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2018 (9) TMI 595 - HC - Companies LawWinding up application - company is commercially insolvent - application filed by the said bank under Section 7 of the IBC, 2016 against the company has not yet been listed - Held that - In the present case, the company has been contesting the winding up application, and it has filed in its affidavit-in-opposition. Even the petitioning creditor has also filed its affidavit-in-reply. The winding up application was ready for hearing and the learned counsel appearing for the petitioning creditor has made his arguments. Whereas, the application filed by the said bank under Section 7 of the IBC, 2016 against the company has not yet been listed before the NCLT and, as such, the question of admission of the said application under Section 7(5) of IBC, 2016 has not arisen. In any event, there is no certainty that the said application by the bank shall be admitted by the NCLT. For all the foregoing reasons, thus find merit in the contentions made by the petitioning creditor not to entertain the prayer made by the company in this application. Accordingly, the application stands rejected.
Issues:
- Application under Section 433(e) of the Companies Act, 1956 for winding up of a company on the ground of commercial insolvency. - Contention regarding transfer of winding up application to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016. - Interpretation of the second Proviso to clause (c) of sub-section (1) of Section 434 of the Companies Act, 2013. - Discretion of the High Court to allow or reject the transfer of winding up application to NCLT. Analysis: The judgment pertains to an application filed under Section 433(e) of the Companies Act, 1956 for the winding up of a company based on commercial insolvency. The petitioning creditor initiated the winding up application, which was contested by the company. The company subsequently filed an application, C.A. No. 220 of 2018, seeking the transfer of the winding up application to the NCLT. The company argued that the incorporation of the second Proviso to clause (c) of sub-section (1) of Section 434 of the Companies Act, 2013 necessitated the transfer to NCLT for initiation of the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016. In response, the petitioning creditor opposed the transfer on various grounds. They argued that the application under the Insolvency Code, 2016 against the company was not admitted by NCLT and that transferring the winding up application would require compliance with fresh procedures, including issuing a new notice of demand under Section 8 of the Code. The petitioning creditor emphasized that the transferred application would be treated as a fresh application for corporate insolvency resolution process under the IBC, 2016. The judgment delves into the interpretation of the second Proviso to clause (c) of sub-section (1) of Section 434 of the Companies Act, 2013. It highlights that the provision grants the High Court the discretion to allow or reject the transfer of the winding up application to NCLT. The Court emphasized the need for judicially exercising such discretion, considering the circumstances of the case. The Court noted that the company had been contesting the winding up application, while the application under the Insolvency Code, 2016 had not been listed before NCLT, and its admission was uncertain. Ultimately, the Court found merit in the contentions of the petitioning creditor and rejected the company's application for transfer to NCLT. The judgment underscores the importance of adhering to legal procedures and the requirement for parties to comply with statutory provisions when seeking the transfer of proceedings between different forums.
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