquidation - Mr. Rajiv Sachdeva, for stay of the winding up proceeding and for sanctioning the revival package.

I.A No.746 of 2010 has been filed on behalf of Anjaney Ferro Alloys Limited (hereinafter referred to As 'AFAL').

Heard the parties.

2. Mr. Umesh Prasad Singh, learned counsel appearing for Mr. Rajiv Sachdeva, ex-director submitted that Mr. Sachdeva has been substituted in place of the secured creditors by order dated 21.5.2010. He further submitted that it is for the management of the company to decide how to run the company in the best interest of shareholders, and that AFAL has got no locus standi to object to the sanction of the revival package, as AFAL was simply one of the bidders. He further submitted that Mr. Sachdeva is ready to negotiate and settle the dues and the value of share with BSCICO, and also the dues of the excise department about which a case is pending.

3. Mr. A.K. Das, appearing for BSCICO submitted that if the ex-management settles the said matters, BSCICO has got no objection.

4. On the other hand, Mr. Rajiv Ranjan, appearing for the AFAL submitted that his case is pending in this Court since 1999 and for about 10 years, ex-management of the company under liquidation could not revive the industry but only after the bids were offered pursuant to the sale notice published in this case by AFAL and M/s Diversified Vyapar Pvt. Ltd.(hereinafter referred to as 'DVPL'), a back door method has been adopted by DVPL for acquiring the company under liquidation which will be clear from the revival package itself, and that this has caused serious prejudice to AFAL, the other bidder.

5. In this case, pursuant to the sale notice published, AFAL and DVPL offered their bids. But, the sale/winding up proceeding was stayed on the request of ex-management on one or other ground. In the meantime, this revival package has been submitted by the ex-management which clearly shows that DVPL is on the back of the Company under Liquidation. DVPL has provided finance for setting/clearing the dues of the Bank and BSFC. The revival package is based on the finance of DVPL. It is true that the ex- management could arrange the resources from any party, but it cannot be overlooked that DVPL was one of the bidder, and therefore, it cannot be said that AFAL, the other bidder has got no locus standi to object to the revival package. Similarly, the contention of the AFAL, that DVPL is trying to acquire the company through back door method, cannot be ignored. It is also true that revival should be the first option for the Court. But it appears that in the garb of revival, DVPL is seeking to purchase the company, after offering the bid to purchase in this case.

In the circumstances, I am not inclined to sanction the revival package and this court wants to find out the best offer for purchase of the company.

Accordingly, it is ordered that this winding up proceeding will proceed. The Official Liquidator will make fresh publication for sale in terms of order dated 4.12.2009 read with 11.12.2009. The bid will be opened in Court on 13th August 2010.

3 Company Petition No.5 of 1999(R)

All these I.As. Stand disposed of.

On the request of Mr. Umesh Prasad Singh, learned counsel appearing for Mr. Sachdeva it is recorded that he objects to this order.

Let a copy of the order be handed over to the Official Liquidator."

6. This order was challenged by Mr. Rajiv Sachdeva, before the Hon'ble Supreme Court in Special Leave to Appeal (Civil) No. 27210 of 2010 which was disposed of by an order dated 4 th October 2010 in the following terms:

"Leave granted.

By consent, the matter is taken up for hearing. In view of the subsequent report of the Official Liquidator dated 5th May, 2010, the matter needs to be remitted to BIFR. After hearing the concerned parties, BIFR will decide whether the creditors of the Company have been paid off and, if so, whether the rehabilitation package proposed by the appellant is viable. The BIFR will consider and decide the matter as expeditiously as possible, preferably within three months from today.

Subject to above, the civil appeal stands disposed of. No order as to costs."

7. Thereafter different orders have been passed in the Company Petition No.5 of 1999(R) but those orders are not relevant for the purpose of taking a decision on I.A No.1467 of 2022 and I.A No.8030 of 2022.

8. I.A No.8030 of 2022 has been filed under 5th proviso to section 434 (1) (c) of the Companies Act, 2013 seeking transfer of the entire proceedings in the Company Petition No.5 of 1999(R) to the National Company Law Tribunal, Kolkata.

9. In view of I.A No.8030 of 2022, Ms. Susmita Lal, the learned counsel for the applicant states that no order is required to be passed on I.A No.1467 of 2022.

10. Ordered accordingly.

11. In I.A No.8030 of 2022, the applicant has made out a ground for transfer of the Company Petition No.5 of 1999(R) primarily in view of the law laid down by the Hon'ble Supreme Court in "Action Ispat and Power Private Limited v. Shyam Metalics and Energy Limited" (2021) 2 SCC 641.

