BANK OF NEW YORK MELLON LONDON BRANCH v. ZENITH INFOTECH LIMITED

Judgment

2 S.C.R. 415 BANK OF NEW YORK MELLON LONDON BRANCH A v. ZENITH INFOTECH LIMITED (Civil Appeal No. 3055of2017) FEBRUARY 21, 2017 [RANJAN GOGOi AND ABHAY MANOHAR SAPRE, JJ.] Sick Industrial Companies (Special Provisions) Act, 1985 - ss. 15, 3(e), 3(j) - Board for Industrial and Financial Reconstruction Regulations, 1987 - Regns. 19(5), (4) _:Registration of the Reference under SICA - Scope - Power and jurisdiction of the Registrar and Secretary to refuse registration of the application for reference by the Company - On facts, application for registration of Reference by respondent no. l company - Dismissal of, by Registrar, Secretary and Chairman of the Board, on the ground that respondent no. 1 company was not an industrial company within the meaning of s. 3(e), (j) - Meanwhile, order of winding up of respondent no. I-Company by the High Court, upheld by the Division Bench - Subsequently, respondent-company challenged the orders of the Secretary and Chairman of the Board rejecting the application for Reference - High Court held that the Registrar and the Secretary and the Chairman of the Board not conferred any power of adjudication and as registration of the Reference was refused on that basis, the said orders non est in law; and that the winding up order passed by the Company Court would not foreclose the proceedings under the SICA, and registration of Reference and inquiry can still be made - On appeal, held: Power to "scrutinize" an application prior to registration thereof and thereafter to register and place the same before the Bench vests in the Registrar or the Secretary of the Board - Power of scrutiny cannot be understood to be vesting in any of the authorities the power to adjudicate the question as to whether a company is an industrial company within the meaning of s. 3(e) read with 3(/) and 3(n) - Rejection of the question could have been made only by a process of adjudication, vested by SICA and the Regulations framed thereunder in a Bench of the Board - High Court was correct in holding that the refusal of registration of the reference sought by the respondent Company by 415 B c D E F G H 416 SUPREME COURT REPORTS [2017) 2 S.C.R. the Registrar, Secretary/Chairman of the Board was non-est in lmv - Reference must, thus, understood to be pending before the Board on the relevant date attracting the provisions of s. 252 of the Insolvency and Bankruptcy Code - In view thereof the question whether reference before the Board stood foreclosed by the order of winding up of the respondent company and the appointment of the liquidator becomes redundant - Respondent open to seek remedies uls. 252 r!w ss. 13, 14, 20 and 25. Disposing of the appeal, the Court HELD: 1.1 From the provisions of Regulation 19(5) of the Board for Industrial and Financial Reconstruction Regulations, 1987 it would appear that on receipt of a Reference under Regulation 19(4) the Secretary or the Registrar, as may be, after making an endorsement of the date on which the same has been received in the office of the Board Is required to make a scrutiny and, thereafter, if found to be in order, to register the same; assign a serial number thereto and place the same before the Chairman for being assigned to a Bench. After completion of the said exercise under Regulation 19(5) the later part of the said Regulation contemplates that simultaneously, remaining information/documents required, if any, may be called for from the applicant. Regulation 20 contained in Chapter III and Regulation 21 contained in Chapter IV deal with the manner in which the proceedings of inquiry after registration of the Reference is to be made. [Para 16] [428-G-H; 429-A-B]

1.2 Regulation 19(5) requires the Registrar or the Secretary, as may be, to make an endorsement of the date of receipt of the Reference [Regulation 19(4)] and thereafter, on scrutiny thereof to register the same and place before the Chairman for being referred to the Bench. When the Regulations framed under the statute vests in the Registrar or the Secretary of the Board the power to "scrutinize" an application prior to registration thereof and thereafter, to register and place the same before the Bench, it cannot be seen bow such power of scrutiny can be understood to be vesting in any of the said authorities the power to adjudicate the question as to whether a company is an industrial company within the meaning of Section 3(e) read with 3(1) and 3(n) of the SICA. A claim to come within the ambit of the A B c D E F G H BANK OF NEW YORK MELLON LONDON BRANCH v. ZENITH JNFOTECH LIMITED said provisions of the SICA i.e. to be an industrial company, more often than not, wonld be a contentions issne. In the instant case, it certainly was. The specific stand of the respondent No. 1 company in this regard need not detain the Court save and except to state that by a detailed description of the manufacturing process the respondent No. 1 company had sought to contend that it is an indnstrial company. Snrely, the rejection of the said stand could have been made only by a process of adjudication which power and jurisdiction clearly and undoubtedly is vested by the SICA and the Regulations framed thereunder in a Bench of the Board and not in authorities like the Registrar and the Secretary. [Para 17] [429-B-F]

1.3 The High .Court was correct in coming to the conclusion that the refusal of registration of the reference sought by the respondent Company by the Registrar, Secretary/Chairman of the Board was non-est in law. The reference must, therefore, understood to be pending before the Board OI) the relevant date attracting the provisions of Section 252 of the Insolvency and Bankruptcy Code. [Para 18] (432-F-G]

1.4 The second question arising before the High Court, namely, whether the reference before the Board stood foreclosed by the order of winding up of the respondent Company and the appointment of liquidator was answered in the negative. The core principles laid down in Real Value Appliances Ltd. case and RislwblJ Agro Industries Ltd. case namely, that immediately on registration of a reference under Section 15 of the erstwhile SICA, the enquiry· under Section 16 is deemed to have commenced and that the winding up proceedings against a company stood terminated only after ord~rs under Section 481 of the Companies Act, 1956, are passed, will have to be noticed to adjudge the correctness of the said view of the High Court. In any event, the said question becomes redundant in view of the conclusion that the reference songht by the respondent Company must be deemed to have been pending on the date of commencement of the Insolvency and Bankruptcy Code, particularly, Section 252 thereof (effective 1.11.2016). It would still be open to the respondent Company to seek its remedies under the provisions of Section 252 of the Code read with what is laid down in Sections 13, 14, 20 and 25. (Para 19, 20] [432-G-H; 433-A-C] 417 A B c D E F G H 418 A B c D E F G H SUPREME COURT REPORTS [2017] 2 S.C.R.