Late Mona Aggarwal Vs.Ghaziabad Engg Company Ltd & Ors. - Even after removal of the name of the company from the register of companies the NCLT can proceed with the petition for winding up under Section 271 of the Companies Act, 2013.

NCLAT (18.03.2020) in Late Mona Aggarwal Vs. Ghaziabad Engg. Company Ltd & Ors. [Company Appeal (AT) No.320 of 2019] held that;

• From sub-section (8) of Section 248, it is clear that Section 248 in no manner will affect the powers of the Tribunal to wind up the company, the name of which has been struck off from the register of companies. Therefore, even after removal of the name of the company from the register of companies the NCLT can proceed with the petition for winding up under Section 271 of the Companies Act, 2013.

Excerpts of the Order;

This appeal filed by Late Smt Mona Aggarwal (since deceased) through her legal heirs Mr. Vijay Kumar Aggarwal and other shareholders of the Respondent No.1 company against the order dated 7.8.2019 passed by NCLT, New Delhi in Company Petition No.1176/2016 thereby dismissing the petition with liberty to file fresh one as and when the company’s name is revived.

# 2. Brief facts of this appeal are that on 22.11.2016 appellants as shareholder of Respondent No.1 filed a petition before Hon’ble High Court of Delhi seeking winding up under the provisions of Section 433(c), (f) and (g) of the Companies Act, 1956. On 12.4.2017 the Hon’ble High Court as per notification Regd. No.D.L.-33004/99 dated 7.12.2016 issued by Ministry of Corporate Affairs transferred the said petition to NCLT Principal Bench, New Delhi. NCLT vide order dated 28.7.2017 directed the petition to be amended  to refer to the relevant sections of the Companies Act, 2013. In compliance of the directions the petition was amended i.e. the petition treated as filed under Section 271 of the Companies Act, 2013. On 19.9.2017 NCLT issued notice on the petition for winding up of the Respondent No.1 to the Respondents herein. During the pendency of the petition, ROC vide order dated 30.6.2017 exercising powers under sub-section (5) of Section 248 of the Companies Act 2013 struck off the name of the Company from register of companies with effect from 7.6.2017. The Respondent No.2 filed an appeal No.632-252-ND -2018 before NCLT Delhi under Section 252 of the Companies Act, 2013 for revival of the Company which is pending for adjudication before the NCLT. The petition for winding up was adjourned from time to time to await the outcome of the appeal under Section 252 of the Companies Act, 2013 filed for revival of the Respondent No.1 company. However on 7.8.2019 NCLT rejected the petition for winding up with liberty to the petitioner(Appellants) to file a fresh one as and when the respondent company is revived.

# 11. Admittedly appellants have filed petition for winding up of Respondent No.1 company on 22.11.2016. Subsequently this petition was transferred to NCLT New Delhi. During the pendency of this petition the name of the company has been struck off w.e.f. 07.06.2017 by ROC exercising power under sub-section (5) of Section 248 of the Companies Act, 2013. Ld NCLT by the impugned order has rejected the winding up petition with liberty to file a fresh one when the name of the company is revived.

# 12. The question for consideration before us that during the pendency of winding up petition the name of the company has been struck off under Section 248 of the Companies Act 2013. In such circumstances whether the NCLT can proceed with winding up petition or not.

# 14. From sub-section (8) of Section 248, it is clear that Section 248 in no manner will affect the powers of the Tribunal to wind up the company, the name of which has been struck off from the register of companies. Therefore, even after removal of the name of the company from the register of companies the NCLT can proceed with the petition for winding up under Section 271 of the Companies Act, 2013.

# 15. We have taken the same view in the case of Mr Hemang P:hophallia (supra) 

# 16. With the aforesaid, we are of the considered view that the impugned order is not sustainable in law. Hence the order is hereby set aside and the matter is remitted to NCLT, New Delhi for deciding the winding up petition on merit as per law. However, no order as to cost.

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Hemang Phophalia Vs. M/s. The Greater Bombay Co-operative Bank Limited & Anr - Application under Sections 7 and 9 is maintainable against the ‘CD’, even if the name of a ‘CD’ has been struck-off.

 NCLAT (05.09.2019) in Hemang Phophalia Vs. M/s. The Greater Bombay Co-operative Bank Limited & Anr. [Company Appeal (AT) (Insolvency) No. 765 of 2019] held that;

• From sub-section (3) of Section 252, it will be evident that the Tribunal, by the order, before expiry of twenty years from the publication in the Official Gazette of the Notice under sub-Section (5) of Section 248, on an application made by a creditor or workman, may pass order and give such other directions and make such provisions as deemed just for placing the name of the Company and all other persons in the same position as nearly as may be as if the name of the Company had not been struck off from the Register of Companies.