12. The provisions under section 434 of the Companies Act, 2013 read as under:

"434. Transfer of certain pending proceedings.-- (1) On such date as may be notified by the Central Government in this behalf,--

4 Company Petition No.5 of 1999(R)

(a) all matters, proceedings or cases pending before the Board of Company Law Administration (herein in this section referred to as the Company Law Board) constituted under sub-section (1) of section 10E of the Companies Act, 1956 (1 of 1956), immediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act;

(b) any person aggrieved by any decision or order of the Company Law Board made before such date may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order:

Provided that the High Court may if it is satisfied that the appellant was prevented by sufficient cause from filing an appeal within the said period, allow it to be filed within a further period not exceeding sixty days; and

(c) all proceedings under the Companies Act, 1956 (1 of 1956), including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer.

Provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a sage as may be prescribed by the Central Government.

Provided further that any party or parties to any proceedings relating to the winding up of companies pending before any Court immediately before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (Ord. 6 of 2018), may file an application for transfer of such proceedings and the Court may by order transfer such proceedings to the Tribunal and the proceedings so transferred shall be dealt with by the Tribunal as an application for initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (31 of 2016);

Provided further that only such proceedings relating to cases other than winding-up, for which orders for allowing or otherwise of the proceedings are not reserved by the High Courts shall be transferred to the Tribunal;

Provided also that -

(i) all proceedings under the Companies Act, 1956 other than the cases relating to winding up of companies that are reserved for orders for allowing or otherwise such proceedings; or

(ii) the proceedings relating to winding up of companies which have not been transferred from the High Courts, shall be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959:

Provided also that proceedings relating to cases of voluntary winding up of a company where notice of the resolution by advertisement has been given under sub-section (1) of section 485 of the Companies Act, 1956 but the company has not been dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.

(2) The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this section."

5 Company Petition No.5 of 1999(R)

13. In "Action Ispat and Power Private Limited" the Hon'ble Supreme Court after referring to the judgments in "Swiss Ribbons Private Limited and Another v. Union of India and Others" (2019) 4 SCC 17 and in "Jaipur Metals and Electricals Employees Organization v. Jaipur Metals and Electricals Limited" (2019) 4 SCC 227 and the amendments made in the Companies Act, 2013 by the Amendment Act of 18 of 2013 held that post-admission of a winding-up petition or even after a Company Liquidator has taken over the assets of the Company, discretion is vested in the Company Court to transfer such petition to National Company Law Tribunal.

14. The test as propounded by the Hon'ble Supreme Court in "Jaipur Metals and Electricals Employees Organization" was reaffirmed in "Action Ispat and Power Private Limited" to the effect that where no irreversible steps have been taken in the proceedings before the Company Court mere taking over possession of assets of the Company in Liquidation by the Company Liquidator would not cause any legal hindrance for exercising powers under 5th proviso to section 434 (1) (c) of the Companies Act, 2013.

15. In "Action Ispat and Power Private Limited", the Hon'ble Supreme Court has held as under:

"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 proceeding 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 (supra) 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 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, 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 NCLT. The question that arises before us in this case is such discretion to be exercised?"

6 Company Petition No.5 of 1999(R)

16. There is no dispute on the aforesaid position in law but Mr. Amit Kumar Das, the learned counsel for Bihar State Credit and Investment Corporation Limited (in short, BICICO) referring to the affidavit filed by BICICO has raised an objection to I.A No.8030 of 2022, stating that this application has been filed with an oblique motive.

17. The reason for raising such a plea by BICICO appears to be a statement made on behalf of the applicant in the proceeding of the Company Petition No.5 of 1999(R), when I.A No.746 of 2010 was dealt with by the order dated 25th June 2010.

18. As would appear from the aforesaid order, on behalf of the applicant a statement was made before the Court that he is ready to negotiate and settle the dues and value of share of BICICO.

19. Mr. Amit Kumar Das, the learned counsel for BICICO, on instructions from Mr. Dilip Kumar, Special Secretary, Industries, Government of Bihar & Managing Director, BICICO who is present in the Court, states that Mr. Rajiv Sachdeva has yet not paid dues of the BICICO. This statement has been opposed by Ms. Susmita Lal, the learned counsel for the applicant stating that in lieu of loan advanced by BICICO it holds shares in the Company in Liquidation and as long as the Company is in existence BICICO shall have rights as a share-holder.

20. Having considered the rival stand taken by the parties in the present proceeding, this Court is of the opinion that inter se dispute between the parties can be addressed before the National Company Law Tribunal, Kolkata where in view of the judgment of the Hon'ble Supreme Court in "Action Ispat and Power Private Limited" the proceedings in the Company Petition No.5 of 1999(R) are required to be transferred. For making such observation, this Court has in mind that no irreversible step has been taken in the present proceeding and an application for sale of properties of the Company in Liquidation has already been dismissed by this Court vide order dated 25th June 2010.

21. Accordingly, let the entire records of the Company Petition No.5 of 1999 (R) be transferred to the National Company Law Tribunal, Kolkata within a period of four weeks through Special Messenger on deposit of cost for the same by the applicant within a week.

7 Company Petition No.5 of 1999(R)

22. I.A No. 8030 of 2022 stands allowed.

23. Company Petition No.5 of 1999(R) stands disposed of.

(Shree Chandrashekhar, J.) sudhir