Case details

Court: Supreme Court of India
Decided: 22 January 2019
Bench: R.F. Nariman
Citations: 2019 INSC 77[2019] 2 S.C.R. 477
Type: Judgment (Disposed off)

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Citation: [2019] 2 S.C.R. 477 (search it on the Supreme Court's e-SCR portal)

Supreme Court of India

FORECH INDIA LTD. versus EDELWEISS ASSETS RECONSTRUCTION CO. LTD. on 22 January 2019

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[2019] 2 S.C.R. 477

FORECH INDIA LTD.

EDELWEISS ASSETS RECONSTRUCTION CO. LTD.

(Civil Appeal No. 818 of 2018)

JANUARY 22, 2019

[R. F. NARIMAN AND NAVIN SINHA, JJ.]

Insolvency & Bankruptcy Code, 2016– ss.7, 9, 11, 238, 255and The Eleventh Schedule – Proceedings u/ss.7 and 9, ifindependent of winding up process pending in High Court – Windingup petition filed by the appellant before High Court, againstRespondent No.2-Company, alleging inability to pay dues –Respondent No.1, financial creditor of the self-same corporatedebtor, filed insolvency petition u/s.7 of the 2016 Code beforeNational Company Law Tribunal (NCLT) – Petition admitted – Appealfiled by the appellant against the order – Dismissed by AppellateTribunal – Plea of appellant inter alia that notice u/r.26 of the 1959Rules was served much prior to the commencement of the Code,hence, the winding up petition should be allowed to carry on andnot proceedings filed by other creditors under the Code – Held:When the Code was enacted, only winding up petitions, where nonotice u/r.26 of the 1959 Rules was served, were to be transferredto the NCLT and treated as petitions under the Code – However, onworking of the Code, the Government realized that parallelproceedings in the High Courts and before the adjudicating authorityin the Code would stultify the objective sought to be achieved bythe Code, i.e. to resuscitate the corporate debtors who are in thered – Accordingly, the Rules kept being amended, until finally s.434,2013 Act was itself substituted in 2018, adding a proviso by whicheven in winding up petitions where notice was served and pendingin the High Courts, any person could apply for transfer of suchpetitions to the NCLT, which would then be transferred by the HighCourt to the adjudicating authority and treated as insolvency petitionunder the Code – Appellate Tribunal’s reasoning is not correct asreference to s.11 of the Code in the context of the present problem iswholly irrelevant – However, the ultimate order passed by theAppellate Tribunal is not interfered with because Respondent No.1’sapplication admitted by the Tribunal is an independent proceedingto be decided in accordance with the provisions of the Code –

AHowever, the appellant is granted liberty to apply under the provisoto s.434 of the 2013 Act (added in 2018), to transfer the windingup proceeding pending before the High Court to the NCLT, whichcan then be treated as proceeding u/s.9 of the Code – CompaniesAct, 1956 – s.433(e) – Companies Act, 2013 – s.434 – Companies(Transfer of Pending Proceedings) Rules, 2016 – r.5 –BCompanies(Transfer of Pending Proceedings) Second AmendmentRules, 2017 – Companies (Court) Rules, 1959– rr.26 and 27.

Companies (Court) Rules, 1959 – rr.26 and 27 – Notice under– Pre-admission or post-admission – Held: Rules 26 and 27 clearlyrefer to a pre-admission scenario making it clear that the noticeCcontained in Form No. 6 appended to r.27 has to be served in notless than 14 days before the date of hearing – Hence, the expression“was admitted” in Form No. 6 only means that notice has beenissued in the winding up petition which is then “fixed for hearingbefore the Company Judge” on a certain day.DDisposing of the appeal, the Court HELD: 1.1 Rules 26 and 27, Companies (Court) Rules,1959 clearly refer to a pre-admission scenario as is clear from aplain reading of Rules 26 and 27, which make it clear that thenotice contained in Form No. 6 has to be served in not less thanE14 days before the date of hearing. Hence, the expression “wasadmitted” in Form No. 6 only means that notice has been issuedin the winding up petition which is then “fixed for hearing beforethe Company Judge” on a certain day. Thus, the Madras HighCourt view in M/s. M.K. & Sons Engineering case is plainlyFincorrect whereas the Bombay High Court view in AshokCommercial Enterprises case is correct in law. [Para 16][489-A-B]

