REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.3055 OF 2017
(Arising out of S.L.P.(C) No.1587 of 2015)
BANK OF NEW YORK MELLON
LONDON BRANCH ...APPELLANT
VERSUS
ZENITH INFOTECH LIMITED ...RESPONDENT
JUDGMENT
RANJAN GOGOI, J.
1. Leave granted.
2. At the very outset, it will be necessary to take note of the relevant
statutory enactments and changes that have come about after hearing of the
case had been concluded. The said enactments and the changes in the
existing enactments give rise to a somewhat altered scenario, as will be
noticed hereinafter, though essentially the core of the question that has
arisen remains substantially unaffected.
3. The Sick Industrial Companies (Special Provisions) Act, 1985
(hereinafter referred to as “the SICA”) had been repealed by the SICA
Repeal Act, 2003. However, it is only by Notification dated 25.11.2016 that
the repeal has been given effect to on and from 1.12.2016. Under Section
4(b) of the repeal Act, all proceedings before the B.I.F.R. or the
Appellate Authority, as the case may be, stood abated and in respect of
such abated proceedings provisions have been made to enable the company to
seek a reference as per provisions of Part VI-A of the Companies Act, 1956
within 180 days from the date of the repeal Act. Interestingly, the
provisions of Part VI-A of the Companies Act, 1956 which, though brought
about by the Companies (Second Amendment) Act of 2002 had/have not been
made effective. In fact, effective 1.11.2016 Section 4(b) of the Repeal Act
has been amended by Section 252 of the Insolvency and Bankruptcy Code of
2016 (hereinafter referred to as “the Code”) and provisions have been made
therein akin to those in repealed Section 4(b) except that reference by a
company in respect of an abated proceeding is to be made to the National
Company Law Tribunal within 180 days of the Code coming into force. Such a
reference is required to be dealt with in accordance with the provisions of
the Code. The code has been enacted and given effect to w.e.f. 1.12.2016.
Relevant details thereof will be noticed hereinafter.
4. At this stage, it will also be necessary to take note of the fact
that the National Company Law Tribunal envisaged under the Companies
(Second Amendment) Act of 2002 has been authorized to exercise and
discharge its powers and functions with effect from 1.6.2016 and, in fact,
the Tribunals with Benches throughout the country have since been
constituted and are presently functioning.
5. Having noticed the above position, we may now turn to the provisions
of the Insolvency and Bankruptcy Code, 2016. It is a comprehensive Code
enacted as the Preamble states, to
“consolidate and amend the laws 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”.
6. Section 3(8) defines a ‘Corporate Debtor’ to mean “a corporate person
who owes a debt to any person.”
Section 5(1) of the Code defines “Adjudicating Authority” to means the
National Company Law Tribunal constituted under Section 408 of the
Companies Act, 2013. The definition of “corporate applicant” in Section
5(5) includes a “corporate debtor.” Under Section 6, amongst others, a
“corporate debtor” who has committed a default may file an application with
the Adjudicating Authority for initiating a corporate insolvency resolution
process. Such a process may also be initiated by others, including a
financial creditor, against the corporate debtor in respect of default
committed by the corporate debtor. Under Section 7 (Explanation-1), default
includes “a default in respect of a financial debt owed not only to the
applicant financial creditor but to any other financial creditor of the
corporate debtor. Under Section 13 once the Adjudicating Authority admits
the application of the corporate applicant [defined by Section 5(5)] filed
under Section 10, the said Authority may proceed to declare a moratorium
for the purposes referred to in Section 14. Section 14 is in the following
terms:
“14(1) Subject to provisions of sub-sections (2) and (3), on the insolvency
commencement date, the Adjudicating Authority shall by order declare
moratorium for prohibiting all of the following, namely:—
the institution of suits or continuation of pending suits or proceedings
against the corporate debtor including execution of any judgment, decree or
order in any court of law, tribunal, arbitration panel or other authority;
transferring, encumbering, alienating or disposing of by the corporate
debtor any of its assets or any legal right or beneficial interest therein;
any action to foreclose, recover or enforce any security interest created
by the corporate debtor in respect of its property including any action
under the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002;
the recovery of any property by an owner or lessor where such property is
occupied by or in the possession of the corporate debtor.
(2) The supply of essential goods or services to the corporate debtor as
may be specified shall not be terminated or suspended or interrupted during
moratorium period.
(3) The provisions of sub-section (1) shall not apply to such transactions
as may be notified by the Central Government in consultation with any
financial sector regulator.
(4) The order of moratorium shall have effect from the date of such order
till the completion of the corporate insolvency resolution process:
Provided that where at any time during the corporate insolvency resolution
process period, if the Adjudicating Authority approves the resolution plan
under sub-section (1) of section 31 or passes an order for liquidation of
corporate debtor under section 33, the moratorium shall cease to have
effect from the date of such approval or liquidation order, as the case may
be.”
Section 16 of the Code visualizes the appointment of an interim resolution
professional to manage the affairs of the corporate debtor. Such
appointment is to be made by the Adjudicating Authority.
Under Section 20 of the Code, the interim resolution professional appointed
under Section 16 is to manage the operations of the corporate debtor as a
going concern and make every endeavour to protect and preserve the value of
the property. Section 25 which enumerates the duty of the resolution
professional is in the following terms:
“25(1) It shall be the duty of the resolution professional to preserve
and protect the assets of the corporate debtor, including the continued
business operations of the corporate debtor.
(2) For the purposes of sub-section (1), the resolution
professional shall undertake the following actions, namely:—
(a) take immediate custody and control of all the assets of the corporate
debtor, including the business records of the corporate debtor;
(b) represent and act on behalf of the corporate debtor with third parties,
exercise rights for the benefit of the corporate debtor in judicial, quasi-
judicial or arbitration proceedings;
(c) raise interim finances subject to the approval of the committee of
creditors under section 28;
(d) appoint accountants, legal or other professionals in the manner as
specified by Board;
(e) maintain an updated list of claims;
(f) convene and attend all meetings of the committee of creditors;
(g) prepare the information memorandum in accordance with section 29;
(h) invite prospective lenders, investors, and any other persons to put
forward resolution plans;
(i) present all resolution plans at the meetings of the committee of
creditors;
(j) file application for avoidance of transactions in accordance with
Chapter III, if any; and
(k) such other actions as may be specified by the Board.
Section 30 of the Code contemplates submission of a resolution plan and
approval thereof by the Adjudicating Authority failing which the
liquidation process of the corporate debtor as contemplated in Chapter III
of the Code would be required to be initiated.
