DUNCANS INDUSTRIES LTD. versus A. J. AGROCHEM on 4 October 2019

SUPREME COURT REPORTS

[2019] 12 S.C.R.

DUNCANS INDUSTRIES LTD.

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v.

A. J. AGROCHEM

(Civil Appeal No. 5120 of 2019)

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OCTOBER 04, 2019

[ARUN MISHRA, M. R. SHAH AND B. R. GAVAI, JJ.]

Insolvency and Bankruptcy Code, 2016:

ss. 7, 9 and 238 – Application for initiation of corporateCinsolvency resolution process by operational creditor – On facts,appellant-operational debtor managing 14 tea gardens, out ofwhich, Central Government in exercise of power u/s. 16E of theTea Act, took control of 7 gardens – Appellant defaulted in makingpayment to respondent–operational creditor against the pesticidesDsupplied by the respondent – Initiation of insolvency proceedingsu/s. 9 by the respondent against the appellant – NCLT held thatthe proceedings were not maintainable since prior consent ofCentral Government as required u/s. 16 G not obtained – In appeal,NCLAT held that application u/s. 9 was maintainable even withoutconsent of Central Government in terms with s. 16 G – On appeal,Eheld: Section 16G(1)(c) shall not be applicable at all, as theappellant-corporate debtor is continuing to be in management andcontrol of the tea gardens – Provisions of the IBC shall have anover-riding effect over the Tea Act, 1953 – No prior consent ofthe Central Government before initiation of the proceedings u/s. 7

For s. 9 would be required and even without such consent of theCentral Government, the insolvency proceedings u/s. 7 or s. 9initiated by the operational creditor shall be maintainable – Thus,the order passed by NCLAT upheld – Tea Act, 1953 – s. 16G(1)(c).

Emphasis of – Held: Primary focus of the Code whileGenacting, is to ensure revival and continuation of the corporatedebtor by protecting the corporate debtor from its own managementand from a corporate debt by liquidation and such corporateinsolvency resolution process is to be completed in a time-boundmanner – As such the entire “corporate insolvency resolutionprocess” cannot be equated with “winding up proceedings”.H

Dismissing the appeals, the Court

Conclusion

HELD: 1.1 In effect, the appellant has been continued tobe in management and control of the tea estates, despite thenotification under Section 16E of the Tea Act. It is required tobe noted that notification under Section 16E was issued by theCentral Government and the Central Government authorisedthe Tea Board to take steps to take over the management andcontrol of the seven tea estates, having satisfied that the saidseven tea gardens were being managed by the appellant in amanner highly detrimental to the tea industry and public interest.Despite the same, very surprisingly, by an interim arrangement,the Division Bench of the High Court has handed over themanagement and control of the seven tea gardens to theappellant, because of whose mis–management, it hasdeteriorated the condition of the tea gardens run by theappellant. Be that as it may, the fact remains that, pursuant tothe interim arrangement/order passed by the Division Bench ofthe High Court dated 29.09.2016, the appellant–corporate debtoris continued to be in management and control of the seven teagardens and they are running the tea gardens. Therefore, in thefacts and circumstances of the case, and more particularly when,despite the notification under Section 16E of the Tea Act, theappellant–corporate debtor is continued to be in managementand control of the tea gardens/units and are running the teagardens as if the notification dated under Section 16E has notbeen issued, Section 16G of the Tea Act, more particularlySection 16G(1)(c), shall not be applicable at all. On a fair readingof Section 16G, Section 16G shall be applicable only in a casewhere the actual management of a tea undertaking or tea unitowned by a company has been taken over by any person or bodyof persons authorised by the Central Government under the TeaAct. Therefore, taking over the actual management and controlby the Central Government or by any person or body of personsauthorised by the Central Government is sine qua non beforeSection 16G of the Tea Act is made applicable. Therefore, in thefacts and circumstances of the case, Section 16G(1)(c) shall notbe applicable at all, as the appellant–corporate debtor iscontinued to be in management and control of the tea units/gardens. [Para 7.1] [841-F-H; 842-A-E]

