2022 (7) TMI 300 - HC - Companies Law

Seeking directions on the Official Liquidator to publish a sale notice in respect of the assets of Maheswary Ispat Limited - no winding up proceedings carried on by the Liquidator - no assets have been sold - whether this Court has the power to exercise jurisdiction in view of the 5th proviso of Section 434(1(c) of the Companies Act, 2013? - HELD THAT - Ordinarily, there is a strong presumption that Civil Courts have jurisdiction to decide all questions of civil nature. The exclusion of jurisdiction of Civil Courts must either be explicitly expressed or clearly implied. In my view, the section does not contemplate proceedings being automatically transferred to the Tribunal. There is an element of discretion which the Company Court retains in respect of pending proceedings whether to exercise the power to transfer or not depending on the facts and circumstances of each case. Despite the pendency of the winding up proceedings for more than six years, there is nothing to demonstrate that an irreversible situation has arisen which justifies this Court in retaining this proceeding. None of the assets of the company (in liquidation) have been sold. There is nothing in the Status Report filed by the Official Liquidator to demonstrate that the Official Liquidator has taken any steps whatsoever to make it impossible to set the clock back warranting this Court to proceed with the winding up notwithstanding the embargo now created under the aforesaid section. There are no facts which have been brought to the attention of this Court either by the Official Liquidator or any of the parties which permits this Court in retaining jurisdiction. There are no substance in the argument that it is only upon filing of a formal application, that a proceeding can be transferred to the National Company Law Tribunal under the aforesaid section - What is of essence is that the Court must examine the facts of each case to ascertain whether an irreversible situation has arisen or not or and the stage of the liquidation proceedings. The making of an application is a mere formality and is not imperative in nature. In fact, to continue with the winding up proceedings simply because no application for transfer has been filed would tantamount to committing a manifest jurisdictional error. In my view, in a given case, after examination of the relevant facts if the Court suo moto finds that the conditions for transfer are satisfied, it should transfer a proceeding to the Tribunal even in the absence of a formal application. Hence, such contention is rejected. Petition with any pending application in this petition stands transferred to the National Company Law Tribunal, Kolkata. Liberty is granted to the applicant to raise its grievances in CA 15/2021 before the Tribunal in accordance with law - petition disposed off.

Summary

Issues:
1. Jurisdiction of the Court to exercise powers in view of the 5th proviso of Section 434(1)(c) of the Companies Act, 2013.
2. Interpretation of the Supreme Court judgment in Action Ispat & Power (P) Ltd. vs. Shyam Metalics & Energy Ltd. (2021) 2 SCC 641 regarding the transferability of winding-up proceedings to NCLT.
3. Discretion of the Company Court in transferring proceedings to NCLT based on the presence of irreversible situations.
4. Requirement of a formal application for the transfer of proceedings to NCLT under the relevant section.

Analysis:

Issue 1:
The Court deliberated on its jurisdiction under the 5th proviso of Section 434(1)(c) of the Companies Act, 2013, regarding the transfer of pending proceedings to the Tribunal. The Court emphasized the legislative intent to transfer proceedings to the Tribunal, except in limited cases where an irreversible situation justifies the Court to retain jurisdiction. The discretion of the Company Court in transferring proceedings was highlighted, subject to the presence of irreversible circumstances.

Issue 2:
Referring to the Supreme Court judgment in Action Ispat & Power (P) Ltd., the Court analyzed the transferability of winding-up proceedings to NCLT. The judgment emphasized that the Company Court must transfer proceedings to NCLT if irreversible steps towards winding up have not occurred, especially when assets have not been sold. The Court noted the importance of examining each case's facts to determine the need for transfer.

Issue 3:
The Court addressed the discretion of the Company Court in transferring proceedings to NCLT based on the presence of irreversible situations. It emphasized that the Court must assess whether irreversible circumstances have arisen, warranting the retention of proceedings. The Court highlighted the necessity of preventing manifest jurisdictional errors by transferring proceedings when conditions for transfer are met, even without a formal application.

Issue 4:
Regarding the requirement of a formal application for the transfer of proceedings to NCLT, the Court rejected the argument that a formal application is mandatory. It emphasized that the Court, after examining relevant facts, can transfer proceedings to NCLT even without a formal application if conditions for transfer are satisfied. The Court highlighted that continuing winding-up proceedings solely due to the absence of a formal application would be a jurisdictional error.

In conclusion, the Court transferred the pending proceedings to the National Company Law Tribunal, Kolkata, based on the absence of irreversible situations justifying the Court to retain jurisdiction. It granted liberty to raise grievances before the Tribunal and disposed of the case insofar as the records of the Court were concerned.