7. The above provisions of the Code have been noticed in some detail and
the provisions thereof, so far as the same are material for the purposes of
the present case, have also been extracted and highlighted. We may now
proceed to examine and see what has happened in the present case.
8. Briefly the facts relevant are as follows.
On 23.07.2013 the respondent No. 1 company-Zenith Infotech Ltd. filed a
Reference before the Board for Industrial and Financial Reconstruction
(hereinafter for short “the Board”) under Section 15 of the SICA. The said
application was refused registration by the Registrar of the Board on
12.08.2013 on the ground that respondent No.1 company is not an industrial
company within the meaning of Section 3(e) and 3(f) of the SICA. An appeal
was filed by the respondent No. 1 company before the Secretary of the Board
against the order of Registrar which was dismissed on 13.09.2013. There
was a further appeal to the Chairman of the Board against the order of the
Secretary. Though the maintainability of the second appeal before the
Chairman of the Board would be in serious doubt in view of the provisions
of Regulation 19(4) read with sub Regulation 8 (1) and (2) of Regulation 19
of the Board for Industrial and Financial Reconstruction Regulations, 1987
(hereinafter for short “the Regulations”) it will not be necessary to deal
with the said question in the present proceedings except to state that the
Chairman of the Board also dismissed the second appeal filed by the
respondent No. 1 company by order dated 03.04.2014.
9. What would be of significance is the events that had transpired while
the matter was before the authorities of the Board, namely, the Secretary
and Chairman of the Board. It appears that on 30.07.2013 a petition for
winding up of the respondent No.1 company was admitted by the High Court of
Bombay and the order of admission was affirmed by the Division Bench in
appeal. The approach to this Court also was not successful with the
Special Leave Petition filed by the respondent No.1 company having been
dismissed on 30.09.2013. Thereafter, it appears that on 13.12.2013 the High
Court of Bombay passed orders for winding up of the respondent No. 1 which
was upheld in appeal by the Division Bench of the High Court on 23.04.2014.
Though, a stay was ordered by the High Court of its winding up order till
31.08.2014, it would appear that the High Court understood the said interim
order to have been vacated by efflux of time, in the absence of any
specific order of extension. Thereafter the Official Liquidator came to be
appointed by the High Court on 02.09.2014.
10. The orders of the Secretary and Chairman of the Board rejecting the
application for Reference filed by the Respondent No.1 company were
subjected to a challenge in a writ petition filed by the respondent-company
before the Delhi High Court out of which the present proceedings have
arisen.
11. Two questions arose before the High Court of Delhi in the writ
petition.
The first was whether the dismissal of the application for Reference by the
Registrar, Secretary and Chairman of the Board was within the jurisdiction
of the said authorities. The second question, which was implicit if there
was to be a positive answer to the first, is whether in view of the order
of winding up passed by the Company Court, and affirmed by the Division
Bench of the Bombay High Court, there is any further scope for registration
of the Reference sought for by the respondent No. 1 company under the
provisions of the SICA if the order declining registration by the aforesaid
authorities is to be understood to be non est.
12. The High Court, by the impugned order, took the view that under the
provisions of the SICA read with the Regulations, the Registrar and the
other authorities like the Secretary and the Chairman of the Board have not
been conferred any power of adjudication which would necessarily be
involved in determining the question as to whether the respondent No.1
company is an industrial company within the meaning of Section 3(e) and
3(f) of the SICA. Since an adjudicatory function and role has been
performed by the Registrar, whose order has been affirmed by the Secretary
and the Chairman of the Board and as registration of the Reference sought
for by the respondent No. 1 company was refused on that basis the said
orders are non est in law. Regarding the second question, the High Court
of Delhi relying on the decisions of this Court in Real Value Appliances
Ltd. Vs. Canara Bank and Others[1] and Rishabh Agro Industries Ltd. Vs.
P.N.B. Capital Services Ltd.[2] came to the conclusion that the winding up
order passed by the Company Court would not foreclose the proceedings under
the SICA and registration of a Reference under Section 15 and the inquiry
under Section 16 can still be made. The question that was agitated in the
present appeal is consequential to the above determination and revolve
around the application of Section 22 of SICA to bar further steps in the
winding up proceeding before the High Court. The above question would no
longer survive in the context of the provisions of the now repealed Act but
would still require an answer from the stand point of the provisions of the
Insolvency and Bankruptcy Code in force with effect from 1.12.2016.
13. The first question, namely, the one with regard to the power and
jurisdiction of the Registrar and Secretary to refuse registration of the
application for reference made by the respondent company on the grounds
mentioned above may now be taken up. To answer the aforesaid question, the
following provisions of SICA may be noticed:
“3. Definitions.—
In this Act, unless the context otherwise requires,—
(e) “industrial company” means a company which owns one or more
industrial undertakings;
(f) “industrial undertaking” means any undertaking pertaining to a
scheduled industry carried on in one or more factories by any company but
does not include-
any ancillary industrial undertaking as defined in clause (aa) of Section 3
of the Industries (Development and Regulation) Act, 1951 (65 of 1951); and
a small scale industrial undertaking as defined in clause (j) of the
aforesaid section 3;
(n) “scheduled industry” means any of the industries specified for the
time being in the First Schedule to the Industries (Development and
Regulation) Act, 1951 (65 of 1951);
12. Constitution of Benches of Board or Appellate Authority.—
(1) The jurisdiction, powers and authority of the Board or the Appellate
Authority may be exercised by Benches thereof.
(2) The Benches shall be constituted by the Chairman and each Bench shall
consist of not less than two Members.
(3) If the Members of a Bench differ in opinion on any point, the point
shall be decided according to the opinion of the majority, if there is a
majority, but if the Members are equally divided, they shall state the
point or points on which they differ, and make a reference to the Chairman
of the Board or, as the case may be, the Appellate Authority who shall
either hear the point or points himself or refer the case for hearing on
such point or points by one or more of the other Members and such point or
points shall be decided according to the opinion of the majority of the
Members who have heard the case including those who first heard it.
13. Procedure of Board and Appellate Authority.—
(1) Subject to the provisions of this Act, the Board or, as the case may
be, the Appellate Authority, shall have powers to regulate—
(a) the procedure and conduct of the business;
(b) the procedure of the Benches, including the places at which the
sittings of the Benches shall be held;
(c) the delegation to one or more Members of such powers or functions as
the Board or, as the case may be, the Appellate Authority may specify.