1.2 As a first step, when the Insolvency & BankruptcyCode, 2016 (the Code) was enacted, only winding up petitions,where no notice under Rule 26 of the Companies (Court) RulesGwas served, were to be transferred to the NCLT and treated aspetitions under the Code. However, on a working of the Code,the Government realized that parallel proceedings in the HighCourts as well as before the adjudicating authority in the Codewould stultify the objective sought to be achieved by the Code,Hwhich is to resuscitate the corporate debtors who are in the red.

In accordance with this objective, the Rules kept being amended,until finally Section 434 was itself substituted in 2018, in which aproviso was added by which even in winding up petitions wherenotice has been served and which are pending in the High Courts,any person could apply for transfer of such petitions to the NCLTunder the Code, which would then have to be transferred by theHigh Court to the adjudicating authority and treated as aninsolvency petition under the Code. [Para 17] [489-C-E]

1.3 The Appellate Tribunal’s reasoning is not correct.Section 11 of the Code specifies which persons are not eligibleto initiate proceedings under it. This Section is of limitedapplication and only bars a corporate debtor from initiating apetition under Section 10 of the Code in respect of whom aliquidation order has been made. From a reading of this Section,it does not follow that until a liquidation order has been madeagainst the corporate debtor, an Insolvency Petition may be filedunder Section 7 or Section 9 of the Code as the case may be, ashas been held by the Appellate Tribunal. Hence, any referenceto Section 11 in the context of the problem before Supreme Courtis wholly irrelevant. However, the ultimate order passed by theAppellate Tribunal is not interfered with because it is clear thatthe financial creditor’s application which has been admitted bythe Tribunal is clearly an independent proceeding which must bedecided in accordance with the provisions of the Code.[Paras 21, 22] [491-G; 492-C-D]

1.4 Though, the Appellate Tribunal’s order dismissing theappeal is not being interfered with, liberty is granted to theappellant to apply under the proviso to Section 434 of theCompanies Act (added in 2018), to transfer the winding upproceeding pending before the High Court of Delhi to the Code.NCLT, which can then be treated as a proceeding under Section9 of the Code. [Para 23] [492-E-F]

PSL Limited v. Jotun India Private Limited. (2018) 2AIR Bom R 350 – approved.

Ashok Commercial Enterprises v. Parekh AluminexLimited (2017) 4 Bom. CR 653 – held correct law.

AM/s. M.K. & Sons Engineering v. Eason Reyrolle Ltd.Decision of Madras High Court in CP/364/2016 – heldincorrect view.

Jaipur Metals & Electricals Employees OrganizationThrough General Secretary Mr. Tej Ram Meena v.JaipurBMetals & Electricals Ltd. Through its Managing Director&Ors.2018 (15) SCALE 836 – referred to.

Case Law Reference

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 818 of

From the Judgment and Order dated 23.11.2017 of the NationalDCompany Law Appellate Tribunal, New Delhi in Company Appeal (AT)(Insolvency) No.202 of 2017.

Ms. Purti Marwah Gupta, Ms. Henna George, A. VenayagamBalan, Advs.for the Appellant.

ESanjeev Sen, Sr. Adv., Ms. Srishti Khare, S. S. Shroff, Advs. forthe Respondent.

The Judgment of the Court was delivered by ROHINTON F. NARIMAN, J. 1. The present matter arisesfrom an Operational Creditor’s appeal to continue with a winding upFpetition that has been filed by the said creditor way back in 2014. Thefacts relevant for disposal of this appeal are as follows:-

2. A winding up petition, being No. 42 of 2014, was filed by thepresent appellant before the High Court of Delhi on 10.01.2014, againstRespondent No. 2-Company, alleging (under Section 433(e) of theGCompanies Act) inability to pay dues. Notice in this petition had beenserved, as is recorded by an order dated 20.01.2014 of the High Courtof Delhi. Further orders which have been pointed out to us by learnedcounsel for the appellant, have gone on to state that there is a debt orliability which is, in fact, admitted.

