Jai Balaji Industries Limited (In Liquidation) vs Lakhotia Transport Company Pvt. Ltd.

Ashis Kumar Chakraborty, J.

In this application the applicant, State Bank of India (hereinafter referred to as the "applicant bank") has prayed for, recalling of the order dated June 07, 2018 passed by this Court in C.A. No. 51 of 2018 with C.P. No. 822 of 2014. By the said order, this Court directed winding up of the company, Jai Balaji Industries Ltd., [hereinafter referred to as the ""company (presently in liquidation)""] and directed the Official Liquidator to forthwith take possession of all the assets and properties of the company (presently in liquidation) lying at its registered office and the factories, together with its business and affairs.

The brief facts leading up to the filing of the present application are that the petitioning creditor, Lakhotia Transport Company Pvt. Ltd. filed the application, C.P. No. 822 of 2014, before this Court claiming winding up of the company (presently in liquidation)"" for non-payment of its dues of Rs.4,69,46,461/- on account of transportation charges of the goods of the company ( presently in liquidation) from its factories to various places. The company (presently in liquidation) contested the winding up application, C.P. No. 822 of 2014. By an order dated August 17, 2015 a learned Single Judge of this Court admitted the said winding up application for the principal sum of Rs. 3,87,49,0003/-, together with interest thereon at the rate of 8% per annum from February 11, 2014. It was, however, directed if the company (presently in liquidation) would pay off the aforementioned entire amount inclusive interest and costs assessed at 2000 GMs within a fortnight from the date of the said order, the petition would remain permanently stayed but, in default of such payment the petition would be advertised in the newspapers. The company (presently in liquidation) carried the said order dated August 17, 2015 in appeal ACO No. 146 of 2015 with APOT No. 419 of 2015, before the Division Bench.

By order dated September 04, 2015 the Division Bench directed that subject to deposit of Rs. 50,00,000/- (Rupees Fifty Lakh only) by the appellant company within September 11, 2015 there would be stay of operation of the order under appeal and in the case of default, the stay order would stand vacated. Since the company (presently in liquidation) did not comply with the direction for payment passed by the Division Bench on September 14, 2015 the petitioning creditor caused advertisement of the winding up application being published in the newspapers. Thereafter, the proceedings of the said winding up application, C.P. No. 822 of 2014 was stayed on the ground that the company (presently in liquidation) was referred to Board of Industrial and Financial Reconstruction (hereinafter referred to as "BIFR"), under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (in short ""SICA, 1985""). Thus, by an order dated March 22, 2016 a learned Single Judge of this Court adjourned the hearing of the said winding up application sine die, with liberty to the parties to mention upon notice.

On May 28, 2016 the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "the IBC") was notified and the said Code came into force on that date. With the Sick Industrial Companies (Special Provisions) Repealing Act, 2003 coming into force with effect from December 01, 2016, any reference pending before BIFR stood abated. Thereafter, the company (presently in liquidation) had an option to make reference to the National Company Law Tribunal (in short "NCLT"), under the IBC within 180 days from December 01, 2016. Nevertheles, the company (presently in liquidation) was not referred to NCLT. On March 16, 2017 the company (presently in liquidation) filed an application, C.A. No. 133 of 2017 praying for, stay of all further proceedings in the winding up application, C.P. No. 822 of 2014. During the pendency of the said application the petitioning creditor and the said company (in liquidation) agreed to settle their disputes in the winding up application and by a consent order dated April 17, 2017 a learned Single Judge of this Court disposed of the said application, C.A. No. 133 of 2017. In terms of the said consent order dated April 17, 2017 the company (presently in liquidation) was liable to pay a sum of Rs. 3,77,88,569/- to the petitioning creditor, out of which Rs. 7,88,569/- was payable at the time of passing of the said order and balance sum of Rs. 3,70,00,000/- would be payable by the company (presently in liquidation) to the petitioning creditor in monthly instalments of Rs. 2,00,000/- each, starting on and from May 02, 2017 and thereafter, on or before the seventh day of each succeeding month. However, in case of default in payment of any two consecutive instalments the petitioning creditor would be entitled to proceed with the winding up proceeding as before. As per the consent order, subject to payment of the entire sum of Rs. 3,77,88,569/- by the company to the petitioning creditor the winding up proceeding would remain permanently stayed upon the matter being mentioned before the Court and in the meantime, the winding up petition would remain adjourned sine die.