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A1.2 Section 16G(1)(c) refers to the proceeding for windingup of such company or for the appointment of receiver in respectthereof. Therefore, as such, the proceedings under Section 9of the IBC shall not be limited and/or restricted to winding upand/or appointment of receiver only. The winding up/liquidationof the company shall be the last resort and only on an eventualityBwhen the corporate insolvency resolution process fails. Theprimary focus of the legislation while enacting the IBC is toensure revival and continuation of the corporate debtor byprotecting the corporate debtor from its own management andfrom a corporate debt by liquidation and such corporateCinsolvency resolution process is to be completed in a time–boundmanner. Therefore, the entire “corporate insolvency resolutionprocess” as such cannot be equated with “winding upproceedings”. Therefore, considering Section 238 of the IBC,which is a subsequent Act to the Tea Act, 1953, shall beapplicable and the provisions of the IBC shall have an over–Driding effect over the Tea Act, 1953. Any other view wouldfrustrate the object and purpose of the IBC. If the submissionon behalf of the appellant that before initiation of proceedingsunder Section 9 of the IBC, the consent of the CentralGovernment as provided under Section 16G(1)(c) of the Tea ActEis to be obtained, in that case, the main object and purpose ofthe IBC, namely, to complete the “corporate insolvencyresolution process” in a time–bound manner, shall be frustrated.The sum and substance would be that the provisions of the IBCwould have an over–riding effect over the Tea Act, 1953 and thatno prior consent of the Central Government before initiation ofFthe proceedings under Section 7 or Section 9 of the IBC wouldbe required and even without such consent of the CentralGovernment, the insolvency proceedings under Section 7 orSection 9 of the IBC initiated by the operational creditor shallbe maintainable. Thus, the order passed by the NCLAT holdingGthat insolvency petition under Section 9 of the Insolvency andBankruptcy Code, 2016 initiated by the respondent–operationcreditor shall be maintainable, is upheld. [Para 7.4, 8] [846-E-H; 847-A-D]

Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd.H(2018) 2 SCC 674 : [ 2017] 13 SCR 751 ;K. Kishan

v. M/s. Vijay Nirman Company Pvt. Ltd. (2018) 17 SCC662 : [2018] 10 SCR 959 ;Swiss Ribbons Pvt. Ltd. v.Union of India [AIR 2019 SC 739 : (2019) 4 SCC 17:[2019] 3 SCR 535 ; Innoventive Industries Ltd. v. ICICIBank[AIR 2017 SC 4084 : (2018) 1 SCC 407 :[2017] 8 SCR 33 ; PCIT v. Monnet Ispat and EnergyLtd. (2018) 18 SCC 786 – referred to.

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CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 5120of 2019.

From the Judgment and Order 20.06.2019 of the NationalCompany Appellate Tribunal, New Delhi in Company Appeal(AT)(Insolvency) No. 710 of 2018.

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Shyam Divan, Sr. Adv., Atul Kumar, R. Banarjee, UdayadityaB., Amit Gupta, Ms. Deepali, Tarun Gupta, Advs. for the Appellant.

Amar Dave, Ms. Sonal Shah, Kushagra Shah, Ms. ShrvtiAgarwal, T. Mahipal, Ms. Sonal Agarwal, Ms. Swati Agarwal, Advs.for the Respondent.

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The Judgment of the Court was delivered by

M. R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgmentand order dated 20.06.2019 passed by the National Company LawAppellate Tribunal (for short “NCLAT”) by which the learned AppellateTribunal has allowed the said appeal preferred by the respondent hereinand has quashed and set aside the order dated 05.10.2018 passed bythe National Company Law Tribunal, Kolkata (for short “NCLT”),holding that the respondent’s application under Section 9 of the G

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AInsolvency and Bankruptcy Code, 2016 (for short “IBC”) would bemaintainable, the original respondent has preferred the present appeal.

2. The facts of the case in nutshell are as under:

2.1 That the appellant is a Corporate Debtor. It is a companywhich owns and manages 14 tea gardens. Out of 14 tea gardens, theBCentral Government vide notification dated 28.01.2016, in exercise ofits power under Section 16E of the Tea Act, 1953 has taken over thecontrol of 7 tea gardens.