(2) In particular and without prejudice to the generality of the foregoing
provisions, the powers of the Board or, as the case may be, the Appellate
Authority, shall include the power to determine the extent to which persons
interested or claiming to be interested in the subject-matter of any
proceeding before it may be allowed to be present or to be heard, either by
themselves or by their representatives or to cross-examine witnesses or
otherwise to take part in the proceedings.
(3) The Board or the Appellate Authority shall, for the purposes of any
inquiry or for any other purpose under this Act, have the same powers as
are vested in a civil court under the Code of Civil Procedure, 1908 (5 of
1908) while trying suits in respect of the following matters, namely:—
the summoning and enforcing the attendance of any witness and examining him
on oath;
the discovery and production of document or other material object
producible as evidence;
(c) the reception of evidence on affidavit;
(d) the requisitioning of any public record from any court or office;
(e) the issuing of any commission for the examination of witnesses;
(f) any other matter which may be prescribed.
14. Proceedings before Board or Appellate Authority to be judicial
proceedings.—
The Board or the Appellate Authority shall be deemed to be a civil court
for the purposes of section 195 and Chapter XXVI of the Code of Criminal
Procedure, 1973 (2 of 1974) and every proceeding before the Board or the
Appellate Authority shall be deemed to be a judicial proceeding within the
meaning of sections 193 and 228 and for the purposes of section 196 of the
Indian Penal Code (45 of 1860).
15. Reference to Board.—
(1) When an industrial company has become a sick industrial company, the
Board of Directors of the company, shall, within sixty days from the date
of finalisation of the duly audited accounts of the company for the
financial year as at the end of which the company has become a sick
industrial company, make a reference to the Board for determination of the
measures which shall be adopted with respect to the company: Provided that
..... ..... ..... “
14. In addition, Section 16 deals with the inquiry to be made by the
Board for determining whether an industrial company has become sick,
whereas Section 17 deals with the power of the Board to make suitable
orders on completion of inquiry.
15. Under Section 13 of the SICA the Board has enacted a set of
Regulations, namely, the Board for Industrial and Financial Reconstruction
Regulations, 1987. Chapter II of the Regulations deals with References
sought under Section 15 of the Act (SICA) and contains provisions as to how
such References are required to be made and dealt with. Regulation 19
would need to be extracted to show what is contemplated to be the role of
the Registrar and the Secretary on receipt of a Reference. The said
provision therefore is extracted below.
“19.(1) Every reference to the Board under sub-section (1) of section 15
shall be made—
(i) in Form A in respect of an industrial company other than a Government
Company;
(ii)in Form AA in respect of a Government Company,]
and shall be accompanied by five further copies thereof alongwith four
copies each of all the enclosures thereto.
[(2) Every reference to the Board under sub-section (2) of section 15 shall
be made—
(i) in Form B in respect of an industrial company other than a Government
Company;
(ii)in Form BB in respect of a Government Company,]
and shall be accompanied by five further copies thereof alongwith four
copies each of all the enclosures thereto.
(3) A reference may be filed either by delivering it at the office of the
Board or by sending it by registered post.
[(4) On receipt of a reference, the Secretary, or as the case may be, the
Registrar shall cause to be endorsed on each reference, the date on which
it is filed or received in the office of the Board.
(5) If on scrutiny, the reference is found to be in order, it shall be
registered, assigned a serial number and submitted to the Chairman or
assigning it to a Bench. Simultaneously, remaining information/ documents
required, if any, shall be called for from the informant.
(6) If on scrutiny, the reference is not found to be in order, the
Secretary or, as the case may be, the Registrar may, by order, decline to
register the reference and shall communicate the same to the informant.
(7) A reference declined to be registered shall be deemed not to have been
made.]
(8) (1) An appeal against the order of the Registrar declining to register
a reference shall be made by the aggrieved person to the Secretary within
fifteen days of communication to him of such an order.
(2) An appeal against the order of the Secretary declining to register a
reference shall be made by the aggrieved person to the Chairman within
fifteen days of communication to him of such an order and the Chairman's
decision thereon shall be final.”
16. From the provisions of Regulation 19(5) it would appear that on
receipt of a Reference under Regulation 19(4) the Secretary or the
Registrar, as may be, after making an endorsement of the date on which the
same has been received in the office of the Board is required to make a
scrutiny and, thereafter, if found to be in order, to register the same;
assign a serial number thereto and place the same before the Chairman for
being assigned to a Bench. After completion of the aforesaid exercise
under Regulation 19(5) the later part of the said Regulation contemplates
that simultaneously, remaining information/documents required, if any, may
be called for from the applicant. Regulation 20 contained in Chapter III
and Regulation 21 contained in Chapter IV deal with the manner in which the
proceedings of inquiry after registration of the Reference is to be made.
17. Regulation 19(5) extracted above, requires the Registrar or the
Secretary, as may be, to make an endorsement of the date of receipt of the
Reference [Regulation 19(4)] and thereafter on scrutiny thereof to register
the same and place before the Chairman for being referred to the Bench.
When the Regulations framed under the statute vests in the Registrar or the
Secretary of the Board the power to “scrutinize” an application prior to
registration thereof and thereafter to register and place the same before
the Bench, we do not see how such power of scrutiny can be understood to be
vesting in any of the said authorities the power to adjudicate the question
as to whether a company is an industrial company within the meaning of
Section 3(e) read with 3(f) and 3(n) of the SICA. A claim to come within
the ambit of the aforesaid provisions of the SICA i.e. to be an industrial
company, more often than not, would be a contentious issue. In the present
case, it certainly was. The specific stand of the respondent No. 1 company
in this regard need not detain the Court save and except to state that by a
detailed description of the manufacturing process the respondent No. 1
company had sought to contend that it is an industrial company. Surely,
the rejection of the above stand could have been made only by a process of
adjudication which power and jurisdiction clearly and undoubtedly is vested
by the SICA and the Regulations framed thereunder in a Bench of the Board
and not in authorities like the Registrar and the Secretary. In this
regard, one can only be reminded of the observations made by this Court in
paras 13 and 14 in the case of Jamal Uddin Ahmad Vs. Abu Saleh Najmuddin
and Another[3] which may be extracted below.