3. It was also pointed out by learned counsel for the appellant thata Reference had been made by the Company itself on 14.07.2015 to theBoard for Industrial and Financial Reconstruction (BIFR) under the SickIndustrial Companies Act, 1985, which, according to the learned counselfor the appellant, has abated as on 11.12.2016. It transpires that anotheroperational creditor, viz., SKF India Ltd. had filed an application underSection 9 of the Insolvency & Bankruptcy Code, 2016 (in short ‘theCode’), against Respondent No. 2, which was allowed to be withdrawnso that the aforesaid operational creditor could go to the High Court in awinding up petition which would then be heard along with the CompanyPetition No. 42/2014.

4. Meanwhile, Respondent No. 1, being a financial creditor of theself-same corporate debtor, moved the National Company Law Tribunal(NCLT) in an insolvency petition filed under Section 7 of the Codesometime in May/June 2017. This petition was admitted on 07.08.2017.Against the aforesaid order, an appeal was filed by the appellant hereinwhich was dismissed by the Appellate Tribunal, in which Section 11 ofthe Code was referred to, and it was held by the Appellate Tribunal thatsince there was no winding up order by the High Court, the financialcreditor’s petition would be maintainable, as a result of which theappellant’s appeal has been dismissed.

5. Learned counsel appearing on behalf of the appellant haspainstakingly taken us through the record, and has referred to the Code,together with Notifications from the Ministry of Corporate Affairs, which,in exercise of powers under Section 239 of the Code, have made Rulescalled the Companies (Transfer of Pending Proceedings) Rules, 2015.She has also referred to amendments made up to date in the EleventhSchedule to the Code and has argued before us that the winding uppetition that had been preferred by her would clearly fall within the ambitof Rule 5 of the aforesaid Rules inasmuch as notice under Rule 26 of theCompanies (Court) Rules had been served much prior to thecommencement of the Code. This being the case, this winding up petitionshould, therefore, have carried on and should be allowed to carry onbefore the High Court. The necessary concomitant of this argumentwas that the winding up proceedings before the High Court shouldcontinue and not proceedings filed by other creditors underthe Code.

A6. Mr. Sanjiv Sen, learned senior counsel appearing on behalf ofRespondent No. 1, countered these submissions and has placed beforeus all the relevant materials, statutory and otherwise, to state that thewhole object of the Code would be frustrated if petitions for winding upin the High Court were to continue in the face of the insolvency petitionsthat have been filed under the Code. He referred to some of ourBjudgments to buttress this submission and, in particular, to Section 238 ofthe Code. According to him, as has been held in some of our judgments,the proceedings that were initiated under Section 7 or Section 9 of theCode are independent proceedings, which must reach their logicalconclusion unhampered by any winding up petition that may be pendingCin a High Court. According to him, it is also important to remember thatthe basic objective of the Code is to infuse life into a corporate debtorwho is in the red, and it is only if the resuscitation process cannot becompleted in accordance with the provisions of the Code that liquidationtakes place under the Code. Keeping this in mind, it is obvious that thejudgment of the Appellate Tribunal can be sustained on the grounds arguedDby him and the appeal must, therefore, be dismissed.7. At this stage, it is important to advert to some of the provisionscontained in the Code. Section 255 of the Code reads as under:

“255. Amendments of Act 18 of 2013.- The Companies Act,E2013 shall be amended in the manner specified in the EleventhSchedule.”

