caselaws

Supreme Court of India
Duncans Industries Ltd. vs A.J. Agrochem on 4 October, 2019Author: M.R. Shah

Bench: Hon’Ble Ms. Banerjee, M.R. Shah

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REPORTABLE
IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5120 OF 2019

Duncans Industries Ltd. .. Appellant

Versus

A. J. Agrochem .. Respondent

JUDGMENT

M. R. Shah, J.

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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2. The facts of the case in nutshell are as under:

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 tea gardens.

2.2 That the respondent is an operational creditor of the

appellant. It used to supply pesticides, insecticides, herbicides

etc. to the appellant. According to the respondent­operational

creditor, a sum of Rs.41,55,500/­ was due and payable by the

appellant­corporate debtor to the respondent­operational

creditor. That the respondent initiated the proceedings against

the appellant­corporate debtor before the NCLT under Section 9

of the IBC. Initiation of the proceedings under the IBC by the

respondent­operation 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 appellant­corporate

debtor that, in the present case, as the prior approval of the
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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

respondent­operational 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 respondent­corporate debtor has

preferred the present statutory appeal.

3. Shri Shyam Divan, learned Senior Advocate has appeared

on behalf of the appellant­corporate debtor and Shri Amar Dave,
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learned Advocate has appeared on behalf of the respondent­

operational creditor.

4. Shri Shyam Divan, learned Senior Advocate appearing on

behalf of the appellant­corporate debtor has taken us through

the relevant provisions of the Tea Act, 1953, more particularly

Section 16. He has also taken us through the objects and the

purpose of the Tea Act.

4.1 It is submitted by Shri Shyam Divan, learned Senior

Advocate appearing on behalf of the appellant that the Tea Act is

a special Act for the purpose of providing control by the Union of

India of the Tea Industry. It is submitted that Section 16D(1) of

the Tea Act, 1953 provides for taking over the tea unit and the

tea undertaking inter alia if the Central Government is of the

opinion that the tea unit is being managed in a manner highly

detrimental to the tea industry or to public interest. It is

submitted that Section 16D(4) provides that the Central

Government shall take such steps as may be necessary for the

purpose of efficiently managing the business of the undertaking.

It is submitted that any notification under Section 16D is to have

effect for a period not exceeding five years which can only be

extended if the Central Government is of the opinion that it is

expedient to do so in public interest, for such period not
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exceeding one year at a time, and for total period not exceeding

six years. It is submitted that Section 16E refers to the power of

the Central Government to restart the tea undertaking if it is

found necessary in the interest of the general public. It is

submitted that Section 16G specifically deals with a situation

such as in the present application. It is submitted that an

insolvency process is also meant to culminate in liquidation, if

there is no revival. It is submitted that since the Tea Act permits

for the Central Government to take over the management of a tea

estate which is not run properly, the prior permission under

Section 16G is applicable to such an estate, the management of

which has been taken over by the Government.

4.2 It is further submitted by Shri Shyam Divan, learned Senior

Advocate appearing on behalf of the appellant that the “winding

up” process under the Companies Act, 1956 includes the

insolvency proceedings under the IBC. It is submitted that,

therefore, initiation of any proceedings for winding up or

liquidation by way of insolvency proceedings under the IBC shall

be maintainable only after the consent of the Central Government

is obtained, as required under Section 16G of the Tea Act which,

in the present case, is lacking.
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4.3 It is further submitted by Shri Shyam Divan, learned Senior

Advocate appearing on behalf of the appellant that, in the present

case, in the proceedings challenging the Central Government

notification dated 28.01.2016 authorising the Tea Board to take

over the management and to take control of the 7 tea estates of

the appellant­corporate debtor, the High Court of Calcutta

though has not stayed the notification, but only made an interim

arrangement for the management of 7 tea estates and the High

Court has directed/permitted the appellant to run the gardens in

a prudent business­like manner and to pay both the current and

arrear dues of the workers. It is submitted that the interim

order has been passed for improving the conditions of the

workers as also that of the tea estates.