“13. The functions discharged by a High Court can be divided broadly into
judicial and administrative functions. The judicial functions are to be
discharged essentially by the Judges as per the Rules of the Court and
cannot be delegated. However, administrative functions need not necessarily
be discharged by the Judges by themselves, whether individually or
collectively or in a group of two or more, and may be delegated or
entrusted by authorization to subordinates unless there be some rule of law
restraining such delegation or authorization. Every High Court consists of
some administrative and ministerial staff which is as much a part of the
High Court as an institution and is meant to be entrusted with the
responsibility of discharging administrative and ministerial functions.
There can be “delegation” as also there can be “authorization” in favour of
the Registry and the officials therein by empowering or entrusting them
with authority or by permitting a few things to be done by them for and on
behalf of the Court so as to aid the Judges in discharge of their judicial
functioning. Authorization may take the form of formal conferral or
sanction or may be by way of approval or countenance. Such delegation or
authorization is not a matter of mere convenience but a necessity at times.
The Judges are already overburdened with the task of performing judicial
functions and the constraints on their time and energy are so demanding
that it is in public interest to allow them to devote time and energy as
much as possible in discharging their judicial functions, relieving them of
the need for diverting their limited resources of time and energy to such
administrative or ministerial functions, which, on any principle of
propriety, logic, or necessity are not required necessarily to be performed
by the Judges. Receiving a cause or a document and making it presentable to
a Judge for the purpose of hearing or trial and many a functions post-
decision, which functions are administrative and ministerial in nature, can
be and are generally entrusted or made over to be discharged by the staff
of the High Court, often by making a provision in the Rules or under the
orders of the Chief Justice or by issuing practice directions, and at
times, in the absence of rules, by sheer practice. The practice gathers the
strength of law and the older the practice the greater is the strength. The
Judges rarely receive personally any document required to be presented to
the Court. Plaints, petitions, memoranda or other documents required to be
presented to the Court are invariably received by the administrative or
ministerial staff, who would also carry out a preliminary scrutiny of such
documents so as to find that they are in order and then make the documents
presentable to the Judge, so that the valuable time of the Judge is not
wasted over such matters as do not need to be dealt with personally by the
Judge.
14. The judicial function entrusted to a Judge is inalienable and differs
from an administrative or ministerial function which can be delegated or
performance whereof may be secured through authorization.
“The judicial function consists in the interpretation of the law and its
application by rule or discretion to the facts of particular cases. This
involves the ascertainment of facts in dispute according to the law of
evidence. The organs which the State sets up to exercise the judicial
function are called courts of law or courts of justice. Administration
consists of the operations, whatever their intrinsic nature may be, which
are performed by administrators; and administrators are all State officials
who are neither legislators nor judges.”
(See Constitutional and Administrative Law, Phillips and Jackson, 6th Edn.,
p. 13.) P. Ramanatha Aiyar’s Law Lexicon defines judicial function as the
doing of something in the nature of or in the course of an action in court.
(p. 1015) The distinction between “judicial” and “ministerial acts” is:
If a Judge dealing with a particular matter has to exercise his discretion
in arriving at a decision, he is acting judicially; if on the other hand,
he is merely required to do a particular act and is precluded from entering
into the merits of the matter, he is said to be acting ministerially. (pp.
1013-14)
Judicial function is exercised under legal authority to decide on the
disputes, after hearing the parties, maybe after making an enquiry, and the
decision affects the rights and obligations of the parties. There is a duty
to act judicially. The Judge may construe the law and apply it to a
particular state of facts presented for the determination of the
controversy. A ministerial act, on the other hand, may be defined to be one
which a person performs in a given state of facts, in a prescribed manner,
in obedience to the mandate of a legal authority, without regard to, or the
exercise of, his own judgment upon the propriety of the act done. (Law
Lexicon, ibid., p. 1234). In ministerial duty nothing is left to
discretion; it is a simple, definite duty. Presentation of election
petition to the High Court within the meaning of Section 81 of the Act
without anything more would mean delivery of election petition to the High
Court through one of its officers competent or authorized to receive the
same on behalf of and for the High Court. Receiving an election petition
presented under Section 81 of the Act is certainly not a judicial function
which needs to be performed by a Judge alone. There is no discretion in
receiving an election petition. An election petition, when presented, has
to be received. It is a simple, definite duty. The date and time of
presentation and the name of the person who presented (with such other
particulars as may be prescribed) are to be endorsed truly and mechanically
on the document presented. It is a ministerial function simpliciter. It can
safely be left to be performed by one of the administrative or ministerial
staff of the High Court which is as much a part of the High Court. It may
be delegated or be performed through someone authorized. The manner of
authorization is not prescribed.”
18. The High Court, in view of what has been discussed above, was correct
in coming to the conclusion that the refusal of registration of the
reference sought by the respondent Company by the Registrar,
Secretary/Chairman of the Board was non-est in law. The reference must,
therefore, understood to be pending before the Board on the relevant date
attracting the provisions of Section 252 of the Insolvency and Bankruptcy
Code.
19. The second question arising before the High Court, namely, whether
the reference before the Board stood foreclosed by the order of winding up
of the respondent Company and the appointment of liquidator was answered
in the negative relying on Real Value Appliances Ltd. (supra) and Rishab
Agro Industries Ltd. (supra). The core principles laid down in the said
decisions of the Court, namely, that immediately on registration of a
reference under Section 15 of the erstwhile SICA, the enquiry under Section
16 is deemed to have commenced and that the winding up proceedings against
a company stood terminated only after orders under Section 481 of the
Companies Act, 1956, are passed, will have to be noticed to adjudge the
correctness of the said view of the High Court. In any event, the aforesaid
question becomes redundant in view of our conclusion that the reference
sought by the respondent Company must be deemed to have been pending on the
date of commencement of the Insolvency and Bankruptcy Code, particularly,
Section 252 thereof (effective 1.11.2016).
20. We, therefore, dispose of the appeal by holding that it would still
be open to the respondent Company to seek its remedies under the provisions
of Section 252 of the Code read with what is laid down in Sections 13, 14,
20 and 25. We make it clear that we should not be understood to have
expressed any opinion on the scope and meaning of the said or any other
provisions of the Code and the adjudicating authority i.e. National Company
Law Tribunal would be free and, in fact, required to decide on the said
questions in such manner as may be considered appropriate.
21. Appeal, consequently, is disposed of accordingly.
....................,J.
(RANJAN GOGOI)
....................,J.
(ABHAY MANOHAR SAPRE)
NEW DELHI
FEBRUARY 21, 2017.
