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2017 Supreme(Mad) 3381
IN THE HIGH COURT OF JUDICATURE AT MADRAS
S. MANIKUMAR, R. SURESH KUMAR, JJ.
M/s. Anandram Developers Private Limited & Another - Petitioners
Versus
The National Company Law Tribunal Represented by its Registrar Corporate Bhawan & Another - Respondents
W.P. Nos. 29084 & 29085 of 2017 W.M.P. Nos. 31321 to 31323 of 2017
Decided On : 17-11-2017
For the Petitioners:Niranjan Rajagopalan, Advocate.
Headnote:
The Insolvency and Bankruptcy Code, 2016 (Code) is a comprehensive code dealing with the matters relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation 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 order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto. The Code is a consolidating and amending act and forms a code complete in itself and is exhaustive of the matters dealt with therein. The Code is a later Parliamentary enactment and is repugnant to the earlier State enactment. The State enactment is void vis-à-vis action taken under the later Central enactment. The provisions of the Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
Fact of the Case:
The petitioners are the Directors and shareholders of a company which had borrowed money from banks and financial institutions. The company defaulted on its loan repayments and the banks and financial institutions initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The company also filed a petition under the Insolvency and Bankruptcy Code, 2016 (Code) seeking a moratorium on the proceedings under the SARFAESI Act. The National Company Law Tribunal (NCLT) admitted the company's petition and stayed the proceedings under the SARFAESI Act. The banks and financial institutions challenged the NCLT's order in the High Court.
Finding of the Court:
The High Court held that the Code is a comprehensive code dealing with the matters relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals. The Code is a consolidating and amending act and forms a code complete in itself and is exhaustive of the matters dealt with therein. The Code is a later Parliamentary enactment and is repugnant to the earlier State enactment. The State enactment is void vis-à-vis action taken under the later Central enactment. The provisions of the Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. The NCLT was therefore correct in admitting the company's petition and staying the proceedings under the SARFAESI Act.
Issues: Whether the Insolvency and Bankruptcy Code, 2016 is a comprehensive code dealing with the matters relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals.
Ratio Decidendi: The Insolvency and Bankruptcy Code, 2016 (Code) is a comprehensive code dealing with the matters relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation 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 order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto. The Code is a consolidating and amending act and forms a code complete in itself and is exhaustive of the matters dealt with therein. The Code is a later Parliamentary enactment and is repugnant to the earlier State enactment. The State enactment is void vis-à-vis action taken under the later Central enactment. The provisions of the Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
Final Decision: The High Court dismissed the banks' and financial institutions' writ petitions challenging the NCLT's order admitting the company's petition and staying the proceedings under the SARFAESI Act.
S. Manikumar, J.
1. W.P.No.29084 of 2017 has been filed for a Writ of Mandamus, forbearing M/s. Asset Reconstruction Company (India) Limited, (ARCIL), Mumbai, 2nd respondent herein, from proceeding with the Application No.603/2017 under Section 7 of Insolvency and Bankruptcy Code, 2016 before the Registrar, National Company Law Tribunal, Chennai, 1st respondent herein, pending disposal of OA filed by the 2nd respondent in O.A.29/2016 on the file of DRT-I, Chennai, and Review Application No.3 of 2017 in OA No.430/2014 on the file of DRT-II, Chennai and consideration of the One Time Settlement Proposal given by the 1st petitioner company.
2. W.P. No.29085 has been filed for a Writ of Mandamus, forbearing the Registrar, National Company Law Tribunal, Chennai, 1st respondent herein, from proceeding further with the Application filed by the M/s. Asset Reconstruction Company (India) Limited, (ARCIL), Mumbai, 2nd respondent herein, in Application No.603/2017 under Section 7 of Insolvency and Bankruptcy Code, 2016 to initiate corporate insolvency resolution process against the company pending disposal of OA filed by the 2nd respondent in O.A.29/2016 on the file of DRT-I, Chennai, and Review Application No.3 of 2017 in OA No.430/2014 on the file of DRT-II, Chennai and consideration of the One Time Settlement Proposal given by the 1st petitioner company.
3. As facts involved in both the writ petitions and the reliefs claimed are similar, they are heard together and taken up for common disposal.
4. The second petitioner is the Director of the 1st petitioner Company and he has filed the writ petitions for the relief stated supra. The company is in the business constructing commercial Mall projects including shopping complex, food court and multiplex theatres. The first petitioner Company has borrowed a Term Loan to an extent of Rs.30 crores each from M/s. Indian Overseas Bank (IOB)and M/s. Oriental Bank of Commerce (OBC) for the purpose of developing a "Multiplex Mall" at Nos.45 & 47, Arcot Road, Saligramam, Chennai in the year 2005. The cost of the said project was approximately Rs.515 crores. In addition to the Term Loan sanctioned by M/s. Indian Overseas Bank (IOB)and M/s. Oriental Bank of Commerce (OBC), the Promoters of the petitioner Company have also contributed a sum of Rs.260 crores from their resources. The first petitioner Company has approached M/s. Indian Overseas Bank (IOB) for a further fund of Rs.100 crores for completion of the said project. Though M/s. Indian Overseas Bank (IOB) initially assured them that the further fund would be sanctioned, the said bank did not extend payment to the petitioner for more than a year and finally the bank dropped the proceedings of sanctioning the said loan, without assigning any reasons. Due to the inordinate delay, on the part of M/s. Indian Overseas Bank (IOB), the project has been stalled for some time for want of further fund, which led to complications in repayment.
5. By then, the first petitioner company had repaid a sum of Rs.48.26 Crores, as against a sum of Rs.60 Crores borrowed from the banks, which establishes the bona fides of the first petitioner company in discharging their liabilities. When the first petitioner company approached the above said banking institutions for One Time Settlement (OTS) in March 2014 by offering Rs.19 Crores to M/s.Indian Overseas Bank (IOB) and Rs.21.00 Crores to M/s.Oriental Bank of Commerce (OBC), respectively, the banking institutions refused to consider the same, but immediately proceeded to assign the debt to a third party, namely, M/s.Asset Reconstruction Company (India) Limited, (ARCIL), Mumbai, 2nd respondent herein. Prior to the assignment, M/s.Indian Overseas Bank (IOB) has filed Original Application before DRT-1 in O.A.No.430/2014, under Section19(1) of Recovery of Debts Due to Bank and Financial Institution Act, 1993 on 04.06.2