8. In pursuance of this Section, the Eleventh Schedule to the Codemade various amendments to the Companies Act, 2013 on 15.11.2016with effect from 01.12.2016. Section 434 of the Companies Act, 2013was substituted as follows:-F

“434. Transfer of certain pending proceedings.- (1) On suchdate as may be notified by the Central Government in this behalf,—

(a) all matters, proceedings or cases pending before the Boardof Company Law Administration (herein in this section referredGto as the Company Law Board) constituted under sub-section(1) of Section 10-E of the Companies Act, 1956, immediatelybefore such date shall stand transferred to the Tribunal andthe Tribunal shall dispose of such matters, proceedings or casesin accordance with the provisions of this Act; H

(b) any person aggrieved by any decision or order of theCompany Law Board made before such date may file an appealto the High Court within sixty days from the date ofcommunication of the decision or order of the Company LawBoard to him on any question of law arising out of such order:

Provided that the High Court may if it is satisfied that theappellant was prevented by sufficient cause from filing an appealwithin the said period, allow it to be filed within a further periodnot exceeding sixty days; and

(c) all proceedings under the Companies Act, 1956, includingproceedings relating to arbitration, compromise, arrangementsand reconstruction and winding up of companies, pendingimmediately before such date before any District Court or HighCourt, shall stand transferred to the Tribunal and the Tribunalmay proceed to deal with such proceedings from the stagebefore their transfer:

Provided that only such proceedings relating to the winding upof companies shall be transferred to the Tribunal that are at astage as may be prescribed by the Central Government.

(2) The Central Government may make rules consistent with theprovisions of this Act to ensure timely transfer of all matters,proceedings or cases pending before the Company Law Board orthe courts, to the Tribunal under this section.”

9. On and from 17.08.2018, Section 434 was substituted again.This time, the provision reads as follows:- “434. Transfer of certain pending proceedings.- (1) On suchdate as may be notified by the Central Government in this behalf,—

(a) all matters, proceedings or cases pending before the Boardof Company Law Administration (herein in this section referredto as the Company Law Board) constituted under sub-section(1) of Section 10-E of the Companies Act, 1956, immediatelybefore such date shall stand transferred to the Tribunal andthe Tribunal shall dispose of such matters, proceedings or casesin accordance with the provisions of this Act; A

Provided that only such proceedings relating to the winding upof companies shall be transferred to the Tribunal that are at astage as may be prescribed by the Central Government:

Provided further that only such proceedings relating to casesother than winding up, for which orders for allowing orotherwise of the proceedings are not reserved by the HighCourts shall be transferred to the Tribunal:

Provided also that—

(i) all proceedings under the Companies Act, 1956 other thanthe cases relating to winding up of companies that are reservedfor orders for allowing or otherwise such proceedings; or

(ii) the proceedings relating to winding up of companies whichhave not been transferred from the High Courts; shall be dealt with in accordance with provisions of theCompanies Act, 1956 and the Companies (Court) Rules, 1959:]

Provided also that proceedings relating to cases of voluntarywinding up of a company where notice of the resolution byadvertisement has been given under sub-section (1) of Section485 of the Companies Act, 1956 but the company has not been dissolved before the 1st April, 2017 shall continue to be dealtwith in accordance with provisions of the Companies Act, 1956and the Companies (Court) Rules, 1959:

Provided further that any party or parties to any proceedingsrelating to the winding up of companies pending before anyCourt immediately before the commencement of the Insolvencyand Bankruptcy Code (Amendment) Ordinance, 2018, mayfile an application for transfer of such proceedings and theCourt may by order transfer such proceedings to theTribunaland the proceedings so transferred shall be dealt with by theTribunal as an application for initiation of corporate insolvencyresolution process under the Insolvency and Bankruptcy Code,2016 (31 of 2016).

(Emphasis supplied.)

10. When the Code was enacted with effect from 01.12.2016,two Notifications both dated 07.12.2015 were made. The firstNotification, which was titled as the Companies (Transfer of PendingProceedings) Rules, 2016 laid down in Rule 5 as follows:

“5. Transfer of pending proceedings of Winding up on theground of inability to pay debts.- (1) All petitions relating towinding up under clause (e) of Section 433 of the Act on theground of inability to pay its debts pending before a High Court,and where the petition has not been served on the respondent asrequired under Rule 26 of the Companies (Court) Rules, 1959shall be transferred to the Bench of the Tribunal established undersub-Section (4) of Section 419 of the Act, exercising territorialjurisdiction and such petitions shall be treated as applications underSections 7, 8 or 9 of the Code, as the case may be, and dealt within accordance with Part II of the code:

7, 8 or 9 of the Code, as the case may be, including details of theproposed insolvency professional to the Tribunal within sixty daysfrom date of this notification, failing which the petition shall abate.”

