Disposed

Mr. K.Nagaraja, S/o K.Krishnamurthy v. Union of India, Rep. by its Secretary, Ministry of

Telangana HC15 Sept 2017WP/29616/2017

Case brief

AI extract

What is this about?

A common order in multiple writ petitions holding that since specific sections of the Insolvency and Bankruptcy Code relevant to individuals and firms are not notified, the Provincial Insolvency Act, 1920 remains in force. The court directed Senior Civil Judges to continue entertaining insolvency applications under said Act.

What did the court decide?

Direction to Senior Civil Judges to entertain insolvency applications under the Provincial Insolvency Act, 1920 as the Code provisions for individuals are not in force.

Mr. K.Nagaraja, S/o K.Krishnamurthy Vs Union of… — Insolvency and Bankruptcy | Telangana HC (2017)

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THE HON’BLE THE ACTING CHIEF JUSTICE RAMESH RANGANATHAN AND

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THE HON’BLE Ms. JUSTICE J. UMA DEVI

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Writ Petition Nos.29517, 26136, 29594, 29616. 29683, 30369, 30655, 30766, 30822, 30868, 30888, 31159 and 31424 of 2017

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Common Order: (Per the Hon’ble The Acting Chief Justice Ramesh Ranganathan)

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In all these writ petitions, a direction is sought either to the Debt Recovery Tribunal to receive the applications filed under the Insolvency and Bankruptcy Code, 2016 (for short “the Code”) or for the Senior Civil Judges concerned to entertain the applications made under the Provincial Insolvency Act, 1920.

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Section 243(1) of the Code provides for the repeal of the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920. Section 179 of the Code relates to the adjudicating authority for individuals and partnership firms; and under Sub-Section (1) thereof, subject to the provisions of Section 60, the adjudicating authority, in relation to insolvency matters of individuals and firms, shall be the Debts Recovery Tribunal having territorial jurisdiction over the place where the individual debtor actually and voluntarily resides, or carries on business, or personally works for gain; and can entertain an application under the Code regarding such person. Section 180(1) provides that no Civil Court or authority shall have jurisdiction to entertain any suit or proceedings in respect of any matter on which the Debts Recovery Tribunal or the Debts Recovery Appellate Tribunal has jurisdiction under the Code. Section 181(1) provides for an appeal from the order of the Debts Recovery Tribunal under the Code to the Debts Recovery Appellate Tribunal.

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Part-II of the Code relates to Insolvency Resolution and Liquidation for Corporate Persons, and Section 4(1) stipulates that Part-II of the Code shall apply to matters relating to the insolvency and

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liquidation of corporate debtors where the minimum amount of default is Rupees one lakh. Section 7(1) of the Code enables a financial creditor, either by itself or jointly with other financial creditors, to file an application for initiating corporate insolvency resolution process against a corporate debtor before the adjudicating authority when a default occurs. The adjudicating authority in Part-II is the National Company Law Tribunal (NCLT) in terms of Section 60(1) of the Code.

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Section 1(3) of the Code stipulates that the Code shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. Clauses (a) to (d) of Section 2, Sections 4 to 32, Sections 60 to 77, Section 188, Section 231, Sections 236 to 238 and Clauses (a) to (f) of Sub-section (2) of Section 239 were notified in SO 3494(E) dated 30.11.2016, and were published in the Gazette of India dated 30.11.2016. Likewise, Sections 188 to 194 were notified by S.O. 2618(E) dated 5.8.2016 and published in the Official Gazette of India dated 5.8.2016. Sections 241 and 242 of the Code were notified by S.O. 2746(E) dated 19.8.2016 and were published in the Official Gazette of India dated 19.8.2016. As the aforesaid provisions, including Sections 4 to 32 and Sections 60 to 77, have already been notified, these provisions have come into force; and, consequently, the applications, relating to Corporate Bodies/ Companies, are justifiably being entertained by the NCLT. It is only if Sections 179, 181 and Section 243(1) are also notified, would the Provincial Insolvency Act, 1920 and the Presidency Towns Insolvency Act, 1909 stand repealed; and insolvency applications, relating to individuals and firms, can be entertained by the Debts Recovery Tribunal.

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Sri K. Lakshman, learned Assistant Solicitor General, would submit, based on the instructions received from the Executive Director, Insolvency and Bankruptcy Board of India, dated 14.9.2017, that

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Sections 179(1) and Section 243 of the Code have not been brought into force; the Central Government (Ministry of Corporate Affairs) has not issued a notification under Sub-section (3) of Section 1 of the Code to bring these Sections into force; therefore, these provisions are not in force; the Finance Ministry issued a press release on 28.8.2017 clarifying that Section 243 of the Code, which provides for the repeal of the Provincial Insolvency Act, 1920 and the Presidency Towns Insolvency Act, 1909, have not been notified till date; Section 243 which provides for repeal of the said enactments, and the provisions relating to insolvency resolution and bankruptcy for individuals and partnerships as contained in Part-III of the Code, have not been notified till date; and stakeholders, who intend to pursue their insolvency cases, may approach the appropriate authority/Court under the existing enactments, instead of approaching the Debts Recovery Tribunals. A copy of the press release of the Government of India dated 28.8.2017 has also been placed for our perusal.

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As Section 243(1) of the Code has not been brought into force, by way of a notification to be issued by the Government of India under Section 1(3) of the Code, it is clear that neither the Presidency Towns Insolvency Act, 1909 nor the Provincial Insolvency Act, 1920 have been repealed; and both these enactments continue to remain in force. Further, as Section 179(1) of the Code has also not been brought into force, the Debts Recovery Tribunal is justified in not entertaining such applications.

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We consider it appropriate, therefore, to direct that the adjudicating authorities (Senior Civil Judges concerned) under the Provincial Insolvency Act, 1920 shall entertain the insolvency applications in as much as the provisions of the said Act continues to remain in force, and does not stand repealed till date.

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All the Writ Petitions are, accordingly, disposed of. Miscellaneous Petitions pending, if any, shall also stand disposed of. There shall be no order as to costs.

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_________________________________ (RAMESH RANGANATHAN, ACJ)

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_________________ (J. UMA DEVI, J)

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15^th September, 2017

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Note:

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Furnish c.c. by 18.9.2017. b/o pnb

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