4.4 It is further submitted by Shri Shyam Divan, learned Senior

Advocate appearing on behalf of the appellant that the provisions

of the Tea Act, 1953 apply to tea units, the management of which

have been taken over for the purpose of stimulating the

production and manufacturing of tea. It is submitted that the

control by the Tea Board of the manufacturing of tea from the tea

units is in public interest. It is also a welfare legislation. The

Tea Act is a Central Act and applies only to companies which are

having tea gardens or tea units. It is submitted that if the
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provisions of the Tea Act are applicable, then on a conjoint

reading of Section 16G, Section 16J and Section 16M of the Tea

Act, an application under Section 7 or Section 9 of the IBC would

not be maintainable and cannot be proceeded with without the

consent of the Central Government.

4.5 It is further submitted by Shri Shyam Divan, learned Senior

Advocate appearing on behalf of the appellant that, in the present

case, by passing the impugned judgment and order, the learned

NCLAT has erroneously relied upon Section 238 of the IBC to

hold that the IBC will have an overriding effect over the Tea Act.

It is submitted that Section 238 of the IBC will be applicable if

there is any conflict between the two legislations. It is

submitted that, in the present case, there is no such conflict

between the Tea Act and the IBC. It is submitted that even the

learned NCLAT in the impugned order recognizes and/or records

that the provisions of the IBC and the Tea Act are not

inconsistent with each other. It is submitted that the IBC

process can be started if the permission is obtained from the

Central Government by a financial creditor or an operational

creditor. It is submitted that the provisions of Section 7 or

Section 9 may not require the consent of the Central Government

to initiate such proceedings, but when the management of the tea
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gardens have been taken over by the Central Government under

the Tea Act, one will have to consider the provisions of the Tea

Act which requires the consent of the Central Government. It is

submitted that, therefore, the process of insolvency resolution

under the IBC has not been stopped, but what it requires is an

additional permission under the Tea Act for the purpose of

initiation of such insolvency proceeding. It is submitted that

this should be logical as the management of the tea gardens is

already under the Central Government under the Tea Act for

public interest and for the interest of workers of the tea gardens.

4.6 It is further submitted by Shri Shyam Divan, learned Senior

Advocate appearing on behalf of the appellant that both IBC and

the Tea Act are welfare legislations. IBC is a general Act for

corporate resolution process for all corporates, but the Tea Act

protects corporates which have tea gardens. The Tea Act is a

special legislation enacted by the Parliament for protecting the

Tea Industries and Tea Gardens and provides for taking over the

management by the Tea Board or the Central Government or any

person authorized by the Central Government for running the tea

gardens or protection of the workers. It is submitted that,

therefore, its provisions can be harmoniously construed along

with the IBC.
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4.7 Shri Shyam Divan, learned Senior Advocate appearing on

behalf of the appellant has heavily relied upon the decision of this

Court in the case of Macquarie Bank Ltd. v. Shilpi Cable

Technologies Ltd. (2018) 2 SCC 674 as well as the recent

decision of this Court dated 14.08.2019 in the case of K. Kishan

v. M/s. Vijay Nirman Company Pvt. Ltd. (2018) 17 SCC 662, on

non­applicability of Section 238 of the IBC. Making the above

submissions and relying upon the above decisions of this Court,

it is submitted by Shri Shyam Divan, learned Senior Advocate

appearing on behalf of the appellant­corporate debtor that since

there is no inconsistency between the Tea Act and the IBC, there

is no occasion to apply Section 238 of the IBC to give overriding

effect.