• The name of the Company having been struck-off, the Corporate Person cannot file an application under Section 59 for Voluntary Liquidation. In such a case and in view of the provisions of Section 250 (3) read with Section 248 (7) and (8), we hold that the application under Sections 7 and 9 will be maintainable against the ‘Corporate Debtor’, even if the name of a ‘Corporate Debtor’ has been struck-off.

• we hold that the Adjudicating Authority who is also the Tribunal is empowered to restore the name of the Company and all other persons in their respective position for the purpose of initiation of ‘Corporate Insolvency Resolution Process’ under Sections 7 and 9 of the I&B Code based on the application, if filed by the ‘Creditor’ (‘Financial Creditor’ or ‘Operational Creditor’) or workman within twenty years from the date the name of the Company is struck off under sub-section (5) of Section 248. In the present case, application under Section 7 having admitted, the ‘Corporate Debtor’ and its Directors, Officers, etc. deemed to have been restored in terms of Section 252(3) of the Companies Act.

Excerpts of the Order;

First Respondent – The Greater Bombay Co-operative Bank Limited (hereinafter referred to as the ‘Financial Creditor’) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘I&B Code’) for initiating ‘Corporate Insolvency Resolution Process’ against Penguine Umbrella Works Private Limited (‘Corporate Debtor’), alleging default in repayment of Rs.9,11,08,439.37/- including interest and other charges. The Adjudicating Authority (National Company Law Tribunal), Mumbai Bench by impugned order dated 12th June, 2019 having admitted the application, the present Appeal has been preferred by Mr. Hemang Phophalia, Ex-Director and Shareholder of the ‘Corporate Debtor’.

# 2. Learned Counsel appearing on behalf of the Appellant submitted that name of the ‘Corporate Debtor’ was struck-off from the Register of the Companies under Section 248 of the Companies Act, 2013 (hereinafter referred to as the ‘Companies Act’), therefore, the application under Section 7 against non-existent Company (‘Corporate Debtor’) is not maintainable.

# 3. It was further submitted that the application under Section 7 preferred by 1st Respondent Bank – ‘Financial Creditor’ was barred by limitation.

# 6. The question arises for consideration is whether an application under Section 7 or 9 for initiating ‘Corporate Insolvency Resolution Process’ is maintainable against a Company/ ‘Corporate Debtor’, if the name of the Company/ ‘Corporate Debtor’ is struck-off from the Register of the Companies.

# 7. For deciding the issue, it is necessary to refer the relevant provisions of the Companies Act, 2013, as also the reasons and manner in which the name of a Company is struck-off.

# 8. Chapter XVIII of the Companies Act deals with “Removal of Names of Companies from the Register of Companies”. The Registrar of Companies is empowered under Section 248 of Companies Act to remove the name of the Company from the Register of the Companies, which reads as follows: - . . . . . . . 

# 9. As per sub-section (6) of Section 248, before passing an order under sub-section (5) (removing the name from the Register of Companies), the Registrar is to satisfy himself that sufficient provision has been made for realization of all amount due to the company and for the payment or discharge of its liabilities and obligations within a reasonable time and, if necessary, obtain necessary undertakings from the Managing Director, Director or other persons in charge of the management of the Company.

# 10. As per proviso thereof, notwithstanding the undertakings referred to in sub-section (6), the assets of the Company are to be made available for payment or discharge of its liabilities and obligations even after the date of the order removing the name of the Company from the Register of Companies.

# 11. From sub-section (7) of Section 248, it is also clear that the liability, if any, of every director, manager or other officer who was exercising any power of management, and of every member of the company dissolved under sub-section (5) of Section 248, shall continue and may be enforced as if the company had not been dissolved.

# 12. From sub-section (8) of Section 248, it is clear that Section 248 in no manner will affect the power of the Tribunal to wind up a company, the name of which has been struck off from the Register of Companies.

# 13. Section 250 of the Companies Act, 2013 relates to effect of Company notified as dissolved and reads as follows: -

• “250. Effect of company notified as dissolved.—Where a company stands dissolved under section 248, it shall on and from the date mentioned in the notice under sub-section (5) of that section cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date except for the purpose of realizing the amount due to the company and for the payment or discharge of the liabilities or obligations of the company.”

