2023 (12) TMI 322 - HC - Companies Law

Transfer of winding up proceedings - whether this court in exercise of its jurisdiction under the said proviso to Section 434(1)(c) of the Companies Act should transfer the winding up application to the NCLT? - HELD THAT - The only conclusion that can be drawn is that there is no credible hope of revival of the company and that it would suit the interest of all stakeholders and of the public if its liquidation was speedily carried out. Thus the learned judge ought not to have passed the impugned order relegating this matter to the tribunal. It is directed that the winding up proceedings to be conducted and concluded as early as possible - the impugned order set aside.

Issues Involved
1. Types of winding up proceedings to be retained by the High Court.
2. Consideration of company paid staff in the Official Liquidator's office.
3. Payment of expenses incurred by the Official Liquidator.
4. Correctness of the learned judge's approach in transferring proceedings to NCLT.

Summary of Judgment

Issue 1: Types of Winding Up Proceedings to be Retained by the High Court
The court discussed the substitution of Section 434 of the Companies Act, 2013, and the relevant amendments. It referenced the Supreme Court's interpretation in *Kaledonia Jute and Fibres Pvt. Ltd. vs. Axis Nirman and Industries Ltd.* and *Action Ispat and Power Pvt. Ltd. vs. Shyam Metalics and Energy Ltd.*, emphasizing that the discretion to transfer proceedings to NCLT depends on whether an irreversible stage, or "corporate death," has been reached. The court concluded that since the winding up order was passed over a decade ago and no revival scheme was presented, the proceedings should not be transferred to NCLT.

Issue 2: Consideration of Company Paid Staff in the Official Liquidator's Office
The court noted the significant role of company paid staff in the Official Liquidator's office, whose salaries are funded from the sale of the company's assets. The court emphasized the need to retain winding up proceedings to ensure these employees are compensated, as there is no provision for their absorption by the government.

Issue 3: Payment of Expenses Incurred by the Official Liquidator
The court acknowledged the expenses incurred by the Official Liquidator for security services and asset valuation, which were sanctioned by the court. It highlighted the duty of the court to ensure these service providers are paid from the sale proceeds of the company's assets.

Issue 4: Correctness of the Learned Judge's Approach in Transferring Proceedings to NCLT
The court criticized the learned judge's decision to transfer the proceedings to NCLT without any application for such transfer and without considering the merits of the case. The court emphasized that the transfer should be based on an application by a party and after hearing all parties involved. The court set aside the impugned order and directed the winding up proceedings to be conducted and concluded by the High Court.

Additional Grounds by Biswaroop Chowdhury, J.
Justice Biswaroop Chowdhury concurred with the judgment but added that the suo-moto power of transfer under the 5th proviso to Section 434(1)(c) of the Companies Act, 2013, cannot be exercised where the petition has been served, admitted, or where the liquidator has been appointed. He reiterated that the learned judge erred in transferring the proceedings without any application and without considering the current stage of the proceedings, thus the order should be set aside.

Conclusion
The court set aside the impugned order and directed the winding up proceedings to be conducted and concluded by the High Court, ensuring the payment of service providers and company paid staff. All appeals and connected applications, except APO 31 of 2022 with ACO 7 of 2023, were disposed of accordingly.

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