2023 (3) TMI 1079 - HC - Companies Law

Application seeking winding up proceedings relating to Shree Shyam Cotspin Ltd. (the company) be transferred to the National Company Law Tribunal for further proceedings under the Insolvency and Bankruptcy Code, 2016 - whether the learned Company Court had erred in proceeding on the basis that irreversible steps have been taken? - HELD THAT - The said question is required to be answered in the negative. It is clear from the record that several steps have been taken for winding up of the company; assets claims have been invited from creditors; parts of the company s assets have been sold; all movable assets taken over by respondent no.4 SARFAESI Act have been sold; the immovable asset of the company is under acquisition; and the assets are insufficient to meet the company s liabilities. There are no error in the impugned order - appeal dismissed.

Summary

Issues involved:
The appellant's appeal against the rejection of the application to transfer winding up proceedings to NCLT under IBC.

Issue 1: Transfer of Winding Up Proceedings to NCLT
- The appellant sought transfer of winding up proceedings to NCLT under IBC, citing the absence of irreversible steps in the winding up process.
- The appellant relied on the Supreme Court decision in Action Ispat and Power Pvt. Ltd. v. Shyam Metallics and Energy Ltd. to support the transfer.
- The respondent no.4, an asset reconstruction company, opposed the transfer.
- The Company Court concluded that irreversible steps had indeed been taken in the winding up process, making it unsuitable for transfer to NCLT.

Issue 2: Background and Progress of Winding Up Proceedings
- The company was declared a sick company by BIFR in 1999, leading to winding up proceedings initiated in 2003.
- The Official Liquidator was appointed for liquidation of assets, but certain challenges, like the acquisition of a principal asset in Haryana, hindered the process.
- Respondent no.4 took over movable assets under the SARFAESI Act and sold them, indicating progress in liquidation efforts.
- The Company Court noted that available assets were insufficient to cover liabilities to respondent no.4, highlighting financial challenges.

Issue 3: Possibility of Land Release and Applicability of NCLT
- The appellant argued for transfer based on the potential release of land acquired by the Haryana Government, but the Company Court dismissed this assumption.
- Lack of concrete evidence regarding imminent land release and the necessity to sell the land for debt liquidation were emphasized.
- The Court affirmed that irreversible steps had been taken in the winding up process, including asset sales and insufficiency to cover liabilities, justifying the rejection of the transfer application.

Conclusion:
The High Court upheld the Company Court's decision, dismissing the appeal against the rejection of the application to transfer winding up proceedings to NCLT under IBC. The Court affirmed that irreversible steps had been taken in the winding up process, including asset sales and financial challenges, making the transfer inappropriate.