On February 16, 2018 the petitioning creditor filed the application, C.A. No. 51 of 2018 alleging that the company (presently in liquidation) failed to make payment in terms of the consent order dated April 17, 2017 passed in C.A. No. 133 of 2017 and prayed for winding up of the company (presently in liquidation) and other consequential reliefs. On June 06, 2018 the petitioning creditor, upon notice to the advocate on record of the company (presently in liquidation) mentioned the application C.A. No.51 of 2018 before this Court for early hearing. On June 06, 2018 the said application appeared before this Court but when the same was taken up for hearing none appeared for the said company (presently in liquidation) and the hearing of the application was adjourned till the next date.

On June 07, 2018 when the application C.A. No.51 of 2018 was once again taken up for hearing the petitioning creditor produced before this Court a notice served upon the advocate on record of the company (presently in liquidation). However, once again the company (presently in liquidation) remained unrepresented. Accordingly, this Court took up the said application for hearing and it was submitted on behalf of the petitioning creditor that in terms of the consent order dated April 17, 2017 the company made payment of the monthly instalments up to the month of November and thereafter, it failed to pay all the monthly instalments amounting to Rs. 2,86,00,000/-. The petitioning creditor contended that in view of the said defaults committed by the company (presently in liquidation) to make payment in terms of the said order dated April 17, 2017 it is entitled not only to proceed with the winding up application C.P. 822 of 2014 but also to obtain the final order of winding up of the company. After the hearing the submissions made on behalf of the petitioning creditor which remained uncontroverted, this Court passed the said order dated June 07, 2018 allowing the winding up application.

As mentioned earlier, it is the said order dated June 07, 2017 which is sought to be recalled by the applicant bank. In the application it is the case of the applicant bank that from 2004 onwards, it had granted financial assistance to the company (presently in liquidation). Thereafter, State Bank of Indore, State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Travancore and State Bank of Hyderabad which now stand merged with the applicant had also granted financial assistance to the company (presently in liquidation). All such financial assistance granted to the said company now stands vested in the applicant bank and more than Rs. 1.82 crores is the debt which is owed by the company (presently in liquidation) to the applicant bank. Therefore, when the IBC of 2016 came into force and the winding up application, C.P. No. 822 of 2014 remained adjourned sine die in terms of the said order dated October 05, 2015, the applicant bank filed an application, C.P. No. 767/KB/2017, under Section 7 of IBC before the NCLT, Kolkata Bench for initiating corporate insolvency resolution process in respect of the company (presently in liquidation).

According to the applicant bank, it filed the said proceeding under IBC against the company (presently in liquidation) to adopt the resolution route within a time frame for maximisation of the assets of the latter and for the benefit of all the stake holders. It was stressed that the company cannot have and has no defence to the huge amount of claim of the applicant bank and the said application filed before the NCLT would be admitted.

However, the said company (presently in liquidation) and its workers' union, in their desperate attempts to stall the admission of the said application filed by the applicant before the NCLT filed two writ petitions before the Chattisgarh High Court. Although in its writ petition the company (presently in liquidation) obtained an ex-parte order dated March 14, 2018 passed by a learned Single Judge of Chattisgarh High Court staying the proceeding before the NCLT but subsequently, with the presence of the applicant bank and the company (presently in liquidation) failing to deposit Rs. 100 crores before the High Court, the said interim order dated March 14, 2014 stood vacated. On May 09, 2018 the writ petition by the workers of the company (presently in liquidation) was withdrawn.