# 14. Therefore, it is clear that after removal of the name of the Company from the Register of the Company for the purpose of right of realization of all amount due to the Company and for the purpose of payment or discharge of its liabilities or obligations of Company continues.

# 16. From sub-section (3) of Section 252, it will be evident that the Tribunal, by the order, before expiry of twenty years from the publication in the Official Gazette of the Notice under sub-Section (5) of Section 248, on an application made by a creditor or workman, may pass order and give such other directions and make such provisions as deemed just for placing the name of the Company and all other persons in the same position as nearly as may be as if the name of the Company had not been struck off from the Register of Companies.

# 17. The Tribunal is the Adjudicating Authority in terms of Section 60(1) of the I&B Code. Hence, on one side it plays role of ‘Adjudicating Authority’ and on the other ‘Tribunal’ under the Companies Act. Therefore, if an application is filed by the ‘Creditor’ (‘Financial Creditor’ or (‘Operational Creditor’) or workman (‘Operational Creditor’) before the expiry of twenty years from the publication in the Official Gazette of the Notice under sub-section (5) of Section 248, it is open to the Adjudicating Authority to give such directions and make such provisions as deemed just for placing the name of the Company and all other persons in the same position nearly as may be as if the name of the Company had not been struck off from the Register of Companies.

# 18. As per amended Clause (94-A) of Section 2 of the Companies Act, 2013 “winding up” means ‘winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable’. Therefore, it is clear that the Company, whose name has been removed from the Register of the Companies can be liquidated under the I&B Code.

# 19. In terms of Part II of I&B Code, for the purpose of liquidation, except ‘Voluntary Liquidation of Corporate Persons’ under Section 59 of the I&B Code, procedure of ‘Corporate Insolvency Resolution Process’ is to be followed, if a proceeding is initiated under Sections 7 or 9 of the I&B code. Instead of liquidation, the first step to be taken is to ensure that in a time bound manner the value of assets of Corporate Debtor/ Company is maximized and to promote entrepreneurship, availability of credit by balancing the interest of all the stakeholders; within an active legal framework for timely resolution of insolvency and bankruptcy. Liquidation of assets of the ‘Corporate Debtor’/ Company is not the object, but object is revival and rehabilitation of the ‘Corporate Debtor’/ Company by way of ‘Resolution’ and maximization of the value of assets of the ‘Corporate Debtor’ and balancing the interest of all the stakeholders.

# 20. The name of the ‘Corporate Debtor’ (Company) may be struck-off, but the assets may continue. Whether in the present case, there are assets of the ‘Corporate Debtor’ or not can be looked into only by the ‘Interim Resolution Professional’/ ‘Resolution Professional’.

# 21. The name of the Company having been struck-off, the Corporate Person cannot file an application under Section 59 for Voluntary Liquidation. In such a case and in view of the provisions of Section 250 (3) read with Section 248 (7) and (8), we hold that the application under Sections 7 and 9 will be maintainable against the ‘Corporate Debtor’, even if the name of a ‘Corporate Debtor’ has been struck-off.

# 22. So far as, liability of the Ex-Directors or Shareholders or Officers are concerned, Section 248 (7) of the Companies Act being clear, we are not expressing specific opinion, till any order is passed by the Adjudicating Authority or demand is made by the ‘Interim Resolution Professional’.

# 23. In view of the aforesaid provision, we hold that the Adjudicating Authority who is also the Tribunal is empowered to restore the name of the Company and all other persons in their respective position for the purpose of initiation of ‘Corporate Insolvency Resolution Process’ under Sections 7 and 9 of the I&B Code based on the application, if filed by the ‘Creditor’ (‘Financial Creditor’ or ‘Operational Creditor’) or workman within twenty years from the date the name of the Company is struck off under sub-section (5) of Section 248. In the present case, application under Section 7 having admitted, the ‘Corporate Debtor’ and its Directors, Officers, etc. deemed to have been restored in terms of Section 252(3) of the Companies Act.

# 24. We find no merit in this Appeal, it is accordingly dismissed. No cost.

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V. Ramakrishnan Vs. M/s. Veesons Energy Systems Pvt. Ltd. & Ors - Guarantor's Property during Moratorium - Right of Subrogation.