-----------------------
[1] [2] (1998) 5 SCC 554
[3] [4] (2000) 5 SCC 515
[5] [6] (2003) 4 SCC 257
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.3055 OF 2017
(Arising out of S.L.P.(C) No.1587 of 2015)
BANK OF NEW YORK MELLON
LONDON BRANCH ...APPELLANT
VERSUS
ZENITH INFOTECH LIMITED ...RESPONDENT
JUDGMENT
RANJAN GOGOI, J.
1. Leave granted.
2. At the very outset, it will be necessary to take note of the relevant
statutory enactments and changes that have come about after hearing of the
case had been concluded. The said enactments and the changes in the
existing enactments give rise to a somewhat altered scenario, as will be
noticed hereinafter, though essentially the core of the question that has
arisen remains substantially unaffected.
3. The Sick Industrial Companies (Special Provisions) Act, 1985
(hereinafter referred to as “the SICA”) had been repealed by the SICA
Repeal Act, 2003. However, it is only by Notification dated 25.11.2016 that
the repeal has been given effect to on and from 1.12.2016. Under Section
4(b) of the repeal Act, all proceedings before the B.I.F.R. or the
Appellate Authority, as the case may be, stood abated and in respect of
such abated proceedings provisions have been made to enable the company to
seek a reference as per provisions of Part VI-A of the Companies Act, 1956
within 180 days from the date of the repeal Act. Interestingly, the
provisions of Part VI-A of the Companies Act, 1956 which, though brought
about by the Companies (Second Amendment) Act of 2002 had/have not been
made effective. In fact, effective 1.11.2016 Section 4(b) of the Repeal Act
has been amended by Section 252 of the Insolvency and Bankruptcy Code of
2016 (hereinafter referred to as “the Code”) and provisions have been made
therein akin to those in repealed Section 4(b) except that reference by a
company in respect of an abated proceeding is to be made to the National
Company Law Tribunal within 180 days of the Code coming into force. Such a
reference is required to be dealt with in accordance with the provisions of
the Code. The code has been enacted and given effect to w.e.f. 1.12.2016.
Relevant details thereof will be noticed hereinafter.
4. At this stage, it will also be necessary to take note of the fact
that the National Company Law Tribunal envisaged under the Companies
(Second Amendment) Act of 2002 has been authorized to exercise and
discharge its powers and functions with effect from 1.6.2016 and, in fact,
the Tribunals with Benches throughout the country have since been
constituted and are presently functioning.
5. Having noticed the above position, we may now turn to the provisions
of the Insolvency and Bankruptcy Code, 2016. It is a comprehensive Code
enacted as the Preamble states, to
“consolidate and amend the laws 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”.
6. Section 3(8) defines a ‘Corporate Debtor’ to mean “a corporate person
who owes a debt to any person.”
Section 5(1) of the Code defines “Adjudicating Authority” to means the
National Company Law Tribunal constituted under Section 408 of the
Companies Act, 2013. The definition of “corporate applicant” in Section
5(5) includes a “corporate debtor.” Under Section 6, amongst others, a
“corporate debtor” who has committed a default may file an application with
the Adjudicating Authority for initiating a corporate insolvency resolution
process. Such a process may also be initiated by others, including a
financial creditor, against the corporate debtor in respect of default
committed by the corporate debtor. Under Section 7 (Explanation-1), default
includes “a default in respect of a financial debt owed not only to the
applicant financial creditor but to any other financial creditor of the
corporate debtor. Under Section 13 once the Adjudicating Authority admits
the application of the corporate applicant [defined by Section 5(5)] filed
under Section 10, the said Authority may proceed to declare a moratorium
for the purposes referred to in Section 14. Section 14 is in the following
terms:
“14(1) Subject to provisions of sub-sections (2) and (3), on the insolvency
commencement date, the Adjudicating Authority shall by order declare
moratorium for prohibiting all of the following, namely:—
the institution of suits or continuation of pending suits or proceedings
against the corporate debtor including execution of any judgment, decree or
order in any court of law, tribunal, arbitration panel or other authority;
transferring, encumbering, alienating or disposing of by the corporate
debtor any of its assets or any legal right or beneficial interest therein;
any action to foreclose, recover or enforce any security interest created
by the corporate debtor in respect of its property including any action
under the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002;
the recovery of any property by an owner or lessor where such property is
occupied by or in the possession of the corporate debtor.
(2) The supply of essential goods or services to the corporate debtor as
may be specified shall not be terminated or suspended or interrupted during
moratorium period.
(3) The provisions of sub-section (1) shall not apply to such transactions
as may be notified by the Central Government in consultation with any
financial sector regulator.
(4) The order of moratorium shall have effect from the date of such order
till the completion of the corporate insolvency resolution process:
Provided that where at any time during the corporate insolvency resolution
process period, if the Adjudicating Authority approves the resolution plan
under sub-section (1) of section 31 or passes an order for liquidation of
corporate debtor under section 33, the moratorium shall cease to have
effect from the date of such approval or liquidation order, as the case may
be.”
Section 16 of the Code visualizes the appointment of an interim resolution
professional to manage the affairs of the corporate debtor. Such
appointment is to be made by the Adjudicating Authority.
Under Section 20 of the Code, the interim resolution professional appointed
under Section 16 is to manage the operations of the corporate debtor as a
going concern and make every endeavour to protect and preserve the value of
the property. Section 25 which enumerates the duty of the resolution
professional is in the following terms:
“25(1) It shall be the duty of the resolution professional to preserve
and protect the assets of the corporate debtor, including the continued
business operations of the corporate debtor.
(2) For the purposes of sub-section (1), the resolution
professional shall undertake the following actions, namely:—
(a) take immediate custody and control of all the assets of the corporate
debtor, including the business records of the corporate debtor;
(b) represent and act on behalf of the corporate debtor with third parties,
exercise rights for the benefit of the corporate debtor in judicial, quasi-
judicial or arbitration proceedings;
(c) raise interim finances subject to the approval of the committee of
creditors under section 28;
(d) appoint accountants, legal or other professionals in the manner as
specified by Board;
(e) maintain an updated list of claims;
(f) convene and attend all meetings of the committee of creditors;
(g) prepare the information memorandum in accordance with section 29;
(h) invite prospective lenders, investors, and any other persons to put
forward resolution plans;
(i) present all resolution plans at the meetings of the committee of
creditors;
(j) file application for avoidance of transactions in accordance with
Chapter III, if any; and
(k) such other actions as may be specified by the Board.
Section 30 of the Code contemplates submission of a resolution plan and
approval thereof by the Adjudicating Authority failing which the
liquidation process of the corporate debtor as contemplated in Chapter III
of the Code would be required to be initiated.