4.8 Making the above submissions and relying upon the above

decisions of this Court, it is prayed to allow the present appeal

and quash and set aside the impugned judgment and order

passed by the learned NCLAT and restore the order passed by the

NCLT, Kolkata by holding that in absence of the consent of the

Central Government as provided under Section 16G of the Tea

Act, the insolvency proceedings initiated by the respondent­

operational creditor under Section 9 of the IBC shall not be

maintainable.
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5. The present appeal is vehemently opposed by Shri Amar

Dave, learned Advocate appearing on behalf of the respondent­

operational creditor.

5.1 It is vehemently submitted by Shri Amar Dave, learned

Advocate appearing on behalf of the respondent­operational

creditor that the IBC is a complete Code in itself. It is submitted

that the IBC is a consolidating and amending law relating to re­

organization and insolvency resolution and for matters connected

therewith or incidental thereto. It is submitted that the Code,

which was promulgated in 2016, has not provided for the pre­

requisite of obtaining consent from the Central Government for

initiating corporate insolvency resolution process like the Tea Act,

which is an earlier Act enacted in 1953. It is submitted that,

thus, such a pre­requisite of obtaining consent cannot be

imported and/or read into the Code when the self­contained

Code itself does not provide for it.

5.2 It is further submitted that importing the requirement of

obtaining consent of the Central Government prior to initiating

the corporate insolvency resolution process would be completely

contrary to the over­riding nature of the Code, and of the clear

legislative intent of keeping the arms of the Government away

from the resolution process and of not delaying the process of
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resolution. It is further submitted that an examination of Chapter

IIIA of the Tea Act reveals that the object of restarting/revival of

the tea company is a writ large in the scheme of the Tea Act. It is

submitted that the said object of restarting/revival is borne out

from Section 16B(2), Section 16E(1)(b), Section 16I(1) and Section

16K of the Tea Act. It is submitted that restarting/revival of the

company is also the object of the IBC, as is clear from the

Preamble of the IBC and also as observed by this Court in the

case of Swiss Ribbons Pvt. Ltd. v. Union of India [AIR 2019 SC

739 : (2019) 4 SCC 17]. It is submitted that therefore in the

event of any conflict between the two legislations, the provisions

of the IBC would prevail by virtue of Section 238 of the IBC.

5.3 It is submitted by Shri Dave, learned Advocate appearing on

behalf of the respondent­operational creditor that the present

case is not one where Section 16G of the Tea Act applies at all, as

the management has not been “taken over” by the Central

Government or the Tea Board. It is submitted that the

notification dated 28.01.2016 was issued under Section 16E(1) of

the Tea Act. It is submitted that, according to the sub­section (2)

thereof, the provisions of Section 16G shall apply to a notified

order made under Section 16E(1). It is submitted that Section

16G(1) shall be applicable when the management of a tea
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undertaking or tea unit owned by a company has been taken over

by the Tea Board. It is submitted that thus Section 16G(1) of the

Tea Act does not automatically get triggered with the issuance of

a notification under Section 16E(1) of the Tea Act, but becomes

applicable once the management of a tea undertaking or tea unit

owned by a company has been taken over by the Tea Board. It is

submitted that, in the present case, pursuant to the interim

order passed by the Division Bench of the High Court of Calcutta

in which the notification dated 28.01.2016 is challenged by the

corporate debtor, the appellant­corporate debtor continues to be

in management and control of the tea units/gardens. It is

submitted that therefore application of Section 16E(1) is no

longer prevalent and consequently Section 16G of the Tea Act

shall not be applicable at all.

