2018 (1) TMI 1444 - HC - Companies Law

NCLT territorial jurisdiction over the Winding up petition - No formal notice issued on the respondent that petition has to be transferred to NCLT - HELD THAT - The judgment of the Bombay High Court in West Hills Realty Private Ltd. and Ors. vs. Neelkamal Realtors Tower Pvt. Ltd. 2016 (12) TMI 1253 - BOMBAY HIGH COURT gives the correct position. As rightly noted by the Bombay High Court, Rule 26 of the Companies (Court) Rules,1959 deals with Service of petition whereas Rule 27 deals with Notice of petition. There is nothing in Rule 26 to show that the service of the petition is to be effected only when the petition is admitted. In fact, admission of a winding up petition is dealtwith the Rule 96 of the Companies (Court)Rules 1959. Rule 96 also provides foran eventualityof service of notice to be given to the company before directions as to the advertisement of the petition. ClearlyRule 26 does not deal only with situationswhere copy is served on the respondent after admission of the winding up petition. Hence, the present petition is liable to be heard by this Court. The learned counsel for the respondent seeks some time to file surrejoinder in view of the additional documents filed by the petitioner along with petition. Needful be done in three weeks. List on 16.04.2018.

Summary

Issues:
1. Interpretation of Companies (Transfer of Pending Proceedings) Rules, 2016 - Rule 5.
2. Conflict in interpretation of Rules 26 and 27 of the Companies (Court) Rules, 1959.
3. Applicability of Rule 26 regarding service of petition in winding-up matters.
4. Examination of judgments by Bombay High Court and Madras High Court on the issue.

Analysis:
1. The primary issue in this case revolves around the interpretation of Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016. The respondent argued that as per Rule 5, the petition should be transferred to the NCLT. However, the petitioner contended that Rule 5 does not mandate transfer if the petition has been served on the respondent as per Rule 26 of the Companies (Court) Rules, 1959.

2. A significant conflict arises in the interpretation of Rules 26 and 27 of the Companies (Court) Rules, 1959. The petitioner relied on the Bombay High Court judgment in West Hills Realty Pvt. Ltd. v. Neelkamal Realtors Tower Pvt. Ltd., which implied that admission of the case is not necessary for the application of Rule 26. On the contrary, the respondent cited the Madras High Court judgment in Mr. Sanjay Goel vs. EL Forge Ltd., which emphasized that notice post-admission is required for Rule 26 to apply.

3. The crux of the matter lies in the applicability of Rule 26 concerning the service of the petition in winding-up matters. The Bombay High Court's interpretation highlighted that Rule 26 mandates service of the petition on the respondent, irrespective of admission, while the Madras High Court's view focused on post-admission notice as a prerequisite for Rule 26 to be effective.

4. The judgments by the Bombay High Court and Madras High Court offer contrasting perspectives on the issue at hand. The Bombay High Court underscored that Rule 26 deals with the service of the petition, distinct from the notice of the petition covered under Rule 27. Conversely, the Madras High Court emphasized that Rule 26 should be construed to require notice on admission, not pre-admission notice, leading to a mandatory transfer of petitions not served under Rule 26.

In conclusion, the interpretation of the Companies (Transfer of Pending Proceedings) Rules, 2016, particularly Rule 5, along with the conflicting views on Rules 26 and 27 of the Companies (Court) Rules, 1959, forms the crux of this legal judgment. The contrasting opinions by the Bombay and Madras High Courts add complexity to the matter, highlighting the nuances in understanding the service and notice requirements in winding-up proceedings.