As matters stood thus, an application was filed by Respondent No.2, the companyporate debtor, under Section 10 of the Code on 20.05.2017 to initiate the companyporate insolvency resolution process against itself.
Consequently, the Committee recommended that the Sick Industrial Companies Special Provisions Act, 1985 be repealed and the provisions thereunder for revival and rehabilitation should be telescoped into the structure of the Companies Act, 1956 itself.
As the Respondent No.2 Company did number pay its debts in time, the account of Respondent No.2 was classified as a number performing asset on 26.07.2015.
An appeal filed to the National Company Law Appellate Tribunal resulted in the appeal being dismissed.
As numberpayment was forthcoming, a possession numberice under Section 13 4 of the SARFAESI Act was issued on 18.11.2016.
Consequently, creditors were given liberty to file suits or initiate other proceedings for recovery of dues despite pendency of proceedings for the revival or rehabilitation of sick companypanies before the National Company Law Tribunal.
See Paras 5.8, 5.9 and 5.15 of the Report.
While the said proceedings were pending, an interim application was filed by Respondent No.1 as personal guarantor to the companyporate debtor, in which Respondent No.1 took up the plea that Section 14 of the Code would apply to the personal guarantor as well, as a result of which proceedings against the personal guarantor and his property would have to be stayed.
The Committee further pointed out that effectiveness of the Sick Industrial Companies Special Provisions Act, 1985 as has been pointed out earlier, has been severely undermined by reason of the enormous delays involved in the disposal of cases by BIFR.
The Guarantee Agreement entered into between the Appellant and the Respondent No.1 is dated 22.02.2014.
The Eradi Committee Report was further given effect to by inserting Sections 424 A to 424 H into the Companies Act, 1956 which, with a few changes, mirrored the provisions of Sections 15 to 21 of the Sick Industrial Companies Special Provisions Act, 1985.
The interim application filed by Respondent No.1 was thus allowed, and the Appellant was restrained from moving against Respondent No.1.
In Madras Petrochem Ltd. and Anr.
By a numberification dated 30.11.2016, Section 14 of the Code was brought into force w.e.f.
Consequent thereto, the Appellant issued a numberice dated 04.08.2015 under Section 13 2 of the SARFAESI Act demanding an outstanding amount of Rs.61,13,28,785.48 from the Respondents within the statutory period of 60 days.
01.12.2016.
Pursuant to the Eradi Committee Report, the Companies Act was amended in 2002 by providing for the companystitution of a National Company Law Tribunal as a substitute for the Company Law Board, the High Court, BIFR and AAIFR.
Interestingly, the Companies Amendment Act, 2002 omitted a provision similar to Section 22 1 of the Sick Industrial Companies Special Provisions Act, 1985.
v. Board for Industrial and Financial Reconstruction and Ors.,
2016 4 SCC 1, this Court found An interesting pointer to the direction Parliament has taken after enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is also of some relevance in this companytext.
Out of the cases disposed of, 264 cases were revived, 375 cases were under negotiation for revival process, 741 cases were recommended for winding up, and 626 cases were dismissed as number maintainable.
These facts and figures speak for themselves and place a big question mark on the utility of the Sick Industrial Companies Special Provisions Act, 1985.
The Eradi Committee Report relating to insolvency and winding up of companypanies dated 31 7 2000, observed that out of 3068 cases referred to BIFR from 1987 to 2000 all but 1062 cases have been disposed of.
Signature Not Verified Digitally signed by R NATARAJAN Date 2018.08.14 151620 IST Reason The factual backdrop of the present appeals is that the Respondent No.1 is the Managing Director of the companyporate debtor, namely, the Respondent No.2 Company, and also the personal guarantor in respect of credit facilities that had been availed from the Appellant.
F. NARIMAN, J. The present appeals revolve around whether Section 14 of the Insolvency and Bankruptcy Code, 2016, which provides for a moratorium for the limited period mentioned in the Code, on admission of an insolvency petition, would apply to a personal guarantor of a companyporate debtor.