A further writ petition filed by another workers' union of the company (presently in liquidation) before this High Court, challenging the right of the applicant bank to proceed with the application under the IBC before the NCLT was also withdrawn on May 18, 2018. With regard to the knowledge of the order dated June 07, 2018 passed by this Court the applicant bank claimed that on June 11, 2018 when its application under IBC was taken up for hearing before the NCLT, relying on the said order dated June 07, 2018 the learned counsel appearing for the company (presently in liquidation), its workers' union pressed for dismissal of the proceeding under IBC. According to the applicant bank, the company (presently in liquidation) was well aware of the date of hearing of the application, C.A.51 of 2018 before this Court on June 06, 2017 and June 07, 2018 but they intentionally avoided the said hearing and allowed the said order dated June 07,2018 being passed for stalling the proceeding before the NCLT.

By referring to the Companies (Court) Rules, 1959 (hereinafter referred to as "the 1959 Rules"), particularly Rule 99 thereof, it was submitted by the applicant bank that in the present case, no doubt after the admission of the winding up application on September 14, 2015 the petitioning creditor caused advertisement of the winding up application being published in the newspapers stating that the application will be taken up for hearing on October 14, 2015 but subsequently, when the company (presently in liquidation) was registered with BIFR, by the order dated March 22, 2016 the hearing of the winding up application, C.P. No. 822 of 2014 was adjourned sine die. Thus, there was no occasion for the applicant bank to participate in the said winding up application on June 07, 2018 without any fresh advertisement.

It was strongly contended that after advertisement of the winding up application, C.P. No. 822 of 2014 in the newspapers, the same assumed the representative character and neither the petitioning creditor nor the company (presently in liquidation) was entitled to obtain the said consent order dated April 17, 2017 in C.A. No. 133 of 2017 providing for payment of the dues of the petitioning creditor above by the company (presently in liquidation). It was submitted that the petitioning creditor and the company (presently in liquidation) surreptitiously obtained both the said orders dated April 17, 2017 and June 07, 2018 without giving any opportunity to the applicant bank and other creditors of the company (presently in liquidation) to participate in the winding up application. By referring to the said application, C.A. No. 133 of 2017 it was pointed out on behalf of the applicant bank that the petitioning creditor and the company (presently in liquidation) obtained the said consent order dated April 17, 2017 on the basis of the averments made by the company (presently in liquidation) in the said application that the said advertisements of the winding up application published in the newspapers on September 14, 2015 were not valid advertisements and with the publication of the same the winding up application failed to assume a representative character.

It was argued for the applicant bank that in the facts of the present case, before passing the final order of the winding up of the company (presently in liquidation), this Court ought to have directed the petitioning creditor to once again advertise the winding up application, C.P. No. 822 of 2014 in the newspapers. It was further argued that without publication of the fresh advertisement of the winding up application, C.P. No. 822 of 2014 the applicant bank could not come to know about the date fixed for hearing of the winding up application and consequently, it was deprived of the right to make appropriate submission in the said winding up application and to inform the Court of the pendency of the said application under IBC before the

NCLT. On these grounds, the applicant bank strenuously pressed for recalling of the said order dated June 07, 2018 passed by this Court.

The present application has been strongly contested mainly by the petitioning creditor. It was argued by the petitioning creditor that in terms of the said order dated April 17, 2017 when the company (presently in liquidation) defaulted to pay the entire amount of Rs. 3,77,88,569/- it was entitled to proceed with the said winding up application, C.P. No. 822 of 2014 and when the applicant bank chose not to appear before this Court on June 07, 2018 to oppose the winding up of the company (presently in liquidation) the latter. It was submitted by the petitioning creditor that as per the provisions contained in the IBC and the Eleventh Schedule thereunder, only an winding up application filed under the Companies Act, 1956 notice of which has not been served upon the company shall stand transferred to the NCLT. Therefore, in the present case, when the winding up application had already been admitted by the said order dated August 17, 2015 passed by the learned Single Judge of this Court the petitioning creditor was entitled to proceed with its winding up application, C.P. 822 of 2014 and this Court rightly allowed the application C.A. No.51 of 2018 by passing directing winding up of the company (presently in liquidation).