NCLT Chennai (18.09.2017) in Mr. V. Ramakrishnan Vs. M/s. Veesons Energy Systems Pvt. Ltd.  & Ors. [IA 05/2017 in CP/510/IB)/CB/2017] held that;

• Section 140 of the Indian Contract Act, 1872

• "Rights of surety on payment or performance. Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.

• It is clear that if the Financial Creditor during the Corporate Insolvency Resolution Process and declaration of the moratorium is permitted to proceed against the personal guarantor of the Corporate Debtor for recovery of the outstanding debt to the extent of the personal guarantee given, then, the security interest, if any, of the Financial Creditor shall get transferred to  the guarantor which will be in violation of Section 14  (1) (b) of the I&B Code, 2016.

Excerpts of the Order;

# 1. Under adjudication is an Interlocutory Application No: 5/2017 in CP/510/IB)/CB/2017 that as been filed by Guarantor (Promoter) viz., Mr. V. Ramakrishnan against M/s Veesons Energy Systems  Private Limited and State Bank of India. The Applicant (hereinafter called the Guarantor) is the Managing Director and Promoter of M/s. Veesons Energy Systems Private Limited who has given personal guarantee against the loan secured by M/s. Veesons Energy Systems Private Limited from State Bank of India. His contentions is that since is under the process of Corporate Insolvency Resolution Process as per the Order passed by this Bench on 04.08.2017 and the moratorium is declared, the first meeting of the Committee of Creditors (COC) has also been held and Mr. Raghavendaran has been recommended for appointment of Resolution Professional(RP). After public announcement, the State Bank of India has also filed the claim before IRP/RP and involved itself in the Corporate Insolvency Resolution Process. Now, after being part of the Corporate Insolvency Resolution Process, as a Financial Creditor, the State Bank of India issued an auction notice dated 12.07.2017 under the provisions of SARFAESI Act, 2002, in order to sell the property of the personal guarantor of M/s. Veesons Energy Systems Private Limited. 

# 2. The guarantor contends that, in case his personal property is sold to realise the portion of the debt outstanding against M/s. Veesons Energy Systems Private Limited, the same shall create charge on the assets of the Corporate Debtor which shall amount ‘encumbering the properties of the Corporate Debtor. 

# 3. For the sake of better appreciation, the relevant portion of Sections 14 and 31 of the I&B Code, 2016 is reproduced as follows: 

• "14. (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: 

• (a) .................... 

• (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; 

• (c) .......... » 

• "31. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. ............ 

As can be seen from the provisions of Section 14 (1) (b), the moratorium prohibits transferring, encumbering, alienating or disposing of by the corporate Debtor any of its assets or any legal right or beneficial interest therein and Section 31 (1) provides that if the adjudicating authority is satisfied that the Resolution Plan as approved by CoC under sub-Section (4) of Section 30, meets requirements as referred to in sub Section (2) of Section 30, it shall, by order approve the Resolution Plan which shall be binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stake holders involved in the Resolution Plan. Because, if the property of the personal guarantor is sold by the Financial Creditor, the personal guarantor will have all the rights of that of the creditors against the Corporate Debtor, and in that way, a charge automatically gets created on the property of the Corporate Debtor which is against the purpose and object of the moratorium declared. Thus will violate the provisions of Section 14(1) (b) of the I&B Code, 2016. 

# 4. In this connection, it will be appropriate to make a reference to the provisions of Section 140 of the Indian Contract Act, 1872, which reads as follows: 

• "Rights of surety on payment or performance. Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor. -Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor."(emphasis supplied) 

# 5. The provisions of the above section came to be interpreted by the Division Bench of Hon'ble High Court of Madras in Parvateneni Bhushayya Vs. Potluri Suryanarayana, AIR 1944 Mad 195 at page 2014, which has held as under: 

• "Section 140, in our opinion, leaves no room for doubt on the point, because it expressly says that the surety upon payment of all that he is liable for is invested-that is, immediately invested-with all the rights which the creditor had against the principal debtor. The condition laid down by the section for this right to arise, is the payment by the surety of all that he is liable for, and not the payment of all that may be due to the creditor who holds the securities. Where the guaranteed debt is a fraction only of the debt, the surety's right comes into existence immediately on payment of that fraction, for that fraction is, so far as he is concerned, the whole.” 

In the light of the above, certainly in the event the guarantor fulfils his obligation for payment of outstanding debt of the Corporate Debtor, he has every right on the assets of the Corporate Debtor to the extent he has paid the outstanding debt to the creditors. 