2.2 That the respondent is an operational creditor of the appellant.It used to supply pesticides, insecticides, herbicides etc. to the appellant.CAccording to the respondent-operational creditor, a sum of Rs.41,55,500/- was due and payable by the appellant-corporate debtor to therespondent-operational creditor. That the respondent initiated theproceedings against the appellant-corporate debtor before the NCLTunder Section 9 of the IBC. Initiation of the proceedings under the IBCby the respondent-operation creditor was opposed by the appellant-Dcorporate debtor mainly and solely on the ground that, as provided underSection 16G(1)(c) of the Tea Act, once the management of tea unithas been taken over by the Central Government, then the proceedingsfor winding up or appointment of receiver cannot be initiated withoutthe consent of the Central Government. It was the case on behalf ofEthe appellant-corporate debtor that, in the present case, as the priorapproval of the Central Government has not been taken, as requiredunder Section 16G of the Tea Act, the insolvency proceeding underSection 9 of the IBC would not be maintainable. That, by an orderdated 05.10.2018, learned NCLT held that in view of the statutoryprovisions under Section 16G of the Tea Act and as the prior consentFof the Central Government has not been obtained, the proceedings underSection 9 of the IBC shall not be maintainable. In an appeal beforethe NCLAT by the respondent-operational creditor, by the impugnedjudgment and order, the NCLAT has reversed the order passed by theNCLT, Kolkata and has held that the respondent’s application underSection 9 of the IBC would be maintainable even without the consentGof the Central Government in terms of Section 16G of the Tea Act.Feeling aggrieved and dissatisfied with the impugned judgment and orderdated 20.06.2019 passed by the learned NCLAT, allowing therespondent’s appeal thereby holding that the insolvency petition filedunder Section 9 of the IBC would be maintainable, the originalHrespondent-corporate debtor has preferred the present statutory appeal.

3. Shri Shyam Divan, learned Senior Advocate has appeared onbehalf of the appellant-corporate debtor and Shri Amar Dave, learnedAdvocate has appeared on behalf of the respondent-operational creditor.

4. Shri Shyam Divan, learned Senior Advocate appearing onbehalf of the appellant-corporate debtor has taken us through the relevantprovisions of the Tea Act, 1953, more particularly Section 16. He hasalso taken us through the objects and the purpose of the Tea Act.

4.1 It is submitted by Shri Shyam Divan, learned Senior Advocateappearing on behalf of the appellant that the Tea Act is a special Actfor the purpose of providing control by the Union of India of the TeaIndustry. It is submitted that Section 16D(1) of the Tea Act, 1953provides for taking over the tea unit and the tea undertaking inter aliaif the Central Government is of the opinion that the tea unit is beingmanaged in a manner highly detrimental to the tea industry or to publicinterest. It is submitted that Section 16D(4) provides that the CentralGovernment shall take such steps as may be necessary for the purposeof efficiently managing the business of the undertaking. It is submittedthat any notification under Section 16D is to have effect for a periodnot exceeding five years which can only be extended if the CentralGovernment is of the opinion that it is expedient to do so in public interest,for such period not exceeding one year at a time, and for total periodnot exceeding six years. It is submitted that Section 16E refers to thepower of the Central Government to restart the tea undertaking if it isfound necessary in the interest of the general public. It is submittedthat Section 16G specifically deals with a situation such as in the presentapplication. It is submitted that an insolvency process is also meant toculminate in liquidation, if there is no revival. It is submitted that sincethe Tea Act permits for the Central Government to take over themanagement of a tea estate which is not run properly, the priorpermission under Section 16G is applicable to such an estate, themanagement of which has been taken over by the Government.

4.2 It is further submitted by Shri Shyam Divan, learned SeniorAdvocate appearing on behalf of the appellant that the “winding up”process under the Companies Act, 1956 includes the insolvencyproceedings under the IBC. It is submitted that, therefore, initiation ofany proceedings for winding up or liquidation by way of insolvencyproceedings under the IBC shall be maintainable only after the consentof the Central Government is obtained, as required under Section 16Gof the Tea Act which, in the present case, is lacking.

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A4.3 It is further submitted by Shri Shyam Divan, learned SeniorAdvocate appearing on behalf of the appellant that, in the present case,in the proceedings challenging the Central Government notification dated28.01.2016 authorising the Tea Board to take over the management andto take control of the 7 tea estates of the appellant-corporate debtor,the High Court of Calcutta though has not stayed the notification, butBonly made an interim arrangement for the management of 7 tea estatesand the High Court has directed/permitted the appellant to run thegardens in a prudent business-like manner and to pay both the currentand arrear dues of the workers. It is submitted that the interim orderhas been passed for improving the conditions of the workers as also A

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4.4 It is further submitted by Shri Shyam Divan, learned SeniorAdvocate appearing on behalf of the appellant that the provisions ofthe Tea Act, 1953 apply to tea units, the management of which havebeen taken over for the purpose of stimulating the production andDmanufacturing of tea. It is submitted that the control by the Tea Boardof the manufacturing of tea from the tea units is in public interest. It isalso a welfare legislation. The Tea Act is a Central Act and appliesonly to companies which are having tea gardens or tea units. It issubmitted that if the provisions of the Tea Act are applicable, then ona conjoint reading of Section 16G, Section 16J and Section 16M of theETea Act, an application under Section 7 or Section 9 of the IBC wouldnot be maintainable and cannot be proceeded with without the consentof the Central Government.

