Case: DUNCANS INDUSTRIES LTD Vs. A.J. AGROCHEM

2.1 That the appellant is a Corporate Debtor. It is a company which owns and manages 14 tea gardens. Out of 14 tea gardens, the Central Government vide notification dated 28.01.2016, in exercise of its power under Section 16E of the Tea Act, 1953 has taken over the control of 7 teaThat the respondent is an operational creditor of the appellant. It used to supply pesticides, insecticides, herbicides etc. to the appellant. According to the respondent-operational creditor, a sum of Rs.41,55,500/- was due and payable by the appellant-corporate debtor to the respondent-operational creditor. That the respondent initiated the proceedings against the appellant-corporate debtor before the NCLT under Section 9 of the IBC. Initiation of the proceedings under the IBC by the respondent-operation creditor was opposed by the appellant- 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 has been taken over by the Central Government, then the proceedings for winding up or appointment of receiver cannot be initiated without the consent of the Central Government. It was the case on behalf of the appellant-corporate debtor that, in the present case, as the prior approval of the Central Government has not been taken, as required under Section 16G of the Tea Act, the insolvency proceeding under Section 9 of the IBC would not be maintainable. That, by an order dated 05.10.2018, learned 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 has not been obtained, the proceedings under Section 9 of the IBC shall not be maintainable. In an appeal before the NCLAT by the respondent-operational creditor, by the impugned judgment and order, the NCLAT has reversed the order passed by the NCLT, Kolkata and has held that the 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. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 20.06.2019 passed by the learned NCLAT, allowing the respondent?s appeal thereby holding that the insolvency petition filed under Section 9 of the IBC would be maintainable, the original respondent-corporate debtor has preferred the present statutory appeal.

Reasoning: 7.1 In the present case, it is true that by notification dated 28.01.2016 issued under Section 16E of the Tea Act, the Central Government authorised the Tea Board to take over the management or the control of the seven tea estates mentioned in the said notification. However, the appellant challenged the said notification before the High Court of Calcutta and the learned Single Judge of the High Court dismissed the said petition. However, in an appeal, the Division Bench of the High Court of Calcutta vide the interim order dated 20.09.2016 has permitted the appellant-corporate debtor to continue with the management of the said tea estates. Therefore, in effect, the appellant herein has been continued to be in management and control of the tea estates, despite the notification under Section 16E dated 28.01.2016. At this stage, it is required to be noted that notification under Section 16E of the Tea Act was issued by the Central Government and the Central Government authorised the Tea Board to take steps to take over the management and control of the seven tea estates, having satisfied that the said seven tea gardens were being managed by the appellant in a manner highly detrimental to the tea industry and public interest. Despite the same, very surprisingly, by an interim arrangement, the Division Bench of the High Court of Calcutta has handed over the management and control of the seven tea gardens to the appellant, because of whose mis-management, it has deteriorated the condition of the tea gardens run by the appellant. Be that as it may, the fact remains that, pursuant to the interim arrangement/order passed by the Division Bench of the High Court dated 29.09.2016, the appellant-corporate debtor is continued to be in management and control of the seven tea gardens and they are running the tea gardens. Therefore, in the facts and circumstances of the case, and more particularly when, despite the notification under Section 16E of the Tea Act, the appellant-corporate debtor is continued to be in management and control of the tea gardens/units and are running the tea gardens as if the notification dated under Section 16E has not been issued, Section 16G of the Tea Act, more particularly Section 16G(1)(c), shall not be applicable at all. On a fair reading of Section 16G of the Tea Act, we are of the opinion that Section 16G of the Tea Act shall be applicable only in a case where the actual management of a tea undertaking or tea unit owned by a company has been taken over by any person or body of persons authorised by the Central Government under the Tea Act. Therefore, taking over the actual management and control by the Central Government or by any person or body of persons authorised by the Central Government is sine qua non before Section 16G of the Tea Act is made applicable. Therefore, in the facts and circumstances of the case, Section 16G(1)(c) shall not be applicable at all, as the appellant-corporate debtor is continued to be in management and control of the teaNow, so far as the main issue, namely, whether before initiation of the proceedings under Section 9 of the IBC, a prior consent of the Central Government as provided under Section 16G(1)(c) of the Tea Act is required or not and/or in absence of any such consent of the Central Government, the proceedings under Section 9 of the IBC shall be maintainable or not, is concerned, at the outset, it is required to be noted that the IBC is a complete Code inSection 16G(1)(c) refers to the proceeding for winding up of such company or for the appointment of receiver in respect thereof. Therefore, as such, the proceedings under Section 9 of the IBC shall not be limited and/or restricted to winding up and/or appointment of receiver only. The winding up/liquidation of the company shall be the last resort and only on an eventuality when the corporate insolvency resolution process fails. As observed by this Court in Swiss Ribbons Pvt. Ltd. (supra), referred to hereinabove, 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 over-riding effect over the Tea Act, 1953. Any other view would frustrate the object and purpose of the IBC. If the submission on behalf of the appellant that before initiation of proceedings under Section 9 of the IBC, the consent of the Central Government as provided under Section 16G(1)(c) of the Tea Act is to be obtained, in that case, the main object and purpose of the IBC, namely, to complete the ?corporate insolvency resolution process? in a time-bound manner, shall be frustrated. The sum and substance of the above discussion would be that the provisions of the IBC would have an over-riding 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.