Case Law Details
Duncans Industries Ltd. Vs A. J. Agrochem (Supreme Court of India)
Conclusion: Insolvency and Bankruptcy Code, 2016 (IBC) proceedings would have an overriding effect over the Tea Act, 1953 and even without such consent of the Central Government, the insolvency proceedings under Section 7 or Section 9 of the IBC initiated by the operational creditor should be maintainable.
Held: Assessee-company owned and managed 14 tea gardens. Out of 14 tea gardens, the Central Government in exercise of its power under Section 16E of the Tea Act, 1953 had taken over the control of 7 tea gardens. Respondent-operational creditor used to supply pesticides, insecticides, herbicides etc. to assessee-company. According to the operational creditor, a sum of Rs.41,55,500/ was due and payable by assessee-corporate debtor to operational creditor. That the respondent initiated the proceedings against the assessee-corporate debtor before the NCLT under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). Initiation of the proceedings under the IBC by the assessee-operation creditor was opposed by assessee-corporate debtor mainly and solely on the ground that, as provided under Section 16G(1)(c) of the Tea Act, once the management of tea unit had been taken over by the Central Government, then the proceedings for winding up or appointment of receiver could not be initiated without the consent of the Central Government. NCLT held that in view of the statutory provisions under Section 16G of the Tea Act and as the prior consent of the Central Government had not been obtained, the proceedings under Section 9 of the IBC should not be maintainable. In an appeal before NCLAT by operational creditor, NCLAT held that respondent’s application under Section 9 of the IBC would be maintainable even without the consent of the Central Government in terms of Section 16G of the Tea Act. It was held following the decision in case of Swiss Ribbons Put. Ltd. v. Union of India [AIR 2019 SC 739 : (2019) 4 SCC 17], wherein it was held that the primary focus of the legislation while enacting the IBC is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate debt by liquidation and such corporate 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”. Therefore, considering Section 238 of the IBC, which is a subsequent Act to the Tea Act, 1953, shall be applicable and the provisions of the IBC shall have an overriding effect over the Tea Act, 1953. Any other view would frustrate the object and purpose of the IBC. The sum and substance would be that the provisions of the IBC would have an overriding effect over the Tea Act, 1953 and that no prior consent of the Central Government before initiation of the proceedings under Section 7 or Section 9 of the IBC would be required and even without such consent of the Central Government, the insolvency proceedings under Section 7 or Section 9 of the IBC initiated by the operational creditor shall be maintainable.
FULL TEXT OF THE SUPREME COURT JUDGMENT
1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 20.06.2019 passed by the National Company Law Appellate Tribunal (for short “NCLAT”) by which the learned Appellate Tribunal has allowed the said appeal preferred by the respondent herein and has quashed and set aside the order dated 05.10.2018 passed by the National Company Law Tribunal, Kolkata (for short “NCLT”), holding that the respondent’s application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (for short “IBC”) would be maintainable, the original respondent has preferred the present appeal.
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