DUNCANS INDUSTRIES LTD. versus A. J. AGROCHEM

Citation: [2019] 12 S.C.R. 830 · Decided: 04-10-2019 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Dismissed

Cited by 2 judgment(s) · cites 5 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2019] 12 S.C.R.
DUNCANS INDUSTRIES LTD.
v.
A. J. AGROCHEM
(Civil Appeal No. 5120 of 2019)
OCTOBER 04, 2019
[ARUN MISHRA, M. R. SHAH AND B. R. GAVAI, JJ.]
Insolvency and Bankruptcy Code, 2016:
ss. 7, 9 and 238 – Application for initiation of corporate
insolvency resolution process by operational creditor – On facts,
appellant-operational debtor managing 14 tea gardens, out of
which, Central Government in exercise of power u/s. 16E of the
Tea Act, took control of 7 gardens – Appellant defaulted in making
payment to respondent–operational creditor against the pesticides
supplied by the respondent – Initiation of insolvency proceedings
u/s. 9 by the respondent against the appellant – NCLT held that
the proceedings were not maintainable since prior consent of
Central Government as required u/s. 16 G not obtained – In appeal,
NCLAT held that application u/s. 9 was maintainable even without
consent of Central Government in terms with s. 16 G –  On appeal,
held: Section 16G(1)(c) shall not be applicable at all, as the
appellant-corporate debtor is continuing to be in management and
control of the tea gardens – Provisions of the IBC shall have an
over-riding effect over the Tea Act, 1953 – No prior consent of
the Central Government before initiation of the proceedings u/s. 7
or s. 9 would be required and even without such consent of the
Central Government, the insolvency proceedings u/s. 7 or s. 9
initiated by the operational creditor shall be maintainable – Thus,
the order passed by NCLAT upheld – Tea Act, 1953 – s. 16G(1)(c).
Emphasis of – Held: Primary focus of the Code while
enacting, 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 – As such the entire “corporate insolvency resolution
process” cannot be equated with “winding up proceedings”.
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   [2019] 12 S.C.R. 830
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Dismissing the appeals, the Court
HELD: 1.1 In effect, the appellant has been continued to
be in management and control of the tea estates, despite the
notification under Section 16E of the Tea Act. It is required to
be noted that notification under Section 16E 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 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, Section 16G 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 tea units/
gardens. [Para 7.1] [841-F-H; 842-A-E]
DUNCANS INDUSTRIES LTD. v. A. J. AGROCHEM
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SUPREME COURT REPORTS
[2019

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