4.5 It is further submitted by Shri Shyam Divan, learned SeniorAdvocate appearing on behalf of the appellant that, in the present case,Fby passing the impugned judgment and order, the learned NCLAT haserroneously relied upon Section 238 of the IBC to hold that the IBCwill have an overriding effect over the Tea Act. It is submitted thatSection 238 of the IBC will be applicable if there is any conflict betweenthe two legislations. It is submitted that, in the present case, there is nosuch conflict between the Tea Act and the IBC. It is submitted thatGeven the learned NCLAT in the impugned order recognizes and/orrecords that the provisions of the IBC and the Tea Act are notinconsistent with each other. It is submitted that the IBC process canbe started if the permission is obtained from the Central Governmentby a financial creditor or an operational creditor. It is submitted thatHthe provisions of Section 7 or Section 9 may not require the consent of the Central Government to initiate such proceedings, but when themanagement of the tea gardens have been taken over by the CentralGovernment under the Tea Act, one will have to consider the provisionsof the Tea Act which requires the consent of the Central Government.It is submitted that, therefore, the process of insolvency resolution underthe IBC has not been stopped, but what it requires is an additionalpermission under the Tea Act for the purpose of initiation of suchinsolvency proceeding. It is submitted that this should be logical as themanagement of the tea gardens is already under the CentralGovernment under the Tea Act for public interest and for the interestof workers of the tea gardens.

4.6 It is further submitted by Shri Shyam Divan, learned SeniorAdvocate appearing on behalf of the appellant that both IBC and theTea Act are welfare legislations. IBC is a general Act for corporateresolution process for all corporates, but the Tea Act protects corporateswhich have tea gardens. The Tea Act is a special legislation enactedby the Parliament for protecting the Tea Industries and Tea Gardensand provides for taking over the management by the Tea Board or theCentral Government or any person authorized by the CentralGovernment for running the tea gardens or protection of the workers.It is submitted that, therefore, its provisions can be harmoniouslyconstrued along with the IBC.

4.7 Shri Shyam Divan, learned Senior Advocate appearing onbehalf of the appellant has heavily relied upon the decision of this Courtin the case of Macquarie Bank Ltd. v. Shilpi Cable TechnologiesLtd. (2018) 2 SCC 674 as well as the recent decision of this Courtdated 14.08.2019 in the case of K. Kishan v. M/s. Vijay NirmanCompany Pvt. Ltd. (2018) 17 SCC 662, on non-applicability of Section238 of the IBC. Making the above submissions and relying upon theabove decisions of this Court, it is submitted by Shri Shyam Divan,learned Senior Advocate appearing on behalf of the appellant-corporatedebtor that since there is no inconsistency between the Tea Act andthe IBC, there is no occasion to apply Section 238 of the IBC to giveoverriding effect.

4.8 Making the above submissions and relying upon the abovedecisions of this Court, it is prayed to allow the present appeal andquash and set aside the impugned judgment and order passed by thelearned NCLAT and restore the order passed by the NCLT, Kolkata A

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Aby holding that in absence of the consent of the Central Governmentas provided under Section 16G of the Tea Act, the insolvencyproceedings initiated by the respondent-operational creditor underSection 9 of the IBC shall not be maintainable.

5. The present appeal is vehemently opposed by Shri Amar Dave,Blearned Advocate appearing on behalf of the respondent-operationalcreditor.

5.1 It is vehemently submitted by Shri Amar Dave, learnedAdvocate appearing on behalf of the respondent-operational creditorthat the IBC is a complete Code in itself. It is submitted that the IBCCis a consolidating and amending law relating to re-organization andinsolvency resolution and for matters connected therewith or incidentalthereto. It is submitted that the Code, which was promulgated in 2016,has not provided for the pre-requisite of obtaining consent from theCentral Government for initiating corporate insolvency resolution processlike the Tea Act, which is an earlier Act enacted in 1953. It is submittedDthat, thus, such a pre-requisite of obtaining consent cannot be importedand/or read into the Code when the self-contained Code itself does notprovide for it.