11. Simultaneously, on the same date, by the Companies (Removalof Difficulties) Fourth Order, 2016, it was made clear in sub-Clause 2 of the said Order as follows:-B

“(2) In the Companies Act, 2013, in Section 434, in sub-section(1), in clause (c), after the proviso, the following provisos shall beinserted, namely:- “Provided further that –

C xxx xxx xxx

12. By a Notification dated 29.06.2017, titled the Companies(Transfer of Pending Proceedings) Second Amendment, Rules, 2017,Rule 5 was substituted as follows:- D

“(5) Transfer of pending proceedings of Winding up on the groundof inability to pay debts.—(1) All petitions relating to winding upEof a company under clause (e) of Section 433 of the Act on theground of inability to pay its debts pending before a High Court,and, where the petition has not been served on the respondentunder Rule 26 of the Companies (Court) Rules, 1959, shall betransferred to the Bench of the Tribunal established under sub-Section (4) of Section 419 of the Companies Act, 2013, exercisingFterritorial jurisdiction to be dealt with in accordance with Part IIof the Code:

Provided that the petitioner shall submit all information, other thaninformation forming part of the records transferred in accordancewith Rule 7, required for admission of the petition under Sections7, 8 or 9 of the Code, as the case may be, including details of theproposed insolvency professional to the Tribunal upto 15[th] day ofJuly, 2017, failing which the petition shall stand abated:

Provided further that any party or parties to the petitions shall,after the 15[th] day of July, 2017, be eligible to file fresh applications under Sections 7 or 8 or 9 of the Code, as the case may be, inaccordance with the provisions of the Code:

Provided also that where a petition relating to winding up of acompany is not transferred to the Tribunal under this Rule andremains in the High Court and where there is another petitionunder clause (e) of Section 433 of the Act for winding up againstthe same company pending as on 15[th] December, 2016 such otherpetition shall not be transferred to the Tribunal, even if the petitionhas not been served on the respondent.”

13. Rules 26 and 27 of the Companies (Court) Rules, 1959 readas follows:

“Rule 26. Service of petition - Every petition shall be servedon the respondent, if any, named in the petition and on such otherpersons as the Act or these rules may require or as the Judge orthe Registrar may direct. Unless otherwise ordered, a copy of thepetition shall be served along with the notice of the petition.

Rule 27. Notice of petition and time of service - Notice ofevery petition required to be served upon any person shall be inForm No. 6, and shall, unless otherwise ordered by Court orprovided by these rules, be served not less than 14 days beforethe date of hearing.

Provided always that such notice when by the Act or under theseRules is required to be served on the Central Government, thesame shall, unless otherwise ordered by the Court, be served notless than 28 clear days before the date of hearing.”

14. Form No. 6 appended to Rule 27 reads as under:

“FORM No. 6(See Rule 27)

[Heading as in Form No. 1]Company Petition No………………. of 19

NOTICE OF PETITION

Take notice that a petition under Sec……………. of theCompanies Act, 1956, for …………………. presented by…………………. on the ………………. day of A

[2019] 2 S.C.R.

………………….. 19………………. was admitted on the………….. day of …………………19……………. and that thesaid petition is fixed for hearing before the Company Judge on the………………. day of …………………….. 19………. If you desire to support or oppose the petition at the hearing, you shouldgive me notice thereof in writing so as to reach me not laterthan……………. days before the date fixed for the hearing ofthe petition, and appear at the hearing in person or by youradvocate. If you wish to oppose the petition, the grounds ofopposition or a copy of your affidavit should be furnished withyour notice. A copy of the petition will be furnished to you if yourequire it on payment of the prescribed charges for the same/isenclosed herewith.

Dated…………… (Sd/-)………………Name…………………

(Advocate

for petitioner)

Address:

[This notice should be served on or before the ……………....

day of …………..19……………]

NOTE: Where the notice is to a respondent named in the petition, a copy of the petition should be served on him alongwith the notice.”

