2020 (5) TMI 684 - HC - Companies Law

Seeking transfer of pending petition before this Court to the file of the National Company Law Tribunal, Chennai Bench - initiation of CIRP - HELD THAT - In the instant case, the proceeding is only at the notice stage and it is only C.P.No.21 of 1995 that has been admitted. The Official Liquidator is yet to be appointed as per the provisions of the Act. The argument of the Third respondent that once the recommendation of the BIFR has been approved by this Court what remains is only the Ministerial Act of winding up cannot be countenanced. Once the petition is received from the BIFR it is thereafter numbered as a Company Petition and the entire procedure envisaged for a winding up proceedings has to be followed to the letter. Further the creditors and contributories of the company are also to be paid their dues first as the case of the Workmen. Reliance placed in Jaipur Metals and Electricals Employees Organisation Vs. Jaipur Metals and Electricals Ltd 2018 (12) TMI 674 - SUPREME COURT , where it was was dealing with the order passed by the High Court of Judicature of Rajasthan refusing to transfer winding up proceedings pending before it to the National Company Law Tribunal (NCLT) and further setting aside the order dated 13.04.2018 of the NCLT admitting a creditor's petition under Section 7 of the Insolvency and Bankruptcy Code, 2016. This Court has no other alternative but to allow the application. It is needless to state that this order does not affect the rights of the workmen granted to them in the Writ proceedings as upheld by the Hon'ble Supreme Court. Application allowed - petition stands transferred to the file of the National Company Law Tribunal, Chennai Bench, to initiate Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016.

Summary

Issues: Transfer of Company Petition to NCLT for Corporate Insolvency Resolution Process

Analysis:
1. Background of the Case: The application sought the transfer of C.P.114 of 2003 to the National Company Law Tribunal (NCLT) for initiating Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016. The applicant, being the Debenture Trustee of the company in question, emphasized the need for a speedy resolution based on the Supreme Court's judgment in "Jaipur Metals and Electricals Employees Organisation Vs. Jaipur Metals and Electricals Ltd."

2. Previous Proceedings: The records revealed that multiple winding-up petitions had been filed against the company in the past, with recommendations for winding up by the Board for Industrial and Financial Reconstruction (BIFR). Notably, the Official Liquidator had been directed to take charge of the assets and make necessary disbursements, indicating the advanced stage of the winding-up process.

3. Contentions of the Parties: The company, represented by its counsel, opposed the transfer to NCLT, arguing that all parties were before the court, and the winding-up order was the only pending decision. On the other hand, the workmen's counsel acknowledged the government's obligation to pay dues to the workers but stressed that the company petition was a regressive step at this stage.

4. Official Liquidator's Report: The Official Liquidator had requested specific directions from the court, including passing orders on BIFR's winding-up recommendation and appointing the Official Liquidator as the Provisional Liquidator. The report highlighted the absence of winding-up orders and the Official Liquidator's pending appointment.

5. Government's Opposition: The Government opposed the transfer, citing the advanced stage of liquidation proceedings, approval of a Voluntary Retirement Scheme (VRS), readiness to hand over assets to the Official Liquidator, and the potential setback transferring the case would cause to the process.

6. Legal Interpretation: Referring to the Supreme Court's judgment in the "Jaipur Metals Case," the court analyzed the provisions of Section 434 of the Companies Act, 2013, along with relevant rules, emphasizing the transfer of winding-up proceedings to NCLT under specific conditions. The court clarified that proceedings under Section 20 of the SICA pending before the High Court must continue unless a party files for transfer post a specified date.

7. Court's Decision: Considering the legal framework and the stage of the present case, the court concluded that the application for transfer to NCLT was justified. The court highlighted that the transfer did not affect the rights of the workmen as upheld in previous writ proceedings by the Supreme Court.

8. Final Order: The court allowed the application, transferring C.P.114 of 2003 to the NCLT, Chennai Bench, to initiate the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016, in line with the judgment in the "Jaipur Metals Case."