# 6. It is clear that if the Financial Creditor during the Corporate Insolvency Resolution Process and declaration of the moratorium is permitted to proceed against the personal guarantor of the Corporate Debtor for recovery of the outstanding debt to the extent of the personal guarantee given, then, the security interest, if any, of the Financial Creditor shall get transferred to  the guarantor which will be in violation of Section 14  (1) (b) of the I&B Code, 2016. 

# 7. In the light of the above, Interlocutory Application of the personal guarantor is allowed. The 2nd Respondent, State Bank of India is restrained from proceeding against the personal guarantor till the period of moratorium is over. 

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Blogger’s Comments; Section 14 of the Code as amended w.e.f. 06.06.2018 & 28.12.2019 reads as follows;

# Section 14. Moratorium. -

(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: -

• (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority;

• (b) transferring, encumbering, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest therein;

• (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);

• (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license or a similar grant or right during moratorium period;

(2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.

(2A) Where the interim resolution professional or resolution professional, as the case may be, considers the supply of goods or services critical to protect and preserve the value of the corporate debtor and manage the operations of such corporate debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such corporate debtor has not paid dues arising from such supply during the moratorium period or in such circumstances as may be specified.

(3) The provisions of sub-section (1) shall not apply to —

• (a) such transactions, agreements or other arrangement as may be notified by the Central Government in consultation with any financial sector regulator or any other authority;

• (b) a surety in a contract of guarantee to a corporate debtor.

(4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process:

Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.

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Pradeep Singh Deswal Vs. M/s Pooja Roller Floor Mills Pvt. Ltd. & Ors. - Winding-up petition U/s 271(e) of The Companies Act., Alternate to Voluntary Liquidation in IBC.

NCLT New Delhi-IV (09.04.2021) in Pradeep Singh Deswal Vs. M/s Pooja Roller Floor Mills Pvt. Ltd. & Ors. [C.P.No. 84(ND)/2020 ] held that;

• The Petitioner states that in order to realize the value of the said property and also in order to ensure the fair distribution of the said value to the Stakeholders of the Respondent No.1, the Petitioner seeks to invoke the provisions of Section 271(e) of the Companies Act, 2013 so the Respondent No.1 Company can be put into liquidation and the value of the said property can be realized and distributed by the Company Liquidator in accordance with applicable law.

Excerpts of the Order;

# 1. The Company Petition bearing No. 84(ND)/2020 is filed by the  Petitioner Mr. Pradeep Singh Deswal being the contributory of the  Respondent No. 1 M/s Pooja Roller Floor Mills Pvt Ltd U/s 271(e)  and Section 248(8) of the Companies Act, 2013 read with Section 255  of the Insolvency and Bankruptcy Code, 2016 by inter alia seeking to  wind up the Respondent No.1 Company with all consequential  directions as main relief. 

# 2. The Petitioner is a contributory holding 2991 equity shares and the   same are registered in his name since incorporation of the Company and therefore met with the requirement as prescribed in Section 272(2) Companies Act, 2013. The Petitioner has served the copy of the Petition to other Directors of the Respondent No.1 Company through email dated 21.11.2020. 

# 3. The Respondent No.1 Company was incorporated as a Private Limited Company on 09.11.1981 with an Authorized Capital of Rs.20,00,000/- and Subscribed Capital and Paid-up Capital of Rs. 10,50,000/-. The CIN of the Respondent No.1 Company is 15311DL1981PTC012614 and its registered office is at 30, Community Centre, Ashok Vihar, New Delhi 10052. The Respondent No.1 Company is involved in the business of manufacturing of grain mill products, starches and starch products and prepare animal feed. 

# 4. Brief facts leading to the filing of the present Petition are that due to unfortunate circumstances the directors and promoters could not carry out the business activity upto 1994. It is submitted that due to the adverse market impact, the business of the Respondent No.1 Company thereafter incurred losses and thereafter the business could not be continued by the directors and promoters since 1994. The Respondent No.1 Company could not comply with any statutory filing with the RoC and the PAN was never applied due to shutting down of the business in the said year. The name of the Respondent No.1 Company was struck off under Section 560 of the Companies Act, 1956 by the RoC. The status of the Respondent No.1 Company is shown as struck off in the Company's master data. 

# 5. The Petitioner submits that the Respondent No.1 Company only has a piece of Agricultural land having substantial value as an asset located at Khasra No.397/11(9-0), 20/1(6-9) Village Binjhol, Tehsil Panipat. The registered sale deed dated 13.05.1981 has been placed on record. 

