Tata Capital Financial Services Ltd vs Shree Shyam Pulp & Board Mills Ltd

JAYANT NATH, J.

CA Nos.741-742/2018

CA No.741/2018 is filed by the UCO Bank seeking to implead the UCO Bank as a party in the present company petition. CA No.742/2018 is also

filed by the UCO Bank seeking transfer of this petition under section 434 of the Companies Act, 1956 to the NCLT.

The learned counsel appearing for the applicant/UCO Bank states that they come to know about the pendency of the present petition on 23.05.2018

during the pendency of the proceedings filed by the UCO Bank before the NCLT under the Insolvency Code. It is pleaded that the respondent

company was enjoying several credit facilities from different banks. There is a consortium of banks whereby the UCO Bank has taken over as the

Lead Bank in terms of Letter of Authority of the consortium member dated 21.05.2007. The respondent company is said to owe about Rs.200

crores plus interest to UCO Bank and the consortium banks in all have to recover about Rs.800 crores plus interest from the respondent company. It

has also been pleaded that the only immoveable assets/properties available with the respondent company is Factory Land and Building at Moradabad

Road, Kashipur, District Rudrapur, Uttarakhand. The immovable properties are mortgaged to the members of the consortium. Similarly, the Plant and

Machineries are hypothecated to the consortium members. Other than the said immoveable assets/properties no other moveable assets/properties are

available with the respondent company. Relying on the provisions of the Insolvency & Bankruptcy Code, 2016, it is pleaded that the applicant would

like to pursue the remedy before NCLT as the proceedings under the Insolvency Code are settled expeditiously in view of the time line stipulated in

the statutory provisions. Reliance is placed on newly added proviso in section 434 of the Companies Act that was inserted by Notification dated

06.06.2018 to submit that this matter be transferred to NCLT.

I have heard the learned counsel for the parties.Â

The learned counsel for the applicant has submitted that firstly the phrase used in the newly added proviso in section 434 of the Companies Act,

2013 states that “any party or parties to any proceedings may request for transfer of the proceedings†to the Tribunal. He submits that UCO

Bank will be covered by the phrase „any party‟. He further submits that as a precaution an application for impleadment has been filed. This court

may implead the applicant UCO Bank as a party in the present petition. He has reiterated that given the magnitude of debt owed to the consortium of

bank, it would be in the interest of the creditors that this matter is transferred to NCLT. He submits that the consortium of bank would like to try the

insolvency resolution process so that the unit of the respondent under liquidation can be sold as a running unit.

The learned counsel for the petitioner has pointed out that the applicant bank has been needlessly lethargic in the matter. The loan account of the

respondent company was declared as Non Performing Assets (in short the ‘NPA’) on 01.11.2014. He further submits that e-auction was held

by the respondent company on 10.10.2017 but no bid was received. The dues of the petitioner were originally Rs.5 crores but including the interest it is

more than Rs.10 crores now. He submits that there are no reasons to transfer the proceedings before the NCLT merely because the secured

creditors have now woken up belatedly to try and recover the dues.Â

The learned counsel for the Ex.Directors has also opposed the transfer stating that the applicant is not a party to the proceedings. It is also pointed

out that the OL was actually appointed on 07.08.2015 and this court has recently reappointed the OL as the provisional liquidator. Fresh appointment

of the OL took place on 15.05.2018 relating back to 2015. He has also stated that the respondent faced problem only after the flood affected the

area which left the unit of the respondent company crippled.Â

Learned counsel for the Official Liquidator has pointed out that the OL has filed a reply stating that they have no objection to the transfer of these

proceedings. He however submits that the OL would like to withdraw this reply and file a fresh reply opposing the transfer.

The plea of the OL is taken on record. There is no particular reason to adjourn the matter to enable the OL to file a new reply. 9.Section 434 of the

Companies Act, 2013 reads as follows:

“[434. (1) On such date as may be notified by the Central Government in this behalf,â€

(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 stage as may be

prescribed by the Central Government.

Provided further that any party or parties to any proceedings relating the winding up of companies pending before any Court immediately before the

commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 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.

(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.â€​

As per the proviso any party or parties to the proceedings relating to the winding up of companies may file an application for transfer of such

proceedings to the NCLT which will be dealt with by the Tribunal under Insolvency & Bankruptcy Code, 2016. The proviso further adds that this

court may by an order transfer the winding up proceedings to NCLT. It is clear from a reading of the proviso to Section 434 of the Companies Act,

2013 that the proviso is discretionary and it gives discretion to this court to transfer the matters. However, in my opinion, once an Official Liquidator

has been appointed as Provisional Liquidator, normally the matter would not be transferred to NCLT.

However, the present winding up petition is at an initial stage. This court on 15.05.2018 had revived the order appointing the OL as the provisional

liquidator. The order appointing the OL was originally passed on 07.08.2015 which had been put in abeyance on account of settlement between the

petitioner and, the respondent. Pursuant to this order of revival passed on 15.05.2018 the OL has taken steps and sealed the head office, as per ROC

records, which is located at A-257, Road No.6, Mahipalpur, New Delhi-110037. Regarding the Factory premises, the possession of the same has

already been taken over by the UCO Bank under the SARFAESI Act, 2002. Clearly the proceedings for winding up of the respondent company are

at an initial stage.Â

The other factor which is admitted by learned counsel for the parties is that other than the factory and land at District Rudrapur, Uttrakhand, there

is no immovable or worthwhile movable asset of the respondent company. The registered office at Mahipalpur, New Delhi is a tenanted property

which has been sealed by the OL. The landlord of the premises is seeking desealingof the suit premises.

In my opinion in the facts and circumstances of this case, it would be in the interest of the creditors that the proceedings are transferred to NCLT

and an attempt is made for initiation of corporate insolvency resolution. In case the same is successful, the same would be in the interest of creditors.

14.To overcome any objection raised by the petitioner and the exdirectors, I also allow CA No. 741/2018 and implead UCO Bank as a party to the

present company petition.Â

The order appointing the OL as the provisional liquidator initially passed on 07.08.2015 and revived on 15.05.2018 is revoked subject to UCO Bank

paying the expenses of Rs.75,000/- which has been incurred by the OL. On payment of the expenses to the OL, the order appointing the OL as the

provisional liquidator would stand revoked. Once, the orders are revoked, the proceedings may be transferred to the NCLT. UCO Bank will file with

the Registry proof of having made payment of expenses to the OL to enable the Registry of this court to initiate steps for transfer of the proceedings.

All issues are left open to be adjudicated upon by the NCLT as per law.Â

The OL will on receipt of the expenses from the applicant will also de-seal the property which was sealed at A-257, Road No.6, Mahipalpur, New

Delhi- 110037. If there any records available with the OL, the OL may keep the same, subject to further orders of the NCLT as to whom the records

are to be handed over.Â

The applications stand disposed of.

CO.PET. 81/2014

The Registry will take steps for transfer of the matter to NCLT after compliance of the conditions by the applicant as noted above.Â

Dasti.  Â