7. The above provisions of the Code have been noticed in some detail and
the provisions thereof, so far as the same are material for the purposes of
the present case, have also been extracted and highlighted. We may now
proceed to examine and see what has happened in the present case.
8. Briefly the facts relevant are as follows.
On 23.07.2013 the respondent No. 1 company-Zenith Infotech Ltd. filed a
Reference before the Board for Industrial and Financial Reconstruction
(hereinafter for short “the Board”) under Section 15 of the SICA. The said
application was refused registration by the Registrar of the Board on
12.08.2013 on the ground that respondent No.1 company is not an industrial
company within the meaning of Section 3(e) and 3(f) of the SICA. An appeal
was filed by the respondent No. 1 company before the Secretary of the Board
against the order of Registrar which was dismissed on 13.09.2013. There
was a further appeal to the Chairman of the Board against the order of the
Secretary. Though the maintainability of the second appeal before the
Chairman of the Board would be in serious doubt in view of the provisions
of Regulation 19(4) read with sub Regulation 8 (1) and (2) of Regulation 19
of the Board for Industrial and Financial Reconstruction Regulations, 1987
(hereinafter for short “the Regulations”) it will not be necessary to deal
with the said question in the present proceedings except to state that the
Chairman of the Board also dismissed the second appeal filed by the
respondent No. 1 company by order dated 03.04.2014.
9. What would be of significance is the events that had transpired while
the matter was before the authorities of the Board, namely, the Secretary
and Chairman of the Board. It appears that on 30.07.2013 a petition for
winding up of the respondent No.1 company was admitted by the High Court of
Bombay and the order of admission was affirmed by the Division Bench in
appeal. The approach to this Court also was not successful with the
Special Leave Petition filed by the respondent No.1 company having been
dismissed on 30.09.2013. Thereafter, it appears that on 13.12.2013 the High
Court of Bombay passed orders for winding up of the respondent No. 1 which
was upheld in appeal by the Division Bench of the High Court on 23.04.2014.
Though, a stay was ordered by the High Court of its winding up order till
31.08.2014, it would appear that the High Court understood the said interim
order to have been vacated by efflux of time, in the absence of any
specific order of extension. Thereafter the Official Liquidator came to be
appointed by the High Court on 02.09.2014.
10. The orders of the Secretary and Chairman of the Board rejecting the
application for Reference filed by the Respondent No.1 company were
subjected to a challenge in a writ petition filed by the respondent-company
before the Delhi High Court out of which the present proceedings have
arisen.
11. Two questions arose before the High Court of Delhi in the writ
petition.
The first was whether the dismissal of the application for Reference by the
Registrar, Secretary and Chairman of the Board was within the jurisdiction
of the said authorities. The second question, which was implicit if there
was to be a positive answer to the first, is whether in view of the order
of winding up passed by the Company Court, and affirmed by the Division
Bench of the Bombay High Court, there is any further scope for registration
of the Reference sought for by the respondent No. 1 company under the
provisions of the SICA if the order declining registration by the aforesaid
authorities is to be understood to be non est.
12. The High Court, by the impugned order, took the view that under the
provisions of the SICA read with the Regulations, the Registrar and the
other authorities like the Secretary and the Chairman of the Board have not
been conferred any power of adjudication which would necessarily be
involved in determining the question as to whether the respondent No.1
company is an industrial company within the meaning of Section 3(e) and
3(f) of the SICA. Since an adjudicatory function and role has been
performed by the Registrar, whose order has been affirmed by the Secretary
and the Chairman of the Board and as registration of the Reference sought
for by the respondent No. 1 company was refused on that basis the said
orders are non est in law. Regarding the second question, the High Court
of Delhi relying on the decisions of this Court in Real Value Appliances
Ltd. Vs. Canara Bank and Others[1] and Rishabh Agro Industries Ltd. Vs.
P.N.B. Capital Services Ltd.[2] came to the conclusion that the winding up
order passed by the Company Court would not foreclose the proceedings under
the SICA and registration of a Reference under Section 15 and the inquiry
under Section 16 can still be made. The question that was agitated in the
present appeal is consequential to the above determination and revolve
around the application of Section 22 of SICA to bar further steps in the
winding up proceeding before the High Court. The above question would no
longer survive in the context of the provisions of the now repealed Act but
would still require an answer from the stand point of the provisions of the
Insolvency and Bankruptcy Code in force with effect from 1.12.2016.
13. The first question, namely, the one with regard to the power and
jurisdiction of the Registrar and Secretary to refuse registration of the
application for reference made by the respondent company on the grounds
mentioned above may now be taken up. To answer the aforesaid question, the
following provisions of SICA may be noticed:
“3. Definitions.—
In this Act, unless the context otherwise requires,—
(e) “industrial company” means a company which owns one or more
industrial undertakings;
(f) “industrial undertaking” means any undertaking pertaining to a
scheduled industry carried on in one or more factories by any company but
does not include-
any ancillary industrial undertaking as defined in clause (aa) of Section 3
of the Industries (Development and Regulation) Act, 1951 (65 of 1951); and
a small scale industrial undertaking as defined in clause (j) of the
aforesaid section 3;
(n) “scheduled industry” means any of the industries specified for the
time being in the First Schedule to the Industries (Development and
Regulation) Act, 1951 (65 of 1951);
12. Constitution of Benches of Board or Appellate Authority.—
(1) The jurisdiction, powers and authority of the Board or the Appellate
Authority may be exercised by Benches thereof.
(2) The Benches shall be constituted by the Chairman and each Bench shall
consist of not less than two Members.
(3) If the Members of a Bench differ in opinion on any point, the point
shall be decided according to the opinion of the majority, if there is a
majority, but if the Members are equally divided, they shall state the
point or points on which they differ, and make a reference to the Chairman
of the Board or, as the case may be, the Appellate Authority who shall
either hear the point or points himself or refer the case for hearing on
such point or points by one or more of the other Members and such point or
points shall be decided according to the opinion of the majority of the
Members who have heard the case including those who first heard it.
13. Procedure of Board and Appellate Authority.—
(1) Subject to the provisions of this Act, the Board or, as the case may
be, the Appellate Authority, shall have powers to regulate—
(a) the procedure and conduct of the business;
(b) the procedure of the Benches, including the places at which the
sittings of the Benches shall be held;
(c) the delegation to one or more Members of such powers or functions as
the Board or, as the case may be, the Appellate Authority may specify.
