Back
2018 Supreme(Del) 1999
IN THE HIGH COURT OF DELHI AT NEW DELHI
JAYANT NATH, J.
Tata Capital Financial Services Ltd. - Petitioner
Versus
Shree Shyam Pulp & Board Mills Ltd. - Respondent
CO. PET. 81 of 2014
Decided On : 13-09-2018
Advocate Appeared:
For the Petitioner: Mr. Varun Kumar, Mr. Dheeraj Pratap Deo, Ms. Avshreya P.S. Rudy
For the Respondent: Mr. Rishi Manchanda, Mr. Rajesh Rattan, Mr. Siddharth Bhatli, Mr. Harsh Kakkar, Ms. Rishith Srivastava, Mr. Akshay Goel, Ms. Priyambada Sharma
The discretion to transfer winding up proceedings to NCLT under Section 434 of the Companies Act, 2013 should consider the interests of the creditors and the assets of the company.
Headnote:
Transfer of Proceedings - Companies Act - Section 434
Fact of the Case:
UCO Bank filed CA No.741/2018 seeking to implead and CA No.742/2018 seeking transfer of the petition under section 434 of the Companies Act, 1956 to the NCLT. The respondent company owed about Rs.200 crores plus interest to UCO Bank and the consortium banks. UCO Bank sought transfer to NCLT under the Insolvency & Bankruptcy Code, 2016.
Finding of the Court:
The court found that the proceedings for winding up of the respondent company were at an initial stage, and it would be in the interest of the creditors to transfer the proceedings to NCLT for initiation of corporate insolvency resolution. UCO Bank was impleaded as a party, and the order appointing the OL as the provisional liquidator was revoked upon payment of expenses by UCO Bank.
Issues: The main issue was whether the proceedings should be transferred to NCLT under section 434 of the Companies Act, 2013.
Ratio Decidendi: The court held that the proviso to Section 434 of the Companies Act, 2013 gives discretion to transfer the winding up proceedings to NCLT. It considered the interests of the creditors and the lack of worthwhile movable assets of the respondent company in reaching its decision.
Final Decision: The court allowed the transfer of proceedings to NCLT, impleaded UCO Bank as a party, and revoked the order appointing the OL as the provisional liquidator upon payment of expenses by UCO Bank.
Jayant Nath, J.
CA Nos.741-742/2018
1. 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.
2. 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.
3. I have heard the learned counsel for the parties.
4. 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.
5. 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.
6. 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.
7.
