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NCLT Dismisses Insolvency Petition Against Duncans Industries

The Kolkata bench of the National Company Law Tribunal (NCLT) has dismissed a plea filed by an operational creditor of Duncans Industries to commence insolvency proceedings against the ailing tea company of The Duncan Goenka Group. The insolvency petition was filed under Section 9 of the Insolvency & Bankruptcy Code (IBC) by AJ Agro Chem, a Surat-based firm, against Duncans Industries as the latter was unable to pay Rs 41.55 lakh towards the supply of various pesticides and herbicides. The petition filed by the operational creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016 is hereby rejected, justice Madan B Gosavi said in his order on Friday. While passing the order, justice Gosavi said the petition filed by AJ Agro Chem could *not be admitted unless the operation creditor sought consent* from the central government as per the Tea Act, 1953. The control of affairs of the tea company along with its tea estates were still with the government, he maintained.

In his submission before the bench, Duncans Industries’ counsel Rishav Banerjee had said, Under the Tea Act, the central government, by a notification of January 28, 2016, took over de jure possession of some gardens of the company. Therefore, under a specific bar under the Tea Act, one cannot go ahead with insolvency proceedings without obtaining consent from the government. Vide the notification dated January 28, 2016 under Section 16E of the Tea Act, the central government had authorised the Tea Board to take over the control and management of the seven ailing tea estates of the GP Goenka-headed company in north Bengal. Following that the company, a sick unit which had been listed with the BIFR, challenged the notification before the Calcutta High Court. In a stock exchange filing on September 27, 2016, Duncans Industries informed that a division bench of the High Court had endorsed the submission of the company and passed an interim order inter alia allowing the company to take over the management of the tea gardens, hitherto statutorily under control of the Tea Board.

In his submission before the bench of the NCLT, the operational creditor’s counsel had argued that the provisions of Section 16G(1)(c) of Tea Act were not applicable in this case as the affairs of the company were no more under the control of the government and, hence, its consent was not required to go ahead with insolvency proceedings. Moreover, intimation of the government notification dated 28.01.2016 is stayed by the High Court, he added. However, in his order, justice Gosavi said, I have gone through the order of the Hon’ble High Court wherein above (central government’s) notification is challenged. It appears that validity of the notification dated 28.01.2016 is still under the consideration of the Hon’ble Calcutta High Court. However, as an interim arrangement, the affairs of seven tea estates have been handed over to the corporate debtor herein with further direction not to alienate or encumber any fixed assets of tea estates. The High Court had not set aside the government notification dated January 28, 2016, and hence the control of affairs of the tea company along with the tea estates were still with the Central government/Tea Board, the judge said; considering the facts of the case and various provisions of law as discussed, I hold that this petition under Section 9 of I&B Code cannot be admitted unless the operational creditor seeks consent from the central government as per Section 16G(1)(c) of the Tea Act, 1953, justice Gosavi concluded.

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