By Pooja J. Punjabi
Chartered Accountant
16.
Vivek Vijay Gupta vs. Steel Konnect (India) (P.) Ltd.
[2018] 90 taxmann.com 78 (NCLT – Ahd.)
Date of Order: 15th January, 2018
Section 31 read with section 30 and 25 of
the Insolvency and Bankruptcy Code, 2016 – NCLT does not have any power or
authority to interfere with the decision of committee of creditors in rejecting
a resolution plan submitted for its consideration.
FACTS
Financial Creditor instituted Insolvency
proceedings against S Co u/s. 7 of the Insolvency and Bankruptcy Code, 2016
(“the Code”). The appeals filed by SCo were dismissed by the National Company
Law Tribunal (“NCLT”) and subsequently by the Supreme Court. Resolution
Professional (“IRP”) was appointed and a valuation report was finalised by him
on 10.11.2017 which pegged the value of S Co at Rs. 39 crore. Promoters of S Co
submitted a resolution plan for Rs. 85 crore on 25.11.2017. In view of the
Ordinance passed by the Central Government amending section 29 of the Code, the
resolution plan submitted by the Promoters was rejected as they were not
eligible to submit a resolution plan and the Committee of Creditors (“COC”) did
not accept the same. Pursuant to an advertisement filed by the IRP an Asset
Reconstruction Company (“ARC”) filed a resolution plan for Rs. 93.42 crore
which was also rejected by the IRP. ARC filed a modified plan which was placed
before the COC and the same was also rejected by the COC.
Present application was filed by the
Promoter / Director of S Co alleging that the plan submitted by the ARC was in
compliance with the provisions of the Code and that COC had simply rejected the
plan with a remark that the same was not in compliance with the Code without
assigning any reasons even though the plan was in the interest of S Co and its
stakeholders. It was prayed that NCLT should intervene and overturn the
decision of COC which rejected the resolution plan.
HELD
NCLT observed that it has two fold powers
granted to it u/s. 31 of the Code, namely:
(i) accept the plan which is
approved by the COC; or
(ii) reject the plan which
though approved by the COC does not meet the requirements of the Code.
In case if no resolution plan is placed before
NCLT before the expiry of the Insolvency Resolution Process period or the
extended period, then NCLT is bound to pass an order for liquidation. Section
33(1)(b) of the Code gives authority to the NCLT to order liquidation in case
it rejects the resolution plan u/s. 31(2) for non-compliance of the
requirements specified therein. Therefore, even at the stage of ordering
liquidation, NCLT has no authority to consider a resolution plan that was
rejected by the COC.
It was observed that NCLT does not have any
power to sit over the judgment on resolution of COC in the rejecting the
resolution plan. The Tribunal held that it had no power to or authority to
interfere with the decision of the COC in rejecting the resolution plan.
When the information is there before the COC
regarding the non-compliance of the requirements of the Code and Regulations,
COC is perfectly justified in rejecting the resolution plan. It was held that
there were no facts and circumstances that warrant interference by NCLT in the
rejection of the resolution plan.
The IRP, in carrying out its duties,
submitted the plan which it received from the ARC before the COC. It also
brought out the fact that the same was not in accordance with the provisions
contained in the Code. The NCLT further observed that in light of the fact
pattern of this case, there was no lapse on part of the IRP in carrying out its
duties enumerated under the Code.
There was a contention raised that the
Promoters and directors of S Co (who filed the application) are persons
aggrieved or not. Since the resolution plan was in the interest of S Co and its
stakeholders, it could be said that its promoters and directors were also
aggrieved persons. However, NCLT observed that although promoters and directors
were invited to be a part of the meeting of COC they did not choose to attend
the same. Without demonstrating how the plan was beneficial to S Co and its
stakeholders it could not be held that the Promoters / directors were aggrieved
persons.
The NCLT, thus rejected the application
filed before it.
17. Bengal Chemists and Druggists Association
vs. Kalyan Chowdhury
[2018] 90 taxmann.com 112 (SC)
Date of Order: 02nd February, 2018
Section 421 read with section 433 of the
Companies Act, 2013 – Proviso to section 421(3) is peremptory in nature – Any
appeal filed after the period specified therein becomes time barred – Delay
cannot then be condoned by resorting to the provisions of Limitation Act, 1963.
