Point of Law: Partnership Firms - Insolvency Code as not applicable for Government Companies - Applicability of A company has a distinct identity of its own after being incorporated as a company under the Companies Act. An incorporated company has a separate identity and existence recognised under the law, as a 'juristic person'.

JUDGMENT :

Sudhanshu Dhulia, J.

Heard Mr. K.N. Choudhury, learned senior counsel for the petitioners. Also heard Mr. R.K.D. Choudhury, learned Assistant Solicitor General of India, appearing for the respondent No.1; Mr. V. Sibal, learned senior counsel, appearing for the respondent Nos.2 & 7; Mr. P.K. Roy, learned counsel, appearing for the respondent Nos.4 & 5; Mr. S. Sharma, learned standing counsel, Income Tax Department, appearing for the respondent No.6 and Ms. M. Bhattacharjee, learned Additional Senior Government, Assam, appearing for the respondent No.8.

2. This writ petition was filed by the petitioners, inter alia, challenging the constitutional validity of some of the provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “Insolvency Code”). In addition, it also sought a writ in the nature of a mandamus for declaring the provisions of the Insolvency Code as not applicable for Government Companies. During the course of his arguments, however, Mr. K.N. Choudhury, learned senior counsel for the petitioners has limited his arguments to the second prayer as referred above. i.e. a declaration that a Government Company is not amenable to the Insolvency Code.

3. The concerned Company here is a Government Company, which is called Hindustan Paper Corporation Limited, and petitioner No.1 is an Association of the employees serving in the Paper Mill of the Company at Nagaon, Assam, and the petitioner Nos.2 & 3 are the President and General Secretary of the said Association, respectively. According to the petitioners, the Nagaon Paper Mill of the Company was set up in the year 1985. Hindustan Paper Corporation Limited, is incorporated under the Indian Companies Act, 1956, and the Company was registered with the Registrar of Companies on 29.05.1970 and 100% of the share are owned by the Government of India in the name of the Hon’ble President of India. Since its inception, the Paper Mill was manufacturing writing and printing papers and was in fact running in profit for a great many years. Thereafter, it started incurring losses and it is an admitted case of the petitioners that the production of the Mill is suspended since 13.03.2017. The Members of the petitioner No.1 Association, who are employees and workers in the Company, have not received their salary since March, 2017. This Company is presently facing insolvency proceedings before the National Company Law Tribunal (NCLT).

4. In Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited, reported in (2018) 1 SCC 353, the whole purpose of bringing the Insolvency Code was discussed. The Apex Court held the Code to be a path breaking legislation and then traced its history to United Nations General Assembly Resolution of 02.12.2004, which had resolved where the Member Nations come out with a “Legislative Guide”, which would be useful both to States who do not have an effective and efficient insolvency regime and to States that are undertaking the process of review and modernization of their insolvency regimes. Then the Apex Court went on to quote provisions after provisions of the Legislative Code.

5. With this background and later with recommendations of several Committees, finally the Insolvency and Bankruptcy Code, 2016 was enacted by the Parliament in the year 2016 and was published in the Gazette of India on 28.05.2016. The purpose of the aforesaid Code is given in the Statement of Objects and Reasons of the Insolvency Code, which is as under:-

“2. The objective of the Insolvency and Bankruptcy Code, 2015 is to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the priority of payment of government dues and to establish and Insolvency and Bankruptcy Fun