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I&B Code : No application can be filed or continued with regard to initiation of resolution process under Chapter II of Part II of IBC without leave of Company Court under Section 446 (1) of Companies Act,1956
• Section 238 IBC came into force with effect from 1-12-2016 and from that date onwards, it eclipsed the provisions of other laws in force including the Act of 1956. But, later came a relief, at least for the Act of 1956 in its application to pending liquidation proceedings. Rule 5 of the Companies (Transfer of Pending Proceedings) Rules,2016 and clause 2 of the Companies(Removal of Difficulties)Fourth Order, 2016 proved to be the ambrosia for the provisions of the Act of 1956 in their application to retained petitions filed for liquidation of a Company by removing the shadow of Section 238 over them with effect from 15-12- 2016. This was also in consonance with Section 11(d) of the IBC.
• IBC would apply with full force to any application filed for resolution of insolvency of a Company facing liquidation before the Company Court. But, such complete dominance of the IBC would start the moment the resolution application is filed and not before that and it would continue till the resolution process ends one way or the other. This is because of the fact that the Company or the Corporate Debtor, which cannot file a resolution application and which is already facing a liquidation proceeding in a saved petition, in respect of whom resolution process is sought to be initiated, is governed by a different set of rules for its liquidation, in terms of clause 2 of Order, 2016 read with rule 5 of the Rules of 2016. To such a Company, the Act of 1956, to the extent of its liquidation process, applies and Section 446 is an intrinsic part of that process. It mandates that leave of the Company Court to file or continue with any such proceeding, must be obtained. Section 446 of the 1956 Act would require that a forum dealing with a proceeding more drastic in consequences is allowed to take a call on the revival possibility of the Company before it is too late in the day. This would mean that no application can be filed or continued with regard to initiation of resolution process under Chapter II of Part II of the IBC without leave of the Company Court under Section 446 (1) of the Act of 1956. It would then follow that if any resolution process is initiated without leave of the Company Court, it would be a defective proceeding in the eye of the IBC read with the Act of 1956. Such a proceeding will acquire sanctity only when leave under Section 446 (1) of the Act of 1956 is granted and till that time, it cannot be said that the prohibition contained in Section 64(2) of the IBC would have its application.Thus,leave to continue with the proceedings before the NCLT, under Section 446 (1) of the Act of 1956, is necessary.