15. Shri Sen pointed out to us that there was a divergence ofviews in the interpretation of the aforesaid rules. The Bombay HighCourt in Ashok Commercial Enterprises vs. Parekh Aluminex Limited,(2017) 4 Bom. CR 653, stated that the notice referred to in Rule 26 wasa pre-admission notice and hence, held that all winding up petitions wherepre-admission notices were issued and served on the respondent will beretained in the High Court. On the other hand, the Madras High Courtin M/s. M.K. & Sons Engineering v/s. Eason Reyrolle Ltd.in CP/364/2016 has held that the notice under Rule 26 is referable to a post-admissionposition of the winding up petition and accordingly held that only thosepetitions where a winding up order is already made can be retained inthe High Court. For this purpose, the Madras High Court stronglyrelied upon Form No. 6 appended to Rule 27 and the expression “wasadmitted” occurring in the Notice of Petition contained in the said Form.

16. We are of the view that Rules 26 and 27 clearly refer to a pre-admission scenario as is clear from a plain reading of Rules 26 and 27,which make it clear that the notice contained in Form No. 6 has to beserved in not less than 14 days before the date of hearing. Hence, theexpression “was admitted” in Form No. 6 only means that notice hasbeen issued in the winding up petition which is then “fixed for hearingbefore the Company Judge” on a certain day. Thus, the Madras HighCourt view is plainly incorrect whereas the Bombay High Court view iscorrect in law.

17. The resultant position in law is that, as a first step, when theCode was enacted, only winding up petitions, where no notice underRule 26 of the Companies (Court) Rules was served, were to betransferred to the NCLT and treated as petitions under the Code. However,on a working of the Code, the Government realized that parallelproceedings in the High Courts as well as before the adjudicating authorityin the Code would stultify the objective sought to be achieved by theCode, which is to resuscitate the corporate debtors who are in the red.In accordance with this objective, the Rules kept being amended, untilfinally Section 434 was itself substituted in 2018, in which a proviso wasadded by which even in winding up petitions where notice has beenserved and which are pending in the High Courts, any person couldapply for transfer of such petitions to the NCLT under the Code, whichwould then have to be transferred by the High Court to the adjudicatingauthority and treated as an insolvency petition under the Code. Thisstatutory scheme has been referred to, albeit in the context of Section20 of the SICA, in our judgment which is contained in Jaipur Metals &Electricals Employees Organization Through General Secretary Mr.Tej Ram Meena vs.Jaipur Metals & Electricals Ltd. Through itsManaging Director &Ors., being a judgment by a Division Bench ofthis Court dated 12.12.2018.

18. After referring to the statutory scheme, as aforesaid, this Courtheld:

“17. However, this does not end the matter. It is clear thatRespondent No. 3 has filed a Section 7 application under the Codeon 11.01.2018, on which an order has been passed admitting suchapplication by the NCLT on 13.04.2018. This proceeding is anindependent proceeding which has nothing to do with the transfer A

of pending winding up proceedings before the High Court. It wasopen for Respondent No. 3 at any time before a winding up orderis passed to apply under Section 7 of the Code. This is clear froma reading of Section 7 together with Section 238 of the Codewhich reads as follows:

“238. Provisions of this Code to override other laws.—The provisions of this Code shall have effect, notwithstandinganything inconsistent therewith contained in any other law forthe time being in force or any instrument having effect by virtueof any such law.”

18. Shri Dave’s ingenious argument that since Section 434 of theCompanies Act, 2013 is amended by the Eleventh Schedule ofthe Code, the amended Section 434 must be read as being part ofthe Code and not the Companies Act, 2013, must be rejected forthe reason that though Section 434 of the Companies Act, 2013 issubstituted by the Eleventh Schedule of the Code, yet Section434, as substituted, appears only in the Companies Act, 2013 andis part and parcel of that Act. This being so, if there is anyinconsistency between Section 434 as substituted and the provisionsof the Code, the latter must prevail. We are of the view that theNCLT was absolutely correct in applying Section 238 of the Codeto an independent proceeding instituted by a secured financialcreditor, namely, the Alchemist Asset Reconstruction CompanyLtd. This being the case, it is difficult to comprehend how theHigh Court could have held that the proceedings before the NCLTwere without jurisdiction. On this score, therefore, the High Courtjudgment has to be set aside. The NCLT proceedings will nowcontinue from the stage at which they have been left off.Obviously, the company petition pending before the High Courtcannot be proceeded with further in view of Section 238 of theCode. The writ petitions that are pending before the High Courthave also to be disposed of in light of the fact that proceedingsunder the Code must run their entire course. We, therefore, allowthe appeal and set aside the High Court’s judgment.”

