The Supreme Court on Wednesday set aside the National Company Law Tribunal’s order that initiated insolvency proceedings against La-Fin Financial Services, thus paving way to handing over of the management of embattled investment firm back to its erstwhile management led by former MCX promoter Jignesh Shah group.
While the insolvency proceeding, initiated by financial creditor IL&FS Financial Services in May 2017 with respect to a debt of Rs 97.79 crore and default of payment of a financial debt of Rs 266.39 crore, was upheld by the National Company Law Appellate Tribunal (NCLAT), the Bombay High Court had stayed the appellate tribunal order and allowed handing over of the management of La-Fin to the Shah group.
A Bench led by Justice RF Nariman, while quashing the orders of both NCLT, Mumbai, and the NCLAT, rejected the IL&FS stand that its suit had been filed well in time and the winding-up plea was within the limitation period.
However, the SC said the winding-up petition filed on October 21, 2016 by IL&FS was beyond the period of three-years mentioned in Article 137 of the Limitation Act, and thus is time-barred and cannot be proceeded further.
The judges said the winding-up petition mentions that the fall in the assets of La-Fin was around `200 crore as of October 2016, which again did not correlate with November 3, 2015, the date when the statutory notice was issued by IL&FS. “This again is only for the purpose of appointing… an official liquidator in order to manage the day-to-day affairs, and otherwise secure and safeguard the assets of the company. There is no averment in the petition that says that the company’s substratum has disappeared, or that the company is otherwise commercially insolvent,” Justice Nariman said in the judgment.
“Whereas, in Form-1, upon transfer of the winding up proceedings to the NCLT, what is correctly stated is that the date of default is August 19, 2012; making it clear that three years from that date had long since elapsed when the winding-up petition under Section 433(e) was filed on October 21, 2016,” the apex court said.
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