5.2 It is further submitted that importing the requirement ofobtaining consent of the Central Government prior to initiating theEcorporate insolvency resolution process would be completely contraryto the over-riding nature of the Code, and of the clear legislative intentof keeping the arms of the Government away from the resolutionprocess and of not delaying the process of resolution. It is furthersubmitted that an examination of Chapter IIIA of the Tea Act revealsFthat the object of restarting/revival of the tea company is a writ largein the scheme of the Tea Act. It is submitted that the said object ofrestarting/revival is borne out from Section 16B(2), Section 16E(1)(b),Section 16I(1) and Section 16K of the Tea Act. It is submitted thatrestarting/revival of the company is also the object of the IBC, as isclear from the Preamble of the IBC and also as observed by this CourtGin the case of Swiss Ribbons Pvt. Ltd. v. Union of India [AIR 2019SC 739 : (2019) 4 SCC 17]. It is submitted that therefore in the eventof any conflict between the two legislations, the provisions of the IBCwould prevail by virtue of Section 238 of the IBC.

5.3 It is submitted by Shri Dave, learned Advocate appearing onHbehalf of the respondent-operational creditor that the present case is not one where Section 16G of the Tea Act applies at all, as themanagement has not been “taken over” by the Central Government orthe Tea Board. It is submitted that the notification dated 28.01.2016was issued under Section 16E(1) of the Tea Act. It is submitted that,according to the sub-section (2) thereof, the provisions of Section 16Gshall apply to a notified order made under Section 16E(1). It is submittedthat Section 16G(1) shall be applicable when the management of a teaundertaking or tea unit owned by a company has been taken over bythe Tea Board. It is submitted that thus Section 16G(1) of the TeaAct does not automatically get triggered with the issuance of anotification under Section 16E(1) of the Tea Act, but becomes applicableonce the management of a tea undertaking or tea unit owned by acompany has been taken over by the Tea Board. It is submitted that,in the present case, pursuant to the interim order passed by the DivisionBench of the High Court of Calcutta in which the notification dated28.01.2016 is challenged by the corporate debtor, the appellant-corporatedebtor continues to be in management and control of the tea units/gardens. It is submitted that therefore application of Section 16E(1) isno longer prevalent and consequently Section 16G of the Tea Act shallnot be applicable at all.

5.4 It is further submitted by Shri Dave, learned Advocateappearing on behalf of the respondent-operational creditor that Section16G(1)(c) of the Tea Act is applicable to a proceeding for “windingup” and not to proceeding for initiation of “corporate insolvencyresolution process”, as the both are not one and the same proceedings.It is submitted that winding up of a company is provided for, andgoverned by, the Companies Act. It is submitted that, on the other hand,initiation of corporate insolvency resolution process is provided for, andgoverned by, the Insolvency and Bankruptcy Code, 2016. It is submittedthat both these processes are distinct from one another and notsynonymous with one another. It is submitted that the power of theParliament to make any law relating to winding up can be traced toEntry nos. 33 and 34 of the Union List of the Seventh Schedule of theConstitution. It is submitted that, on the other hand, the power of theParliament to make any law relating to insolvency can be traced to Entryno. 9 of the Concurrent List of the Seventh Schedule of the Constitution.It is submitted that, thus, winding up and insolvency proceedings arenot one and the same as they have been mentioned under two separate AB

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Aentries in two separate lists in the Seventh Schedule. It is submittedthat, as such, Section 16G(1)(c) of the Tea Act, which mandates thatno winding up proceeding can lie in any court against a company whichhas been taken over by the Tea Board without consent of the CentralGovernment, does not and cannot be interpreted to mean that the said Bsection applies to any proceeding for initiation of corporate insolvencyresolution process against a company which has been taken over bythe Tea Board. It is submitted that the learned NCLAT has rightly heldthat Section 16G(1)(c) relates to winding up and, on the other hand,Section 9 of the IBC is not a proceeding for winding up, but for initiation of “corporate insolvency resolution process” to ensure revival andCcontinuation of the corporate debtor by protecting the corporate debtorfrom its own management and from corporate debt by liquidation. Insupport of his above submissions, Shri Dave, learned Advocateappearing on behalf of the respondent-operational creditor, has heavilyreplied upon the decisions of this Court in Innoventive Industries Ltd.Dv. ICICI Bank [AIR 2017 SC 4084 at paras 16, 51 and 56 : (2018) 1SCC 407], Swiss Ribbons Pvt. Ltd.[AIR 2019 SC 739 at paras 10 to12 : (2019) 4 SCC 17] and a decision in PCIT v. Monnet Ispat andEnergy Ltd. (2018) 18 SCC 786. Making the above submissions andrelying upon the above decisions of this Court, it is prayed to dismiss Ethe present appeal and to confirm the impugned judgment and orderpassed by the learned NCLAT.