(2) In particular and without prejudice to the generality of the foregoing
provisions, the powers of the Board or, as the case may be, the Appellate
Authority, shall include the power to determine the extent to which persons
interested or claiming to be interested in the subject-matter of any
proceeding before it may be allowed to be present or to be heard, either by
themselves or by their representatives or to cross-examine witnesses or
otherwise to take part in the proceedings.
(3) The Board or the Appellate Authority shall, for the purposes of any
inquiry or for any other purpose under this Act, have the same powers as
are vested in a civil court under the Code of Civil Procedure, 1908 (5 of
1908) while trying suits in respect of the following matters, namely:—
the summoning and enforcing the attendance of any witness and examining him
on oath;
the discovery and production of document or other material object
producible as evidence;
(c) the reception of evidence on affidavit;
(d) the requisitioning of any public record from any court or office;
(e) the issuing of any commission for the examination of witnesses;
(f) any other matter which may be prescribed.
14. Proceedings before Board or Appellate Authority to be judicial
proceedings.—
The Board or the Appellate Authority shall be deemed to be a civil court
for the purposes of section 195 and Chapter XXVI of the Code of Criminal
Procedure, 1973 (2 of 1974) and every proceeding before the Board or the
Appellate Authority shall be deemed to be a judicial proceeding within the
meaning of sections 193 and 228 and for the purposes of section 196 of the
Indian Penal Code (45 of 1860).
15. Reference to Board.—
(1) When an industrial company has become a sick industrial company, the
Board of Directors of the company, shall, within sixty days from the date
of finalisation of the duly audited accounts of the company for the
financial year as at the end of which the company has become a sick
industrial company, make a reference to the Board for determination of the
measures which shall be adopted with respect to the company: Provided that
..... ..... ..... “
14. In addition, Section 16 deals with the inquiry to be made by the
Board for determining whether an industrial company has become sick,
whereas Section 17 deals with the power of the Board to make suitable
orders on completion of inquiry.
15. Under Section 13 of the SICA the Board has enacted a set of
Regulations, namely, the Board for Industrial and Financial Reconstruction
Regulations, 1987. Chapter II of the Regulations deals with References
sought under Section 15 of the Act (SICA) and contains provisions as to how
such References are required to be made and dealt with. Regulation 19
would need to be extracted to show what is contemplated to be the role of
the Registrar and the Secretary on receipt of a Reference. The said
provision therefore is extracted below.
“19.(1) Every reference to the Board under sub-section (1) of section 15
shall be made—
(i) in Form A in respect of an industrial company other than a Government
Company;
(ii)in Form AA in respect of a Government Company,]
and shall be accompanied by five further copies thereof alongwith four
copies each of all the enclosures thereto.
[(2) Every reference to the Board under sub-section (2) of section 15 shall
be made—
(i) in Form B in respect of an industrial company other than a Government
Company;
(ii)in Form BB in respect of a Government Company,]
and shall be accompanied by five further copies thereof alongwith four
copies each of all the enclosures thereto.
(3) A reference may be filed either by delivering it at the office of the
Board or by sending it by registered post.
[(4) On receipt of a reference, the Secretary, or as the case may be, the
Registrar shall cause to be endorsed on each reference, the date on which
it is filed or received in the office of the Board.
(5) If on scrutiny, the reference is found to be in order, it shall be
registered, assigned a serial number and submitted to the Chairman or
assigning it to a Bench. Simultaneously, remaining information/ documents
required, if any, shall be called for from the informant.
(6) If on scrutiny, the reference is not found to be in order, the
Secretary or, as the case may be, the Registrar may, by order, decline to
register the reference and shall communicate the same to the informant.
(7) A reference declined to be registered shall be deemed not to have been
made.]
(8) (1) An appeal against the order of the Registrar declining to register
a reference shall be made by the aggrieved person to the Secretary within
fifteen days of communication to him of such an order.
(2) An appeal against the order of the Secretary declining to register a
reference shall be made by the aggrieved person to the Chairman within
fifteen days of communication to him of such an order and the Chairman's
decision thereon shall be final.”
16. From the provisions of Regulation 19(5) it would appear that on
receipt of a Reference under Regulation 19(4) the Secretary or the
Registrar, as may be, after making an endorsement of the date on which the
same has been received in the office of the Board is required to make a
scrutiny and, thereafter, if found to be in order, to register the same;
assign a serial number thereto and place the same before the Chairman for
being assigned to a Bench. After completion of the aforesaid exercise
under Regulation 19(5) the later part of the said Regulation contemplates
that simultaneously, remaining information/documents required, if any, may
be called for from the applicant. Regulation 20 contained in Chapter III
and Regulation 21 contained in Chapter IV deal with the manner in which the
proceedings of inquiry after registration of the Reference is to be made.
17. Regulation 19(5) extracted above, requires the Registrar or the
Secretary, as may be, to make an endorsement of the date of receipt of the
Reference [Regulation 19(4)] and thereafter on scrutiny thereof to register
the same and place before the Chairman for being referred to the Bench.
When the Regulations framed under the statute vests in the Registrar or the
Secretary of the Board the power to “scrutinize” an application prior to
registration thereof and thereafter to register and place the same before
the Bench, we do not see how such power of scrutiny can be understood to be
vesting in any of the said authorities the power to adjudicate the question
as to whether a company is an industrial company within the meaning of
Section 3(e) read with 3(f) and 3(n) of the SICA. A claim to come within
the ambit of the aforesaid provisions of the SICA i.e. to be an industrial
company, more often than not, would be a contentious issue. In the present
case, it certainly was. The specific stand of the respondent No. 1 company
in this regard need not detain the Court save and except to state that by a
detailed description of the manufacturing process the respondent No. 1
company had sought to contend that it is an industrial company. Surely,
the rejection of the above stand could have been made only by a process of
adjudication which power and jurisdiction clearly and undoubtedly is vested
by the SICA and the Regulations framed thereunder in a Bench of the Board
and not in authorities like the Registrar and the Secretary. In this
regard, one can only be reminded of the observations made by this Court in
paras 13 and 14 in the case of Jamal Uddin Ahmad Vs. Abu Saleh Najmuddin
and Another[3] which may be extracted below.