# 6. The Petitioner has placed on record the Statement of Affairs of the Company dated 25.06.2020 which shows a fixed asset (one parcel of land) to the value of Rs. 15,37,758/-. The Petitioner has also placed on record the financial statements for the year 1993-94 of the Respondent no.1 Company which reflects that there are no assets other than the land and no liabilities or statutory demand pending against the Respondent No.1 Company. 

# 7. The Petitioner has placed on record the no dues certificate issued by the Financial Creditor “Haryana Financial Corporation” dated 12.08.1998 and the charge of the above-mentioned Financial Creditor has been vacated in the revenue records on the land measuring 15 kanal 9 marla situated at village Binjhal, Panipat which was mortgaged to the financial Creditor vide mortgaged deed dated 26.12.1884. 

# 8. The Tribunal vide its order dated 24.11.2020 directed RoC and the Income Tax Department to file their objections if any, within two weeks however, none was filed hence, it is resumed that there are no objections to be raised by the said authorities. 

# 9. It is submitted by the Petitioner that the directors of the Company, who are also the shareholders and contributories to the Company in the aforesaid matter have also given unconditional undertaking and/or indemnity dated 17.11.2020 as required under the provision of Section 248 of the Companies Act, 2013, to settle all the lawful claims arising in future. 

# 10. The registered office of Respondent No. 1 Company is situated in Delhi and therefore this Tribunal has jurisdiction to entertain and try this Petition. 

# 11. The Petitioner states that in order to realize the value of the said property and also in order to ensure the fair distribution of the said value to the Stakeholders of the Respondent No.1, the Petitioner seeks to invoke the provisions of Section 271(e) of the Companies Act, 2013 so the Respondent No.1 Company can be put into liquidation and the value of the said property can be realized and distributed by the Company Liquidator in accordance with applicable law. 

# 12. For the aforesaid reasons and circumstances of the case, and the law on the issue, we are of the considered opinion that prima facie case is made out by the Petitioner. Mr Tarun Batra, Insolvency professional having registration number IBBI/IPA-001/IP P00572/2017-18/11013 as proposed by the Petitioner to be appointed as the Company Liquidator for winding up of the Respondent No.1 Company. 

# 13. As a result, by exercising powers conferred on the Tribunal, especially under Section 273 and other relevant provisions of the Companies Act, 2013, we hereby pass the following directions: 

• a. We admit the Company Petition 84(ND)/2020 and appoint Mr. Tarun Batra as the Company Liquidator for winding up of the Respondent No.1 Company; 

• b. The Company Liquidator shall file a declaration disclosing conflicts of interest or lack of independence in respect of his appointment if any, within 7 days of appointment; C.P.No. 84(ND)/2020 

• c. We direct the existing Management of the Respondent No.1 Company to extend full cooperation to the Company Liquidator to carry out his duties under the extant provisions of the Companies Act, 2013. It will be the duty of such of the persons as are liable to submit the books of account of company completed and audited up to the date of order under section 274(3) to attend on the Company Liquidator at such time and place as he may appoint and to give him all information he may require; 

• d. The Petitioner is directed to make appropriate publication in the Business Standard English and Hindi Edition, within 14 days of the date of this order; 

• e. The Company Liquidator shall initiate appropriate action in accordance with the extant provisions of the Companies Act, to take control of the Management of the Respondent No.1 Company and to take custody or control of the property, effect and actionable claims to which the Respondent No.1 Company is or appear to be entitled to and take such steps and measures, as may be necessary, to protect and preserve the properties of the Respondent No.1 Company and to avoid misuse of the property; 

• f. The Company Liquidator is further directed to strictly adhere to the extant provisions as applicable in the instant case, as mentioned under Chapter XX Part 1 of the Companies Act, 2013; 

• g. The Registry is directed to communicate this order to all the Parties to the case and also to the Official Liquidator; cased 

• h. The Petitioner shall serve a certified copy of this order on the Registrar of Companies not later than one month from this date; 

# 14. The Petition C.P.No. 84(ND)/2020 is allowed and disposed off in terms of above orders

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The Companies Act, 2013.

# Section 271. Circumstances in which company may be wound up by Tribunal. - A company may, on a petition under section 272, be wound up by the Tribunal, —

(a) if the company has, by special resolution, resolved that the company be wound up by the Tribunal;

(b) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality;

(c) if on an application made by the Registrar or any other person authorised by the Central Government by notification under this Act, the Tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent manner or the company was formed for fraudulent and unlawful purpose or the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and that it is proper that the company be wound up;

(d) if the company has made a default in filing with the Registrar its financial statements or annual returns for immediately preceding five consecutive financial years; or

(e) if the Tribunal is of the opinion that it is just and equitable that the company should be wound up.”

