2023 (2) TMI 1283 - HC - Companies Law

Seeking transfer of present winding-up proceedings to the National Company Law Tribunal, Delhi NLCT - HELD THAT - It would be pertinent to note that in Action Ispat 2020 (12) TMI 535 - SUPREME COURT , the petition was transferred to NCLT because at the time when such an application was made, not much time had lapsed since appointment of the OL therein and moreover, steps for seizure of company s factory premises had not been initiated. It is for this reason that the Court had opined that no effective or irreversible steps had been taken by the OL. In the present case, as noted above, the sale of Company s assets was effected, but the possession could not be transferred to the Auction Purchaser due to acquisition proceedings. Further, as it manifests, possession of the Company s entire plant and machinery presently vests with Pegasus, and its land has been acquired by the Government of Haryana. In the afore-noted backdrop of the case, with no assets available for satisfying dues of the sole creditor Pegasus, the Court is of the opinion that winding-up proceedings have progressed to an irreversible stage, and it would not be beneficial to transfer the same to NCLT. Mr. Rohatgi also argued that there is a possibility that the land may be de-notified. The Court however cannot decide the application on presumptions which have no basis. Therefore, without delving into the question as to whether the Applicant, as a shareholder of the Company, has the locus to file present application or not, the Court is of the opinion that in the instant case for the facts recounted above, there is no good reason to transfer present winding up proceedings before NCLT. Application is dismissed.

Summary

Issues:
Transfer of winding-up proceedings to NCLT under the Companies Act, 2013.

Analysis:
The judgment addressed an application for the transfer of winding-up proceedings to the National Company Law Tribunal (NCLT) under the Companies Act, 2013. The applicant, an ex-Director and shareholder of the company, relied on the Supreme Court's decision in Action Ispat and Power Pvt. Ltd. v. Shyam Metalics and Energy Ltd. to support the transfer. The applicant argued that transferring the proceedings to NCLT would initiate the corporate insolvency process, aiming to revive the company under the Insolvency and Bankruptcy Code, 2016 (IBC). The applicant emphasized that the IBC serves as a beneficial legislation for corporate debtors' revival and is not merely a recovery tool for creditors.

The creditor, Pegasus Assets Reconstruction Pvt. Ltd., opposed the application, questioning the applicant's locus standi and contending that the application was not maintainable. The creditor argued that the applicant, as a shareholder/ex-Director, was not entitled to file such an application for transfer. Additionally, the creditor highlighted that the proceedings had reached an advanced stage, making it inappropriate to transfer them to NCLT at that point.

The court considered the arguments presented by both parties and reviewed the preceding proceedings of the case. It noted the history of the company's winding-up proceedings, including the declaration of the company as a 'sick company' by the Board for Industrial and Financial Reconstruction (BIFR) and subsequent orders for winding up and appointment of the Official Liquidator. The court also highlighted the challenges faced during the auction process and the subsequent possession issues related to the company's assets.

Referring to the Supreme Court's observations in Action Ispat, the court emphasized that the transfer of proceedings to NCLT should occur before irreversible steps in the winding-up process. The court noted that in the present case, significant progress had been made in the liquidation proceedings, including the possession of assets by the creditor and the acquisition of the company's land. Considering the irreversible stage reached in the winding-up proceedings and the lack of available assets to satisfy the creditor's dues, the court concluded that transferring the proceedings to NCLT would not be beneficial. The court dismissed the application for transfer based on the advanced stage of the winding-up process and the lack of grounds to warrant a transfer to NCLT.

In conclusion, the court dismissed the application for transfer of winding-up proceedings to NCLT, citing the irreversible stage of the liquidation proceedings and the lack of assets available to satisfy the creditor's dues. The court's decision was based on the specific circumstances of the case, emphasizing the advanced state of the winding-up process and the absence of compelling reasons to warrant a transfer to NCLT.