“13. The functions discharged by a High Court can be divided broadly into
judicial and administrative functions. The judicial functions are to be
discharged essentially by the Judges as per the Rules of the Court and
cannot be delegated. However, administrative functions need not necessarily
be discharged by the Judges by themselves, whether individually or
collectively or in a group of two or more, and may be delegated or
entrusted by authorization to subordinates unless there be some rule of law
restraining such delegation or authorization. Every High Court consists of
some administrative and ministerial staff which is as much a part of the
High Court as an institution and is meant to be entrusted with the
responsibility of discharging administrative and ministerial functions.
There can be “delegation” as also there can be “authorization” in favour of
the Registry and the officials therein by empowering or entrusting them
with authority or by permitting a few things to be done by them for and on
behalf of the Court so as to aid the Judges in discharge of their judicial
functioning. Authorization may take the form of formal conferral or
sanction or may be by way of approval or countenance. Such delegation or
authorization is not a matter of mere convenience but a necessity at times.
The Judges are already overburdened with the task of performing judicial
functions and the constraints on their time and energy are so demanding
that it is in public interest to allow them to devote time and energy as
much as possible in discharging their judicial functions, relieving them of
the need for diverting their limited resources of time and energy to such
administrative or ministerial functions, which, on any principle of
propriety, logic, or necessity are not required necessarily to be performed
by the Judges. Receiving a cause or a document and making it presentable to
a Judge for the purpose of hearing or trial and many a functions post-
decision, which functions are administrative and ministerial in nature, can
be and are generally entrusted or made over to be discharged by the staff
of the High Court, often by making a provision in the Rules or under the
orders of the Chief Justice or by issuing practice directions, and at
times, in the absence of rules, by sheer practice. The practice gathers the
strength of law and the older the practice the greater is the strength. The
Judges rarely receive personally any document required to be presented to
the Court. Plaints, petitions, memoranda or other documents required to be
presented to the Court are invariably received by the administrative or
ministerial staff, who would also carry out a preliminary scrutiny of such
documents so as to find that they are in order and then make the documents
presentable to the Judge, so that the valuable time of the Judge is not
wasted over such matters as do not need to be dealt with personally by the
Judge.
14. The judicial function entrusted to a Judge is inalienable and differs
from an administrative or ministerial function which can be delegated or
performance whereof may be secured through authorization.
“The judicial function consists in the interpretation of the law and its
application by rule or discretion to the facts of particular cases. This
involves the ascertainment of facts in dispute according to the law of
evidence. The organs which the State sets up to exercise the judicial
function are called courts of law or courts of justice. Administration
consists of the operations, whatever their intrinsic nature may be, which
are performed by administrators; and administrators are all State officials
who are neither legislators nor judges.”
(See Constitutional and Administrative Law, Phillips and Jackson, 6th Edn.,
p. 13.) P. Ramanatha Aiyar’s Law Lexicon defines judicial function as the
doing of something in the nature of or in the course of an action in court.
(p. 1015) The distinction between “judicial” and “ministerial acts” is:
If a Judge dealing with a particular matter has to exercise his discretion
in arriving at a decision, he is acting judicially; if on the other hand,
he is merely required to do a particular act and is precluded from entering
into the merits of the matter, he is said to be acting ministerially. (pp.
1013-14)
Judicial function is exercised under legal authority to decide on the
disputes, after hearing the parties, maybe after making an enquiry, and the
decision affects the rights and obligations of the parties. There is a duty
to act judicially. The Judge may construe the law and apply it to a
particular state of facts presented for the determination of the
controversy. A ministerial act, on the other hand, may be defined to be one
which a person performs in a given state of facts, in a prescribed manner,
in obedience to the mandate of a legal authority, without regard to, or the
exercise of, his own judgment upon the propriety of the act done. (Law
Lexicon, ibid., p. 1234). In ministerial duty nothing is left to
discretion; it is a simple, definite duty. Presentation of election
petition to the High Court within the meaning of Section 81 of the Act
without anything more would mean delivery of election petition to the High
Court through one of its officers competent or authorized to receive the
same on behalf of and for the High Court. Receiving an election petition
presented under Section 81 of the Act is certainly not a judicial function
which needs to be performed by a Judge alone. There is no discretion in
receiving an election petition. An election petition, when presented, has
to be received. It is a simple, definite duty. The date and time of
presentation and the name of the person who presented (with such other
particulars as may be prescribed) are to be endorsed truly and mechanically
on the document presented. It is a ministerial function simpliciter. It can
safely be left to be performed by one of the administrative or ministerial
staff of the High Court which is as much a part of the High Court. It may
be delegated or be performed through someone authorized. The manner of
authorization is not prescribed.”
18. The High Court, in view of what has been discussed above, was correct
in coming to the conclusion that the refusal of registration of the
reference sought by the respondent Company by the Registrar,
Secretary/Chairman of the Board was non-est in law. The reference must,
therefore, understood to be pending before the Board on the relevant date
attracting the provisions of Section 252 of the Insolvency and Bankruptcy
Code.
19. The second question arising before the High Court, namely, whether
the reference before the Board stood foreclosed by the order of winding up
of the respondent Company and the appointment of liquidator was answered
in the negative relying on Real Value Appliances Ltd. (supra) and Rishab
Agro Industries Ltd. (supra). The core principles laid down in the said
decisions of the Court, namely, that immediately on registration of a
reference under Section 15 of the erstwhile SICA, the enquiry under Section
16 is deemed to have commenced and that the winding up proceedings against
a company stood terminated only after orders under Section 481 of the
Companies Act, 1956, are passed, will have to be noticed to adjudge the
correctness of the said view of the High Court. In any event, the aforesaid
question becomes redundant in view of our conclusion that the reference
sought by the respondent Company must be deemed to have been pending on the
date of commencement of the Insolvency and Bankruptcy Code, particularly,
Section 252 thereof (effective 1.11.2016).
20. We, therefore, dispose of the appeal by holding that it would still
be open to the respondent Company to seek its remedies under the provisions
of Section 252 of the Code read with what is laid down in Sections 13, 14,
20 and 25. We make it clear that we should not be understood to have
expressed any opinion on the scope and meaning of the said or any other
provisions of the Code and the adjudicating authority i.e. National Company
Law Tribunal would be free and, in fact, required to decide on the said
questions in such manner as may be considered appropriate.
21. Appeal, consequently, is disposed of accordingly.
....................,J.
(RANJAN GOGOI)
....................,J.
(ABHAY MANOHAR SAPRE)
NEW DELHI
FEBRUARY 21, 2017.
-----------------------
[1] [2] (1998) 5 SCC 554
[3] [4] (2000) 5 SCC 515
[5] [6] (2003) 4 SCC 257