6. The short question which is posed for consideration of thisCourt is whether before initiation of the proceedings under Section 9of the IBC, a consent of the Central Government as provided underFSection 16G(1)(c) of the Tea Act, 1953 is required and/or whether inabsence of any such consent of the Central Government theproceedings initiated by the respondent-operational creditor underSection 9 of the IBC would be maintainable or not?

7. Sections 16G of the Tea Act reads as under:

G“16G. Application of Act 1 of 1956.—(1) Where themanagement of a tea undertaking or tea unit owned by a companyhas been taken over by any person or body of persons authorisedby the Central Government under this Act, then, notwithstandinganything contained in the said Act or in the memorandum orHarticles of association of such company,—

(a) it shall not be lawful for the shareholders of such companyor any other person to nominate or appoint any person tobe a director of the company; (b) no resolution passed in a meeting of the shareholders of suchcompany shall be given effect to unless approved by theCentral Government;

(c) no proceeding for the winding up of such company or forthe appointment of receiver in respect thereof shall lie inany court except with the consent of the CentralGovernment.

(2) Subject to the provisions contained in sub-section (1), and tothe other provisions contained in this Act, and subject to suchother exceptions, restrictions and limitations, if any, as the CentralGovernment may, by notification in the Official Gazette specifyin this behalf, the Companies Act, 1956, shall continue to applyto such company in the same manner as it applied thereto beforethe issue of the notified order.”

7.1 In the present case, it is true that by notification dated28.01.2016 issued under Section 16E of the Tea Act, the CentralGovernment authorised the Tea Board to take over the managementor the control of the seven tea estates mentioned in the said notification.However, the appellant challenged the said notification before the HighCourt of Calcutta and the learned Single Judge of the High Courtdismissed the said petition. However, in an appeal, the Division Benchof the High Court of Calcutta vide the interim order dated 20.09.2016has permitted the appellant-corporate debtor to continue with themanagement of the said tea estates. Therefore, in effect, the appellantherein has been continued to be in management and control of the teaestates, despite the notification under Section 16E dated 28.01.2016.At this stage, it is required to be noted that notification under Section16E of the Tea Act was issued by the Central Government and theCentral Government authorised the Tea Board to take steps to takeover the management and control of the seven tea estates, havingsatisfied that the said seven tea gardens were being managed by theappellant in a manner highly detrimental to the tea industry and publicinterest. Despite the same, very surprisingly, by an interim arrangement,the Division Bench of the High Court of Calcutta has handed over themanagement and control of the seven tea gardens to the appellant, A

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Abecause of whose mis-management, it has deteriorated the conditionof the tea gardens run by the appellant. Be that as it may, the factremains that, pursuant to the interim arrangement/order passed by theDivision Bench of the High Court dated 29.09.2016, the appellant-corporate debtor is continued to be in management and control of theseven tea gardens and they are running the tea gardens. Therefore, inBthe facts and circumstances of the case, and more particularly when,despite the notification under Section 16E of the Tea Act, the appellant-corporate debtor is continued to be in management and control of thetea gardens/units and are running the tea gardens as if the notificationdated under Section 16E has not been issued, Section 16G of the TeaCAct, more particularly Section 16G(1)(c), shall not be applicable at all.On a fair reading of Section 16G of the Tea Act, we are of the opinionthat Section 16G of the Tea Act shall be applicable only in a case wherethe actual management of a tea undertaking or tea unit owned by acompany has been taken over by any person or body of personsauthorised by the Central Government under the Tea Act. Therefore,Dtaking over the actual management and control by the CentralGovernment or by any person or body of persons authorised by theCentral Government is sine qua non before Section 16G of the TeaAct is made applicable. Therefore, in the facts and circumstances ofthe case, Section 16G(1)(c) shall not be applicable at all, as theEappellant-corporate debtor is continued to be in management and controlof the tea units/gardens.

7.2 Now, so far as the main issue, namely, whether beforeinitiation of the proceedings under Section 9 of the IBC, a prior consentof the Central Government as provided under Section 16G(1)(c) of theFTea Act is required or not and/or in absence of any such consent ofthe Central Government, the proceedings under Section 9 of the IBCshall be maintainable or not, is concerned, at the outset, it is requiredto be noted that the IBC is a complete Code in itself. In a recentdecision of this Court in the case of Swiss Ribbons Pvt. Ltd. (supra),this Court had an occasion to consider the Statement of Objects andGReasons of the IBC and also the Preamble of the IBC, which whennoted by this Court in its earlier decision in Innoventive Industries Ltd.(supra), in paragraphs 25 and 26 in the case of Swiss Ribbons Pvt.Ltd. (supra), this Court has referred to the Statement of Objects andReasons of the IBC and the Preamble of the IBC. Paragraphs 25 andH26 are as under:

25. The Statement of Objects and Reasons for the Code havebeen referred to in Innoventive Industries [InnoventiveIndustries Ltd. v. ICICI Bank, (2018) 1 SCC 407 : (2018) 1 SCC(Civ) 356] which states: (SCC pp. 421-22, para 12)

“12. … The Statement of Objects and Reasons of the Codereads as under:

‘Statement of Objects and Reasons.—There is no single lawin India that deals with insolvency and bankruptcy. Provisionsrelating to insolvency and bankruptcy for companies can befound in the Sick Industrial Companies (Special Provisions)Act, 1985, the Recovery of Debts Due to Banks and FinancialInstitutions Act, 1993, the Securitisation and Reconstructionof Financial Assets and Enforcement of Security Interest Act,2002 and the Companies Act, 2013. These statutes providefor creation of multiple fora such as Board of Industrial andFinancial Reconstruction (BIFR), Debts Recovery Tribunal(DRT) and National Company Law Tribunal (NCLT) and theirrespective Appellate Tribunals. Liquidation of companies ishandled by the High Courts. Individual bankruptcy andinsolvency is dealt with under the Presidency TownsInsolvency Act, 1909, and the Provincial Insolvency Act, 1920and is dealt with by the courts. The existing framework forinsolvency and bankruptcy is inadequate, ineffective andresults in undue delays in resolution, therefore, the proposedlegislation.

2. The objective of the Insolvency and Bankruptcy Code,2015 is to consolidate and amend the laws relating toreorganisation and insolvency resolution of corporate persons,partnership firms and individuals in a time-bound manner formaximisation of value of assets of such persons, to promoteentrepreneurship, availability of credit and balance the interestsof all the stakeholders including alteration in the priority ofpayment of government dues and to establish an Insolvencyand Bankruptcy Fund, and matters connected therewith orincidental thereto. An effective legal framework fortimely resolution of insolvency and bankruptcy wouldsupport development of credit markets and encourageentrepreneurship. It would also improve Ease of Doing A

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Business, and facilitate more investments leading to highereconomic growth and development.

3. The Code seeks to provide for designating NCLT and DRTas the adjudicating authorities for corporate persons and firmsand individuals, respectively, for resolution of insolvency,liquidation and bankruptcy. The Code separates commercialaspects of insolvency and bankruptcy proceedings from judicialaspects. The Code also seeks to provide for establishment ofthe Insolvency and Bankruptcy Board of India (Board) forregulation of insolvency professionals, insolvency professionalagencies and information utilities. Till the Board is established,the Central Government shall exercise all powers of the Boardor designate any financial sector regulator to exercise thepowers and functions of the Board. Insolvency professionalswill assist in completion of insolvency resolution, liquidationand bankruptcy proceedings envisaged in the Code.Information Utilities would collect, collate, authenticate anddisseminate financial information to facilitate suchproceedings. The Code also proposes to establish a fund tobe called the Insolvency and Bankruptcy Fund of India forthe purposes specified in the Code.

4. The Code seeks to provide for amendments in the IndianPartnership Act, 1932, the Central Excise Act, 1944, CustomsAct, 1962, the Income Tax Act, 1961, the Recovery of DebtsDue to Banks and Financial Institutions Act, 1993, the FinanceAct, 1994, the Securitisation and Reconstruction of FinancialAssets and Enforcement of Security Interest Act, 2002, theSick Industrial Companies (Special Provisions) Repeal Act,2003, the Payment and Settlement Systems Act, 2007, theLimited Liability Partnership Act, 2008, and the CompaniesAct, 2013.

5. The Code seeks to achieve the above objectives.’”

26. The Preamble of the Code states as follows:

“An Act to consolidate and amend the laws relating toreorganisation and insolvency resolution of corporate persons,partnership firms and individuals in a time-bound manner formaximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interestsof all the stakeholders including alteration in the order ofpriority of payment of government dues and to establish anInsolvency and Bankruptcy Board of India, and for mattersconnected therewith or incidental thereto.”