5.4 It is further submitted by Shri Dave, learned Advocate

appearing on behalf of the respondent­operational creditor that

Section 16G(1)(c) of the Tea Act is applicable to a proceeding for

“winding up” and not to proceeding for initiation of “corporate

insolvency resolution process”, as the both are not one and the

same proceedings. It is submitted that winding up of a company

is provided for, and governed by, the Companies Act. It is

submitted that, on the other hand, initiation of corporate
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insolvency resolution process is provided for, and governed by,

the Insolvency and Bankruptcy Code, 2016. It is submitted that

both these processes are distinct from one another and not

synonymous with one another. It is submitted that the power of

the Parliament to make any law relating to winding up can be

traced to Entry nos. 33 and 34 of the Union List of the Seventh

Schedule of the Constitution. It is submitted that, on the other

hand, the power of the Parliament to make any law relating to

insolvency can be traced to Entry no. 9 of the Concurrent List of

the Seventh Schedule of the Constitution. It is submitted that,

thus, winding up and insolvency proceedings are not one and the

same as they have been mentioned under two separate entries in

two separate lists in the Seventh Schedule. It is submitted that,

as such, Section 16G(1)(c) of the Tea Act, which mandates that

no winding up proceeding can lie in any court against a company

which has been taken over by the Tea Board without consent of

the Central Government, does not and cannot be interpreted to

mean that the said section applies to any proceeding for initiation

of corporate insolvency resolution process against a company

which has been taken over by the Tea Board. It is submitted that

the learned NCLAT has rightly held that Section 16G(1)(c) relates

to winding up and, on the other hand, Section 9 of the IBC is not
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a proceeding for winding up, but for initiation of “corporate

insolvency resolution process” to ensure revival and continuation

of the corporate debtor by protecting the corporate debtor from

its own management and from corporate debt by liquidation. In

support of his above submissions, Shri Dave, learned Advocate

appearing on behalf of the respondent­operational creditor, has

heavily replied upon the decisions of this Court in Innoventive

Industries Ltd. v. ICICI Bank [AIR 2017 SC 4084 at paras 16,

51 and 56 : (2018) 1 SCC 407], Swiss Ribbons Pvt. Ltd. [AIR

2019 SC 739 at paras 10 to 12 : (2019) 4 SCC 17] and a decision

in PCIT v. Monnet Ispat and Energy Ltd. (2018) 18 SCC 786.

Making the above submissions and relying upon the above

decisions of this Court, it is prayed to dismiss the present appeal

and to confirm the impugned judgment and order passed by the

learned NCLAT.

6. The short question which is posed for consideration of this

Court is whether before initiation of the proceedings under

Section 9 of the IBC, a consent of the Central Government as

provided under Section 16G(1)(c) of the Tea Act, 1953 is required

and/or whether in absence of any such consent of the Central

Government the proceedings initiated by the respondent­
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operational creditor under Section 9 of the IBC would be

maintainable or not?

7. Sections 16G of the Tea Act reads as under:

“16G. Application of Act 1 of 1956.—(1) Where
the 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 this Act, then, notwithstanding
anything contained in the said Act or in the
memorandum or articles of association of such
company,—

(a) it shall not be lawful for the shareholders of
such company or any other person to
nominate or appoint any person to be a
director of the company;
(b) no resolution passed in a meeting of the
shareholders of such company shall be given
effect to unless approved by the Central
Government;
(c) no proceeding for the winding up of such
company or for the appointment of receiver
in respect thereof shall lie in any court
except with the consent of the Central
Government.

(2) Subject to the provisions contained in sub­
section (1), and to the other provisions contained in
this Act, and subject to such other exceptions,
restrictions and limitations, if any, as the Central
Government may, by notification in the Official
Gazette specify in this behalf, the Companies Act,
1956, shall continue to apply to such company in the
same manner as it applied thereto before the issue of
the notified order.”

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
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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 appellant­corporate 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 mis­management, it has deteriorated
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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 appellant­corporate 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

appellant­corporate 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
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facts and circumstances of the case, Section 16G(1)(c) shall not

be applicable at all, as the appellant­corporate debtor is

continued to be in management and control of the tea

units/gardens.

7.2 Now, 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 in itself. In a recent decision of this Court in the

case of Swiss Ribbons Pvt. Ltd. (supra), this Court had an

occasion to consider the Statement of Objects and Reasons of the

IBC and also the Preamble of the IBC, which when noted by this

Court in its earlier decision in Innoventive Industries Ltd.

