NCLT Kolkata: Provisions Of IBC Shall Override The Section 29 Of State Financial Corporation Act, 1951

The National Company Law Tribunal (‘NCLT’), Kolkata Bench comprising of Mrs. Bidisha Banerjee (Judicial Member) and Mr. Balraj Joshi (Technical Member), allowed the application filed in Pankaj Tibrewal Resolution Professional of Dutta Agro Mills Pvt. Ltd. vs. West Bengal Industrial Development Corporation. The application was filed by Pankaj Tibrewal, Resolution Professional (RP) of Dutta Agro Mills Pvt. Ltd. (‘Corporate Debtor’) to direct the West Bengal Industrial Development Corporation (‘WBIDC’) to assist the RP in completion of the Corporate Insolvency Resolution Process (‘CIRP’) of the Corporate Debtor in a time bound manner and to handover the possession of the movable and immovable assets (‘assets’) of the Corporate Debtor to the RP. The Tribunal held that the provisions of the Insolvency and Bankruptcy Code, 2016 (‘IBC) should prevail over the State Financial Corporation Act, 1951 (‘SFC’). Background Facts: CIRP was initiated against the Corporate Debtor on 04.07.2022. The RP requested possession of the assets of the Corporate Debtor which as per ex-management of the Corporate Debtor had been taken over by WBIDC. The RP on its visit found that no records were available at the premises as claimed by the Director of the Corporate Debtor. Further, a charge was created upon the assets of the Corporate Debtor in 2006 when it availed a term loan of Rs.17.2 crores from WBIDC. WBIDC being a Financial Corporation falls under SFC and as per Section 29 of SFC has powers to take over the management and possession of the Corporate Debtor. However, as per Section 19 and Section 25 of the IBC, the RP also has the right and power to take over the possession of the assets whereas the SFC has not handed over the possession of the RP. NCLT Verdict: The NCLT allowed the application and held that the provisions of the IBC should prevail over SFC. It observed that no authority, post-framing of the IBC has been cited to substantiate the view that an earlier Special Act, in the instant case SFC Act, 1951 with a non-observant clause shall prevail over the IBC which is a later one. It further held that the argument produced by the WBIDC that there has been a change of ownership in favor of WBIDC before the enactment of the IBC has no legs to stand upon. The Tribunal pointed out that the Corporate Debtor is a defaulter debtor but the WBIDC is a creditor and is not the owner of the property hypothecated/mortgaged to it by the Corporate Debtor and WBIDC is rarely in control over the assets of the Corporate Debtor. The Tribunal observed that as per Section 238 of the IBC, the provisions of the IBC will prevail over the other Statutes. Section 238: Provisions of this Code to override other laws. The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. It highlighted that the IBC is indubitably and indisputably a Special Statute as also a later statute vis-a-vis the SFC Act, 1951, both having non-obstante clauses. The reach of the non-obstante clause of the SFC Act, 1951 is limited by Section 46B of the Act, whereas non non-obstante clause of the IBC shows that it prevails in all situations. It concluded that IBC as a Special statute has a non-obstante clause which does not have a limited reach, unlike the SFC Act, 1951. Case Title: Pankaj Tibrewal Resolution Professional of Dutta Agro Mills Private Limited vs. West Bengal Industrial Development Corporation Case No.: IA(IB)No.1267/KB/2022 in C.P (IB) No.1712/KB/201 Click here to Read/Download Order

NCLT Kolkata: Provisions Of IBC Shall Override The Section 29 Of State Financial Corporation Act, 1951

Sachika Vij

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Sachika Vij

NCLT Kolkata: Provisions Of IBC Shall Override The Section 29 Of State Financial Corporation Act, 1951

Sachika Vij

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Sachika Vij

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