FACTS
B Co being aggrieved by an order passed by
National Company Law Tribunal filed an appeal before the National Company Law
Appellate Tribunal (“NCLAT”). NCLAT dismissed the appeal on the grounds that
the same was filed 9 days after the expiry of period of limitation of 45 days
as well as further period of another 45 days. NCLAT held that the appeals were
not maintainable in lines with section 421(3) of the Companies Act, 2013 (“the
Act”).
B Co filed an application before the Supreme
Court against the order of NCLAT dismissing the appeal.
It was argued before the Supreme Court that
section 421(3) of the Act does not contain the language of section 34(3)
proviso of the Arbitration Act, 1996 which contains the words “but not
thereafter”. It was further argued that in terms of section 433 of the Act,
provisions of the Limitation Act, 1963 shall, as far as may be, apply to
Appeals before the Appellate Tribunal. Section 5 would therefore be applicable
to condone the delay beyond the period of 90 days.
HELD
The Supreme Court considered the provisions
of sections 421 and 433 of the Act. It observed that a cursory reading of
section 421(3) made it clear that the proviso provides a period of limitation
different from that provided in the Limitation Act, and also provides a further
period not exceeding 45 days only if it is satisfied that the appellant was
prevented by sufficient cause from filing the appeal within that period.
It was observed that section 433 cannot
apply because the provisions of the Limitation Act only apply “as far as may
be”. There is a special provision contained in proviso to section 421(3) and as
a corollary, section 5 of the Limitation Act cannot apply.
The Supreme
Court held that 45 days is the period of limitation, and a further period not
exceeding 45 days is provided only if sufficient cause is made out for filing
the appeal within the extended period. If the Court was to accept the argument
put forth by the Applicant, it would mean that notwithstanding that the further
period of 45 days had elapsed, the NCLAT may, if the facts so warrant, condone
the delay. This would be to render otiose the second time limit of 45 days,
which is peremptory in nature.
In coming to this conclusion, the Supreme
Court relied on its own decision in the case of Chhattisgarh SEB vs. Central
Electricity Regulatory Commission, 2010 (5) SCC 23. The Supreme Court also
distinguished the decisions which were relied upon by the counsel for B Co.
The appeal filed by B Co was thus dismissed
by the Supreme Court.
18. Prem Prakash Sethi vs. Union of India
[2018] 89 taxmann.com 234 (Delhi)
Date of Order: 10th January, 2018
Section 252 of Companies Act, 2013 read
with Condonation of Delays Scheme, 2018 – Name of company was struck-off from
the Register of Companies owing to non-compliances – Petition filed u/s. 252 was still pending before the NCLT – Directors of the
company could avail the benefit of Condonation of Delays Scheme, 2018
FACTS
S Co was in an active business and it
defaulted in making certain statutory compliances under Companies Act, 2013
(“the Act”) and requisite returns were not filed by them. Registrar of
Companies (“ROC”) believed that directors of S Co were disqualified u/s.
164(2)(a) of the Act and that S Co was disqualified u/s. 248(1) of the Act.
ROC
therefore, issued a show cause notice in March 2017 requiring S Co to show
cause as to why it was not liable to be removed from the Register of Companies.
S Co failed to respond to this notice, resulting in passing of an order of
removal of the company from the Register of Companies. S Co then invoked remedy
available u/s. 252(3) of the Act by filing a petition with the National Company
Law Tribunal (“NCLT”) praying for revival of
the company.
Director of S Co filed the present writ
petition before the High Court expressing that it was desirous of availing the
Condonation of Delays Scheme, 2018 (“CODS-2018”) but was unable to do so
because name of S Co had been struck off from the Register of Companies. It was
prayed before the High Court that they be permitted to avail the benefit of
CODS-2018, subject to the outcome of the proceedings initiated u/s. 252 of the
Act.
S Co also conceded that non-filing of
returns was a bonafide mistake on part of the company and it was stated that it
was ready to submit all the relevant documents which were required by the ROC.
HELD
The High
Court observed that S Co deserves to be fairly given an opportunity to avail
the benefit of CODS-2018 given that order striking off its name from the
Register of Companies was itself pending consideration before the NCLT.