In support of such contention, reliance was placed by the petitioning creditor on a Single Bench decision of the Bombay High Court in the case of Ashok Commercial Enterprises-vs- Parekh Aluminex Ltd. reported in (2017) 202 Comp Cases 148. It was further argued for the petitioning creditor that Rule 99 of the Rules of 1959 provides for advertisement of the winding up application in the newspaper only once and in this case, when the advertisement of the winding up application, C.P. 822 of 2014 had already been published in the newspapers on September 14, 2015, the submission of the applicant bank that the winding up order dated June 07, 2018 should be recalled on the ground of absence of further advertisement of the winding up application is fallacious.

It was emphasised that it is not the case of the applicant bank that the company (presently in liquidation) is capable of paying the dues of its creditors or that the company (presently in liquidation) should not be bound up but it is pressing for recalling of the order dated June 07, 2018 with the sole object to pursue its proceeding filed, under IBC, before the NCLT where the petitioning creditor has little scope to claim any relief. The petitioning creditor, however, could not dispute that the company (presently in liquidation) asserted in its application, C.A. 133 of 2017 that the advertisement of the winding up application, C.P. 822 of 2014 in the newspapers on September 14, 2015 was an invalid advertisement and based on such assertion by the company (presently in liquidation), the parties to the said application, C.A. 133 of 2017 obtained the said consent order dated April 17, 2017.

The learned Senior Advocate appearing for some of the promoters of the company (presently in liquidation) submitted that the said promoters have filed an application for recalling of the order dated June 07, 2018 and to submit a scheme for revival of the company (presently in liquidation). I have considered the materials on record and the arguments advanced on behalf of the applicant bank and the petitioning creditor as well . In the present case, it is a fact that when the company (presently in liquidation) failed to deposit Rs. 50,00,000/- as directed by the Division Bench on September 04, 2015 the petitioning creditor caused the advertisement of the winding up application being published in newspapers stating that application would be heard by the Court on October 14, 2015. However, when the company (presently in liquidation) was registered with the BIFR, by the order dated March 22, 2016 a learned Single Judge of this Court adjourned the hearing of the winding up application, C.P.

No. 822 of 2014 sine die. Until the company (presently in liquidation) filed the said application, C.A. No. 133 of 2017 the winding up application did not appear before this Court. Even in the said application, C.A. No. 133 of 2017 the company (present in liquidation) claimed the advertisement of the winding up application published in the newspapers on September 14, 2015 to be invalid advertisement.

In the facts of the present case as discussed above, I find that in the instant case before allowing the application C.A.51 of 2018 and passing the order dated June 07, 2018, this Court ought to have directed publication of fresh advertisement of the winding up application in the newspapers and enable the secured creditors and the other creditors of the company (presently in liquidation) to participate in the winding up application. In the instant case the contentions raised by the petitioning creditor to oppose the prayer of the applicant bank in this application do not have any merit. For the reasons as aforesaid, the application, C.A. No. 165 of 2018 succeeds and the order dated June 07, 2018 passed by this Court in C.A. No. 51 of 2018 is recalled .

Let, C.A. No. 51 of 2018, together with the winding up application, C.P. No. 822 of 2014 appear before this Court, under heading 'Company Matter Adjourned', on July 09, 2018 when appropriate direction will be passed for fresh advertisement of the winding up application of the petitioning creditor in the newspapers. It is, however, made clear that since this application is disposed of without requiring the petitioning creditor to file its affidavit-in-opposition, the allegations made against it in this application, if any, shall be deemed not to have been admitted. With the above directions, C.A. No. 165 of 2018 stands disposed of. There shall, however, be no order as to costs. Urgent certified copy of this judgement, if applied for, be made available to the parties subject to compliance with all requisite formalities.