The National Company Law Appellate Tribunal (NCLAT) set aside the order of the National Company Law Tribunal, Kolkata Bench (NCLT) and inter alia held that no prior approval/sanction of the Central Government is required for making an insolvency application against a tea company since Section 16G(1)(c) of the Tea Act and Section 9 of the IBC operate in separate spheres.
In the instant case titled A.J. Agrochem v Duncans Industries Limited the issue that was raised before the NCLAT was:
Whether approval of the Central Government under Section 16G(1)(c) of the Tea Act, 1953 (Tea Act) is necessary for filing an application under the Insolvency and Bankruptcy Code, 2016 (IBC) against a tea company?
With regard to the issue, NCLAT held that according to the IBC's statement of purposes and reasons, the fundamental goal of the IBC was to secure the resurrection and continuance of debtor enterprises by completing the CIRP procedure in a timely way. Under the IBC, liquidation is only used as a last resort and is not a desirable conclusion.
The nature and logic of initiating CIRP in response to an application under Section 9 of the IBC differ significantly from the 'winding-up' processes specified in Section 16G(1)(c) of the Tea Act. As a result, there is no contradiction between the two statutes, and the Tea Act's Section 16G(1)(c) does not apply to the IBC's Section 9 provisions.
The court categorically held that:
“Section 238 of the IBC deals only with situations where there is a conflict between the provisions of the IBC and other laws. Since there was no such conflict in the present matter, Section 238 was not applicable to the matter at hand; and the right to make an application under Section 9 of the IBC only accrued to the Operational Creditor on 1 December 2016 when the IBC came into force. As such, in terms of Article 137 of the Schedule of the Limitation Act, 1963 (Limitation Act), the limitation period would be calculated from 1 December 2016. However, this point was kept open for adjudication, since the limitation is a mixed question of law and fact”.
Hence, the Tribunal held that the requirement to seek prior approval of the Central Government under Section 16G(1)(c) of the Tea Act is not applicable to an application under Section 9 of the IBC.