2023 (7) TMI 1492 - HC - Companies Law

Transfer of winding-up petition to NCLT - whether Resolution ought to be explored by it first or the company should straightaway be taken to liquidation? - Section 434 of the Companies Act, 2013 - HELD THAT - It is found that in Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd. 2019 (1) TMI 1442 - SUPREME COURT , the Hon ble Supreme Court held that once an application for transfer is filed, the High Court must transfer such proceedings to NCLT which will then deal with the same as an application for initiation of corporate insolvency resolution process. From a perusal of the second proviso to Section 434(1)(c) as also the aforesaid judgement it is clear that any matter, which is transferred, is to be dealt with by the NCLT as an application for initiation of Corporate Insolvency Resolution Process (CIRP) process under the IBC, 2016. Thus, it is clarified that the NCLT would have to strictly proceed in accordance with the said provision and treat the petition as an initiation of CIRP process. Application disposed off.

Summary

Issues:
Clarification sought regarding NCLT order transferring winding-up petition to NCLT, Interpretation of Section 434 of Companies Act, 2013, Application of Supreme Court judgments on transfer of proceedings to NCLT.

Analysis:
The judgment involves a clarification sought by the Petitioner regarding an NCLT order transferring a winding-up petition to NCLT. The NCLT order requested clarification from the High Court on whether the resolution process should be explored first or if the company should proceed straight to liquidation. The NCLT relied on Section 434 of the Companies Act, 2013, which governs the transfer of pending proceedings to NCLT. The provision mandates that matters transferred to NCLT should be treated as applications for initiation of Corporate Insolvency Resolution Process (CIRP) under the IBC, 2016.

The judgment also references a Supreme Court judgment in Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd., which emphasized that once an application for transfer is filed, the High Court must transfer such proceedings to NCLT for treatment as an application for the initiation of CIRP. The Supreme Court highlighted the objective of the Code to resuscitate corporate debtors in financial distress and the need to avoid parallel proceedings in High Courts and NCLT.

The judgment clarifies that NCLT must strictly adhere to the provisions of Section 434 and treat the transferred petition as an initiation of the CIRP process. It also notes that the Petitioner has paid the expenses of the Official Liquidator and withdrawn the deposited amount, leading to the disposal of the application without further orders. The judgment provides a detailed analysis of the legal framework governing the transfer of proceedings to NCLT and emphasizes the importance of following statutory provisions and Supreme Court precedents in such matters.

Overall, the judgment underscores the significance of procedural compliance and adherence to legal principles in the context of transferring winding-up petitions to NCLT for resolution under the IBC, ensuring consistency and efficiency in insolvency proceedings.