# Section 272. Petition for winding up. - (1) Subject to the provisions of this section, a petition to the Tribunal for the winding up of a company shall be presented by—

• (a) the company;

• (b) any contributory or contributories;

• (c) all or any of the persons specified in clauses (a) and (b);

• (d) the Registrar;

• (e) any person authorised by the Central Government in that behalf; or

• (f) in a case falling under clause (b) of section 271, by the Central Government or a State Government.

(2) A contributory shall be entitled to present a petition for the winding up of a company, notwithstanding that he may be the holder of fully paid-up shares, or that the company may have no assets at all or may have no surplus assets left for distribution among the shareholders after the satisfaction of its liabilities, and shares in respect of which he is a contributory or some of them were either originally allotted to him or have been held by him, and registered in his name, for at least six months during the eighteen months immediately before the commencement of the winding up or have devolved on him through the death of a former holder.

(3) The Registrar shall be entitled to present a petition for winding up under section 271, except on any of the grounds specified in except on the grounds specified in clause (a) or clause (e) of that sub-section:

Provided that the Registrar shall obtain the previous sanction of the Central Government to the presentation of a petition:

Provided further that the Central Government shall not accord its sanction unless the company has been given a reasonable opportunity of making representations.

(4) A petition presented by the company for winding up before the Tribunal shall be admitted only if accompanied by a statement of affairs in such form and in such manner as may be prescribed.

(5) A copy of the petition made under this section shall also be filed with the Registrar and the Registrar shall, without prejudice to any other provisions, submit his views to the Tribunal within sixty days of receipt of such petition.”

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Alpha & Omega Diagnostics (India) Ltd. Vs. Asset Reconstruction Company of India Ltd. & Ors. - Guarantor's Property during Moratorium.

 NCLAT (31.07.2017) in Alpha & Omega Diagnostics (India) Ltd. Vs. Asset Reconstruction Company of India Ltd. & Ors. [Company Appeal (AT) (Insol.) No. 116 of 2017] held that;

• As a result, "its" denotes the property owned by the Corporate Debtor. The property not owned by the Corporate Debtor do not fall within the ambits of the Moratorium.

• The outcome of this discussion is that the Moratorium shall prohibit the action• against the properties reflected in the Balance Sheet of the Corporate Debtor. The Moratorium has no application on the properties beyond the ownership of the Corporate Debtor.

• Before I past with it is necessary to clarify my humble view that the SARFAESI Act may come within the ambits of  Moratorium if an action is to foreclose or to recover or to create any interest in respect of the property belonged to •or owned by a Corporate Debtor, otherwise not.

• In the aforesaid background, if Ld. Adjudicating Authority, on careful reading of the provisions has come to the definite conclusion that on commencement of the insolvency process the "Moratorium" shall be declared for prohibiting any action to recover or enforce any security interest created by the 'Corporate Debtor' in respect of "its" property, no ground is made out to interfere with the said order.

Excerpts of the Order;

31.07.2017- The Appellant-Corporate Applicant filed an application under Section 10 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "I & B Code") for initiation of corporate insolvency resolution process in so far it relates to Corporate Debtor with the Adjudicating Authority.

# 2. Ld. Adjudicating Authority (National Company Law Tribunal) Mumbai Bench, Mumbai, after notice to the 'Financial Creditor' and others passed impugned order dated 10th July, 2017 in T.C.P. No. 11 17/I&BP/NCLT/MB/MAH/2017, admitting the application subject to qualification, as quoted below:

• "4.8. Nevertheless, the decision on "Admission" as pronounced hereinabove is subject to a qualification. The I&BP Code, 2016 has prescribed certain limitations which are inbuilt and must not be overlooked. The 'Moratorium' indeed is an effective tool, sometimes being used by the corporate Debtor to thwart or frustrate the Recovery Proceedings, as happened in this Case. The Learned Chief Metropolitan Magistrate vide Order (supra) dated 11. 04.2017 has appointed a Court Commissioner to take over the possession of the flats. The admitted position is that the Flats in question are not under the Ownership of the corporate Debtor. A question in this regard was raised during the hearing however not disputed by the either side. Even in the balance sheet of the Corporate Debtor these flats are not reflected. It is further evidenced that the documents annexed have clearly demonstrated that the personal properties of the Promoters have been given as a "Security" to the banks. Now the question is that whether a property(ies) which is/are not 'owned' by a Corporate Debtor shall come within the ambits of the Moratorium? To examine this aspect, it is useful to reproduce verbatim the provisions of Section 14 of the Code as under: -