(supra), in paragraphs 25 and 26 in the case of Swiss Ribbons

Pvt. Ltd. (supra), this Court has referred to the Statement of

Objects and Reasons of the IBC and the Preamble of the IBC.

Paragraphs 25 and 26 are as under:
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25. The Statement of Objects and Reasons for
the Code have been referred to in Innoventive
Industries [Innoventive Industries Ltd. v. ICICI Bank,
(2018) 1 SCC 407 : (2018) 1 SCC (Civ) 356] which
states: (SCC pp. 421­22, para 12)

“12. … The Statement of Objects and
Reasons of the Code reads as under:
‘Statement of Objects and Reasons.—
There is no single law in India that deals with
insolvency and bankruptcy. Provisions
relating to insolvency and bankruptcy for
companies can be found in the Sick Industrial
Companies (Special Provisions) Act, 1985, the
Recovery of Debts Due to Banks and Financial
Institutions Act, 1993, the Securitisation and
Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
and the Companies Act, 2013. These statutes
provide for creation of multiple fora such as
Board of Industrial and Financial
Reconstruction (BIFR), Debts Recovery
Tribunal (DRT) and National Company Law
Tribunal (NCLT) and their respective Appellate
Tribunals. Liquidation of companies is
handled by the High Courts. Individual
bankruptcy and insolvency is dealt with
under the Presidency Towns Insolvency Act,
1909, and the Provincial Insolvency Act, 1920
and is dealt with by the courts. The existing
framework for insolvency and bankruptcy is
inadequate, ineffective and results in undue
delays in resolution, therefore, the proposed
legislation.
2.The objective of the Insolvency and
Bankruptcy Code, 2015 is to consolidate and
amend the laws relating to reorganisation and
insolvency resolution of corporate persons,
partnership firms and individuals in a time­
bound manner for maximisation of value of
20

assets of such persons, to promote
entrepreneurship, availability of credit and
balance the interests of all the stakeholders
including alteration in the priority of payment
of government dues and to establish an
Insolvency and Bankruptcy Fund, and
matters connected therewith or incidental
thereto. An effective legal framework for timely
resolution of insolvency and bankruptcy
would support development of credit markets
and encourage entrepreneurship. It would
also improve Ease of Doing Business, and
facilitate more investments leading to higher
economic growth and development.
3. The Code seeks to provide for
designating NCLT and DRT as the
adjudicating authorities for corporate persons
and firms and individuals, respectively, for
resolution of insolvency, liquidation and
bankruptcy. The Code separates commercial
aspects of insolvency and bankruptcy
proceedings from judicial aspects. The Code
also seeks to provide for establishment of the
Insolvency and Bankruptcy Board of India
(Board) for regulation of insolvency
professionals, insolvency professional
agencies and information utilities. Till the
Board is established, the Central Government
shall exercise all powers of the Board or
designate any financial sector regulator to
exercise the powers and functions of the
Board. Insolvency professionals will assist in
completion of insolvency resolution,
liquidation and bankruptcy proceedings
envisaged in the Code. Information Utilities
would collect, collate, authenticate and
disseminate financial information to facilitate
such proceedings. The Code also proposes to
establish a fund to be called the Insolvency
and Bankruptcy Fund of India for the
purposes specified in the Code.
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4. The Code seeks to provide for
amendments in the Indian Partnership Act,
1932, the Central Excise Act, 1944, Customs
Act, 1962, the Income Tax Act, 1961, the
Recovery of Debts Due to Banks and Financial
Institutions Act, 1993, the Finance Act, 1994,
the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security
Interest Act, 2002, the Sick Industrial
Companies (Special Provisions) Repeal Act,
2003, the Payment and Settlement Systems
Act, 2007, the Limited Liability Partnership
Act, 2008, and the Companies Act, 2013.
5. The Code seeks to achieve the above
objectives.’”

