9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (8) TMI 1413 - HC - Companies LawSeeking transfer of Company Petition to the NCLT - transfer sought on the basis of the 5th proviso to section 434 (1) (c) of the Companies Act, 2013 - HELD THAT - The reason for inserting the the 5th proviso appears to be quite clear. Initially, so far as the transfer of winding up proceedings were concerned, the Code began tentatively by leaving proceedings relating to winding up of companies to be transferred to the NCLT at a stage as may be prescribed by the Central Government. This was stipulated by the Transfer Rules, 2016 which came into force w. e. f. 15th December, 2016. Rules 5 and 6 referred to three types of proceedings. Only those proceedings which were at the stage of pre-service of notice of the winding up Petition stood compulsorily transferred to the NCLT. The result thereof was that post-notice and pre-admission of winding up Petitions, parallel proceedings would continue under both Statutes leading to a most unsatisfactory state of affairs. It is for this reason that the 5th proviso to Section 434 (1) (c) was introduced on the Statute book. After the insertion of the 5th proviso, even post admission of a winding up Petition and even after an order of the Court appointing an Official Liquidator to take over the assets of the Company sought to be wound up, the Company Court has the discretion to transfer such Petition to the NCLT. The only question that would arise is as to how this discretion is to be exercised in the facts and circumstances of a given case. As far as the exercise of discretion under the 5th proviso to section 434(1)(c) is concerned, it is found that this issue is no longer res integra. The Supreme Court in the case of Action Ispat and Power 2020 (12) TMI 535 - SUPREME COURT has clearly laid down as to how the discretion may be exercised - the Hon ble Supreme Court had clearly laid down that even after a Petition for winding up a company is admitted and even after the assets of the company sought to be wound up become custodia-legis, so long as no actual sales of the immovable or movable properties of the company have taken place, or nothing irreversible has been done which would warrant the Company Court to stay its hands on a transfer application made to it by a creditor or any party to the proceedings, the Company Petition should be transferred. It is only in cases where the winding up proceedings have reached an irreversible stage, and hence making it impossible to set the clock back, that the Company Court must proceed with the winding up, instead of transferring the proceedings to the NCLT to be decided in accordance with the provisions of the IBC. Applying the test laid down by the Supreme Court in the aforesaid decisions, now it is required to be seen whether any irreversible event has taken place which would warrant to stay hands and not transfer the above Company Petition to the NCLT - Be that as it may, and dehors the conduct of the Applicant Company, it is to be decided whether or not the above Company Petition should be transferred to the NCLT in order to give the Applicant Company one last opportunity to be revived. Petitioner cannot be agreed upon that simply because the Applicant - Company entered into certain transactions after the presentation of the winding up petition, the same results in any irreversible event. It is not as if that those transactions cannot be assailed under the provisions of the IBC before the NCLT. The Supreme Court in the decision of Action Ispat as well as in A. Navinchandra Steels 2021 (3) TMI 38 - SUPREME COURT have clearly spelt out that looking at object of the IBC and it being a beneficial legislation to ensure revival of the corporate debtor rather than its death, transfer of a winding up Petition to the NCLT should be the norm and only in very limited circumstances (as set out in the aforesaid decisions), should the Company Court decline to transfer the winding up Petition. This being the situation and finding that an adequate remedy is available under the IBC to assail the transactions which are enumerated above by petitioner, these contentions would not in in any way hinder this Court from transferring the above Company Petition to the NCLT. Interim Application is allowed and it is ordered that the above Company Petition is transferred to the NCLT, Mumbai. The NCLT, Mumbai is directed to treat the above Petition as an application for initiation of the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016. In order to enable the NCLT, Mumbai to initiate the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016, the order of admission of the above Petition is recalled/revoked - application disposed off.
Issues Involved:
1. Application for transfer of Company Petition to NCLT. 2. Admission and winding up of the Applicant - Company. 3. Discretionary powers of the Court under the 5th proviso to Section 434 (1) (c) of the Companies Act, 2013. 4. Conduct of the Applicant - Company and its Directors. 5. Allegations of irreversible events and fraudulent transactions. 6. Application of the Insolvency and Bankruptcy Code (IBC), 2016. Issue-wise Detailed Analysis: 1. Application for transfer of Company Petition to NCLT: The Applicant - Company filed Interim Application Lodg No. 13530 of 2021 to transfer the Company Petition to the NCLT based on the 5th proviso to Section 434 (1) (c) of the Companies Act, 2013. The Applicant argued that the transfer is permissible under the law and aligns with the objective of the IBC to restructure the Company rather than wind it up. 2. Admission and winding up of the Applicant - Company: The Company Petition No. 708 of 2016 was filed on 7th September 2016, admitted on 18th September 2018, and the Company was finally wound up on 7th August 2019. The winding up order was set aside upon the deposit of Rs. 2.50 Crores, and the Petition was remanded for hearing and final disposal. 3. Discretionary powers of the Court under the 5th proviso to Section 434 (1) (c) of the Companies Act, 2013: The Court has discretionary powers to transfer winding up petitions to the NCLT even post-admission or after the appointment of an Official Liquidator. The Supreme Court in Action Ispat and Power Pvt Ltd v/s Shyam Metalics and Energy Ltd [(2021) 2 SCC 641] and A. Navinchandra Steels Pvt Ltd v/s SREI Equipment Finance Ltd and Ors [(2021) 4 SCC 435] clarified that the discretion should be exercised unless irreversible steps towards winding up have been taken. 4. Conduct of the Applicant - Company and its Directors: The conduct of the Applicant - Company and its Ex-Director, Mr. Sunil Kotecha, was found to be reprehensible. The Applicant - Company had admitted its liability (at least Rs. 9.6 Crores) but failed to make payments, issued dishonored cheques, and attempted to delay proceedings with malafide intentions. 5. Allegations of irreversible events and fraudulent transactions: The Petitioner argued that irreversible events had occurred, including the illegal transfer of shares, sale of a duplex apartment, and withdrawal of funds from a project during liquidation. These transactions were purportedly entered into after the filing of the winding up petition and were liable to be rendered void under the Companies Act. 6. Application of the Insolvency and Bankruptcy Code (IBC), 2016: The IBC aims to revive and continue the Corporate Debtor's operations rather than liquidate it. The Court found that the transactions alleged by the Petitioner could be assailed under the IBC, specifically under Section 49, which deals with fraudulent and undervalued transactions. The Court emphasized that the IBC is a beneficial legislation, and transfer to the NCLT should be the norm unless an irreversible situation is created. Conclusion: The Court allowed the Interim Application Lodg No. 13530 of 2021, transferring the Company Petition No. 708 of 2016 to the NCLT, Mumbai, to be treated as an application for initiation of the Corporate Insolvency Resolution Process under the IBC. The order of admission of the Petition was recalled/revoked. Protective directions were continued, subject to any order by the NCLT. The other applications listed were disposed of, and the order was digitally signed for execution.
|