The High Court therefore, directed S Co to
file all the requisite returns in relation to the company and submit necessary
application along with requisite charges to the ROC in order to enable it to
avail the benefits provided under the CODS-2018.
The High Court also directed NCLT to dispose
the application expeditiously given that benefit under CODS-2018 is available
only up to 31.03.2018. In the event the NCLT is unable to dispose of the appeal
within the time as requested for the reasons that are not attributable to S Co,
it was directed that the ROC shall ensure that the Scheme under CODS-2018 is
extended in respect of the directors of S Co.
The High Court held that directors of S Co
would not be deprived of the opportunity to avail the CODS-2018 only on account
of pendency of the petition before NCLT.
It was also clarified that if directors of S
Co did not avail of the CODS-2018 or file necessary documents then, in addition
to other consequences, they would also be liable for prosecution for Contempt
of Court.
Petition filed by S Co was thus allowed.
19.
Real time Interactive Media Pvt. Ltd. vs. Metro Mumbai Infradeveloper Pvt. Ltd.
[2018] 90 taxmann.com 89 (Bombay)
Date of Order: 12th January, 2018
Section 271 read with section 248 of
Companies Act, 2013 – High Court has the power to order winding up of company
although its name has been struck off from the Register of Companies.
FACTS
R Co was engaged in the business of
publishing and managing advertisements on BEST TV LED screens in the BEST buses
(BEST TV) running in Mumbai. R Co was the sole agent of BEST in respect of
airing such advertisements on BEST TV. M Co engaged R Co for displaying
advertisements on BEST TV in 1300 Non AC buses and 250 AC buses for a period of
3 months from 07.10.2011 till 07.01.2012 for a consideration of Rs. 15 lakhs
plus taxes. In terms of the agreement, R Co aired those advertisements and
raised invoices of Rs. 5,16,665 in respect of each of the months for which the
service was provided. Invoices raised also mentioned that interest would be
charged if the same were not paid on or before the due date.
M Co paid in installments a total amount of
Rs. 5 lakhs and as on 16th April, 2012 after adjusting this Rs. 5
lakhs from the total invoice of Rs. 15,49,995 there was a balance outstanding
of Rs. 10,49,995. As no payments came forth, R Co issued a statutory notice
dated 27.05.2014 to M Co. M Co did not file any reply to the statutory notice
issued to it.
R Co urged before the Court that the
registered address shown in the Company Master Data is the same address to
which notice under Rule 28 of the Companies Court (Rules), 1959 (“the Rules”)
has been sent and that is the same address which reflected even in the cause
title to which statutory notice was also sent. As on date, recent MCA website
extract indicates the status of M Co as “Strike Off”.
The Court was approached to decide whether
winding up proceedings can be initiated against a company which has been struck
off the Register of Companies.
HELD
The High Court observed that in light of the
facts it was possible to hold that the statutory notice was duly served as
required under Rule 28 of the Rules.
The High Court after examining the
provisions of section 248 of Companies Act, 2013 (“the Act”) observed that
there was nothing in section 248 which shall affect the power of the Court to
wind up a company the name of which has been struck off from the register of
companies. The effect of company notified as dissolved was that the company
shall on and from the date mentioned in the notice u/s. 248(5) of the Act cease
to operate as a company and the Certificate of Incorporation issued to it shall
be deemed to have been cancelled from such date except for the purpose of
realising the amount due to the company and for the payment or discharge of the
liabilities or obligations of the company.
The High Court held that just because the
name of the company was struck off the register u/s. 248 of the Act, the same
will not come in the way of the Court to pass an order of winding up of
company.
It was further observed that M Co neither
filed any affidavit opposing the petition nor did it reply to the statutory notice
that was duly served. The High Court had the power to order winding up on the
presumption of inability to pay the amounts claimed and not denied. The High
Court held that where no response has been made to the statutory notice, the
company runs a risk of winding up petition being allowed. By virtue of section
434 of the Companies Act, 1956 a presumption of the indebtedness could be
legitimately drawn by the court where no reply to the statutory notice was
forthcoming.
The High Court thus, ordered winding up of
M Co and proceeded to appoint Official Liquidator who would take charge of the
winding up proceedings to be carried out against M Co. _