19. Mr. Sen also referred us to a judgment of the learned SingleJudge of the High Court of Bombay reported, in (2018) 2 AIR Bom R350 in PSL Limitedvs. Jotun India Private Limited. The LearnedSingle Judge, after referring to the self-same provisions of the Code andHsubordinate legislation made thereunder, held as follows:- “93. The fact that post notice winding up petitions continue to begoverned by the Companies Act, 1956, only means – that to thoseproceedings it will be the Companies Act, 1956 which will apply.It does not, however, mean that if, in a post-notice winding uppetition a new proceeding is filed under IBC, and where ordersare passed by NCLT, including under Section 14 of IBC, theconsequences provided for under IBC will not apply to post noticeproceeding, whatever their stage may be.

xxx xxx xxx

98. Furthermore, this transitional provision cannot in any way affectthe remedies available to a person under IBC, vis-a-vis thecompany against whom a winding up petition is filed and retainedin the High Court, as the same would amount to treating IBC as ifit did not exist on the statute book and would deprive persons ofthe benefit of the new legislation. This is contrary to the plainlanguage of IBC. If the contentions of petitioner were to beaccepted, it would mean that in respect of companies, where apost notice winding up petition is admitted or a provisional liquidatorappointed, provisions of IBC can never apply to such companiesfor all times to come.

xxx xxx xxx

100. The mere fact that post notice winding up proceedings are tobe “dealt with” in accordance with the provisions of the CompaniesAct, 1956, does not bar the applicability of the provisions of IBCin general to proceedings validly instituted under IBC, [nor] doesit mean that such proceeding can be suspended.”

20. This judgment was upheld by a Division Bench of the BombayHigh Court. We may hasten to add that the law declared by this judgmenthas our approval.

21. The resultant position, therefore, is that we agree with thelearned counsel for the appellant that the Appellate Tribunal’s reasoningis not correct. Section 11 of the Code specifies which persons are noteligible to initiate proceedings under it. In particular, Section 11(d) readsas follows:

“11. Persons not entitled to make applications- The followingpersons shall not be entitled to make an application to initiate AB

492SUPREME COURT REPORTS

[2019] 2 S.C.R.

Acorporate insolvency resolution process under this Chapter,namely:- xxx xxx xxx(d) a corporate debtor in respect of whom a liquidation order hasbeen made.

Explanation - For the purposes of this section, a corporate debtorincludes a corporate applicant in respect of such corporate debtor.”

22. This Section is of limited application and only bars a corporatedebtor from initiating a petition under Section 10 of the Code in respectCof whom a liquidation order has been made. From a reading of thisSection, it does not follow that until a liquidation order has been madeagainst the corporate debtor, an Insolvency Petition may be filed underSection 7 or Section 9 as the case may be, as has been held by theAppellate Tribunal. Hence, any reference to Section 11 in the contextof the problem before us is wholly irrelevant. However, we decline toDinterfere with the ultimate order passed by the Appellate Tribunal becauseit is clear that the financial creditor’s application which has been admittedby the Tribunal is clearly an independent proceeding which must bedecided in accordance with the provisions of the Code.

23. Though, we are not interfering with the Appellate Tribunal’sEorder dismissing the appeal, we grant liberty to the appellant before us toapply under the proviso to Section 434 of the Companies Act (added in2018), to transfer the winding up proceeding pending before the HighCourt of Delhi to the NCLT, which can then be treated as a proceedingunder Section 9 of the Code.

F24. With these observations, we dispose of the aforesaid appeal.

Divya Pandey

Appeal disposed of