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Bank of New York Mellon London Branch v. Zenith Infotech Limited

Special Leave Petition (Civil) · Neutral citation not assigned (Special Leave Petition (Civil) No. 1587 of 2015)Decided 21 Feb 2017
Special Leave Petition (Civil) No. 1587 of 2015
Justice Ranjan Gogoi · Justice Abhay Manohar Sapre

Background

Zenith Infotech Limited had sought to be declared a "sick industrial company" under the now-repealed Sick Industrial Companies (Special Provisions) Act (SICA), but its reference was refused registration by the Board's Registrar/Secretary without the matter ever reaching a judicial Bench of the Board for adjudication. By the time the appeal reached the Supreme Court, SICA had been repealed and the new Insolvency and Bankruptcy Code, 2016 had come into force, raising the question of what happens to a reference that was wrongly never registered when the old law was replaced by the new one. The company's bank creditor (Bank of New York Mellon) appealed against a High Court ruling that had favoured the company on both points: that the refusal to register was invalid, and that the company's winding-up did not kill its right to pursue the reference.

Decision Breakdown

The Supreme Court held that only a judicial Bench of the Board, not administrative staff like the Registrar or Secretary, has the power to decide whether a company qualifies as an "industrial company," so the refusal to register Zenith's reference was rightly treated by the High Court as void in law; the reference must be treated as still pending on the relevant date. Because of this, the Court held the reference was alive when the Insolvency and Bankruptcy Code's transitional provision (Section 252) came into force on 1.11.2016, making the second question (whether winding-up had already foreclosed the reference) redundant. The Court disposed of the appeal by ruling that Zenith remains free to pursue its remedies under Section 252 of the new Code before the National Company Law Tribunal, while expressly declining to give any opinion on how the Tribunal should decide those questions on their merits.

Lesson Learnt

A company's statutory right to seek relief cannot be extinguished by a wrongful administrative refusal to even register its claim, administrative staff cannot make adjudicative decisions reserved for a judicial bench, and such a wrongly-blocked claim survives a change in the governing law if a transitional provision (here, Section 252 of the IBC) is designed to carry pending matters forward.

Official source (sci.gov.in)View Judgment (PDF)

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