• 5. Section 14. Moratorium (1) Subject to provisions of sub-sections (2)(3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following namely: -

• (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; 

• (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; 

• (c) any action to foreclose, recover or enforce any security interest, created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);

• (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

• 6. On careful reading I have noticed that the term "its" is significant. The plain language of the Section is that on the commencement of the Insolvency process the 'Moratorium' shall be declared for prohibiting any action to recover or enforce any security interest created by the Corporate Debtor in respect of "its" property. Relevant section which needs in-depth examination is Section 14(1)(c) of the Code.

• 7. There are recognised canons of interpretation. Language of the Statute should be read as it existed. This is a trite law that no word can be added or substituted or deleted from the enacted Code duly legislated. Every word is to be read and interpreted as it exists in the statute with the natural meaning attached to the word. Rather in this Section the language is so simple that there is no scope even to supply 'casus omissus'. I hasten to add that the doctrine of 'Noscitur a Sociis' is somewhat applicable that the associated words take their meaning from one another so that common sense meaning coupled together in their cognate sense be interpreted. As a result, "its" denotes the property owned by the Corporate Debtor. The property not owned by the Corporate Debtor do not fall within the ambits of the Moratorium. Even Section 10 is confined to the Book of the Accounts of the Corporate Debtor, due to the reason that Section 10(3) has specified that the Corporate Applicant shall furnish "its" Books of Accounts. This Bench has no legislative authority to expand the meaning of the term, "its" even under the umbrella of 'Ejusdem generis'.

• 8. The outcome of this discussion is that the Moratorium shall prohibit the action• against the properties reflected in the Balance Sheet of the Corporate Debtor. The Moratorium has no application on the properties beyond the ownership of the Corporate Debtor. For the sake of completeness, it is worth to refer that the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (the SARFAESI Act) may be having different criteria for enforcement of recovery of outstanding debt, which is not the subject matter of this Bench. Before I past with it is necessary to clarify my humble view that the SARFAESI Act may come within the ambits of  Moratorium if an action is to foreclose or to recover or to create any interest in respect of the property belonged to •or owned by a Corporate Debtor, otherwise not.

• 9. To conclude the Application under Section 10 of the Code is hereby "Admitted" subject to the exception as carved out supra. The consequential directions shall be that the provisions of Section 14 of The Code i.e. "Moratorium" shall come into operation: Next, the proposed name of Interim Resolution professional i.e. Mr. Rajendra Karanmal Bhuta, ℅ RK Bhutta & Co. Chartered Accountants, Insolvency Professionals, 1207, Yogi paradise, Yodi Nagar, Borivali (West), Mumbai-400 092, email - rkbhuta,co.@gmail.corn, IP Registration No. INNI/IBA-IP/00078/201 6-2017/1074 is hereby approved. The IRP shall take appropriate action such as Public Announcement etc. so that the Insolvency Resolution Process shall be initiated expeditiously. He is directed to submit a Progress Report within one month's time from the commencement of Insolvency Resolution Process."

# 3. The impugned order dated 10th July, 2017 is under challenge in this appeal.

# 4. Ld. Counsel appearing on behalf of the Appellant submitted that the appellant has grievance only relating to qualifying part of the impugned order as quoted above. According to the appellant, the Moratorium should take into its recourse on the subject matters and assets relating to its matters pending before the Debt Recovery Tribunal (DRT) and under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI).

# 5. However, we are not inclined to accept such submissions as Appellant-Corporate Applicant has sought for "its" own insolvency resolution process that will include only the assets of the Corporate Debtor and not any assets, movable or immovable of a third party, like any director or other. In so far as 'guarantor' is concerned, we are not expressing any opinion, as they come within the meaning of 'Corporate Debtor individually', as distinct from principal debtor who has taken a loan.

# 6. In the aforesaid background, if Ld. Adjudicating Authority, on careful reading of the provisions has come to the definite conclusion that on commencement of the insolvency process the "Moratorium" shall be declared for prohibiting any action to recover or enforce any security interest created by the 'Corporate Debtor' in respect of "its" property, no ground is made out to interfere with the said order.

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