7.3 After noticing and considering the Statement of Objects andReasons for the IBC and the Preamble to the Code, thereafter thisCourt has observed and held in paragraphs 27 and 28 as under:

“27. As is discernible, the Preamble gives an insight into whatis sought to be achieved by the Code. The Code is first andforemost, a Code for reorganisation and insolvency resolution ofcorporate debtors. Unless such reorganisation is effected in atime-bound manner, the value of the assets of such persons willdeplete. Therefore, maximisation of value of the assets of suchpersons so that they are efficiently run as going concerns isanother very important objective of the Code. This, in turn, willpromote entrepreneurship as the persons in management of thecorporate debtor are removed and replaced by entrepreneurs.When, therefore, a resolution plan takes off and the corporatedebtor is brought back into the economic mainstream, it is ableto repay its debts, which, in turn, enhances the viability of creditin the hands of banks and financial institutions. Above all,ultimately, the interests of all stakeholders are looked after asthe corporate debtor itself becomes a beneficiary of the resolutionscheme—workers are paid, the creditors in the long run will berepaid in full, and shareholders/investors are able to maximisetheir investment. Timely resolution of a corporate debtor who isin the red, by an effective legal framework, would go a long wayto support the development of credit markets. Since moreinvestment can be made with funds that have come back intothe economy, business then eases up, which leads, overall, tohigher economic growth and development of the Indian economy.What is interesting to note is that the Preamble does not, in anymanner, refer to liquidation, which is only availed of as a lastresort if there is either no resolution plan or the resolution planssubmitted are not up to the mark. Even in liquidation, the liquidatorcan sell the business of the corporate debtor as a going concern.(See ArcelorMittal [ArcelorMittal (India) (P) Ltd. v. SatishKumar Gupta, (2019) 2 SCC 1] at para 83, fn 3).

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A28. It can thus be seen that the primary focus of the legislationis to ensure revival and continuation of the corporate debtor byprotecting the corporate debtor from its own management andfrom a corporate death by liquidation. The Code is thus abeneficial legislation which puts the corporate debtor back on itsfeet, not being a mere recovery legislation for creditors. TheBinterests of the corporate debtor have, therefore, been bifurcatedand separated from that of its promoters/those who are inmanagement. Thus, the resolution process is not adversarial tothe corporate debtor but, in fact, protective of its interests. Themoratorium imposed by Section 14 is in the interest of theCcorporate debtor itself, thereby preserving the assets of thecorporate debtor during the resolution process. The timelineswithin which the resolution process is to take place again protectsthe corporate debtor’s assets from further dilution, and alsoprotects all its creditors and workers by seeing that the resolutionprocess goes through as fast as possible so that anotherDmanagement can, through its entrepreneurial skills, resuscitate thecorporate debtor to achieve all these ends.

7.4 Section 16G(1)(c) refers to the proceeding for winding upof such company or for the appointment of receiver in respect thereof.Therefore, as such, the proceedings under Section 9 of the IBC shallEnot be limited and/or restricted to winding up and/or appointment ofreceiver only. The winding up/liquidation of the company shall be thelast resort and only on an eventuality when the corporate insolvencyresolution process fails. As observed by this Court in Swiss RibbonsPvt. Ltd. (supra), referred to hereinabove, the primary focus of theFlegislation while enacting the IBC is to ensure revival and continuationof the corporate debtor by protecting the corporate debtor from its ownmanagement and from a corporate debt by liquidation and suchcorporate insolvency resolution process is to be completed in a time-bound manner. Therefore, the entire “corporate insolvency resolution process” as such cannot be equated with “winding up proceedings”.GTherefore, considering Section 238 of the IBC, which is a subsequentAct to the Tea Act, 1953, shall be applicable and the provisions of theIBC shall have an over-riding effect over the Tea Act, 1953. Any otherview would frustrate the object and purpose of the IBC. If thesubmission on behalf of the appellant that before initiation of proceedingsHunder Section 9 of the IBC, the consent of the Central Government as provided under Section 16G(1)(c) of the Tea Act is to be obtained, inthat case, the main object and purpose of the IBC, namely, to completethe “corporate insolvency resolution process” in a time-bound manner,shall be frustrated. The sum and substance of the above discussionwould be that the provisions of the IBC would have an over-riding effectover the Tea Act, 1953 and that no prior consent of the CentralGovernment before initiation of the proceedings under Section 7 orSection 9 of the IBC would be required and even without such consentof the Central Government, the insolvency proceedings under Section7 or Section 9 of the IBC initiated by the operational creditor shall bemaintainable.

8. In view of the above and for the reasons stated above, thepresent appeal fails and the same deserves to be dismissed and isaccordingly dismissed. The impugned judgment and order dated20.06.2019 passed by the learned NCLAT holding that insolvencypetition under Section 9 of the Insolvency and Bankruptcy Code, 2016initiated by the respondent-operation creditor shall be maintainable, ishereby confirmed. No costs.

Nidhi Jain

Appeal dismissed.

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