26. The Preamble of the Code states as follows:

“An Act to consolidate and amend the
laws relating to reorganisation and insolvency
resolution of corporate persons, partnership
firms and individuals in a time­bound manner
for maximisation of value of assets of such
persons, to promote entrepreneurship,
availability of credit and balance the interests
of all the stakeholders including alteration in
the order of priority of payment of government
dues and to establish an Insolvency and
Bankruptcy Board of India, and for matters
connected therewith or incidental thereto.”

7.3 After noticing and considering the Statement of Objects and

Reasons for the IBC and the Preamble to the Code, thereafter this

Court has observed and held in paragraphs 27 and 28 as under:
22

“27. As is discernible, the Preamble gives an
insight into what is sought to be achieved by the
Code. The Code is first and foremost, a Code for
reorganisation and insolvency resolution of corporate
debtors. Unless such reorganisation is effected in a
time­bound manner, the value of the assets of such
persons will deplete. Therefore, maximisation of value
of the assets of such persons so that they are
efficiently run as going concerns is another very
important objective of the Code. This, in turn, will
promote entrepreneurship as the persons in
management of the corporate debtor are removed and
replaced by entrepreneurs. When, therefore, a
resolution plan takes off and the corporate debtor is
brought back into the economic mainstream, it is
able to repay its debts, which, in turn, enhances the
viability of credit in the hands of banks and financial
institutions. Above all, ultimately, the interests of all
stakeholders are looked after as the corporate debtor
itself becomes a beneficiary of the resolution scheme
—workers are paid, the creditors in the long run will
be repaid in full, and shareholders/investors are able
to maximise their investment. Timely resolution of a
corporate debtor who is in the red, by an effective
legal framework, would go a long way to support the
development of credit markets. Since more
investment can be made with funds that have come
back into the economy, business then eases up,
which leads, overall, to higher economic growth and
development of the Indian economy. What is
interesting to note is that the Preamble does not, in
any manner, refer to liquidation, which is only
availed of as a last resort if there is either no
resolution plan or the resolution plans submitted are
not up to the mark. Even in liquidation, the
liquidator can sell the business of the corporate
debtor as a going concern.
(See ArcelorMittal [ArcelorMittal (India) (P)
Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1] at para
83, fn 3).
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28. It can thus be seen that the primary focus of
the legislation is to ensure revival and continuation
of the corporate debtor by protecting the corporate
debtor from its own management and from a
corporate death by liquidation. The Code is thus a
beneficial legislation which puts the corporate debtor
back on its feet, not being a mere recovery legislation
for creditors. The interests of the corporate debtor
have, therefore, been bifurcated and separated from
that of its promoters/those who are in management.
Thus, the resolution process is not adversarial to the
corporate debtor but, in fact, protective of its
interests. The moratorium imposed by Section 14 is
in the interest of the corporate debtor itself, thereby
preserving the assets of the corporate debtor during
the resolution process. The timelines within which
the resolution process is to take place again protects
the corporate debtor’s assets from further dilution,
and also protects all its creditors and workers by
seeing that the resolution process goes through as
fast as possible so that another management can,
through its entrepreneurial skills, resuscitate the
corporate debtor to achieve all these ends.

7.4 Section 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
24

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 time­bound 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. 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 time­bound manner, shall be

frustrated. The sum and substance of the above discussion

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
25

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.

8. In view of the above and for the reasons stated above, the

present appeal fails and the same deserves to be dismissed and is

accordingly dismissed. The impugned judgment and order dated

20.06.2019 passed by the learned NCLAT holding that insolvency

petition under Section 9 of the Insolvency and Bankruptcy Code,

2016 initiated by the respondent­operation creditor shall be

maintainable, is hereby confirmed. No costs.

…………………………….J.
(ARUN MISHRA)

……………………………..J.
(M. R. SHAH)

New Delhi ……………………………..J.
October 04, 2019 (B. R. GAVAI)

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