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2024 (6) TMI 510 - HC - Companies LawSeeking transfer of company petition to the NCLAT - Liquidation of a company - 5th proviso to Section 434(1)(c) of the Companies Act, 2013 - HELD THAT - In view of 5th proviso to Section 434(1)(c), any party or parties to any proceedings relating to the winding up of company pending before any Court may file an application for transfer such proceedings and the Court may, by order, transfer such proceedings to the Tribunal which was then to be dealt with by the Tribunal as an application for initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016. It is only where the winding up proceedings have reached the stage where it would be irreversible, making it impossible to set the clock back, that the Company Court must proceed with the winding up instead of transferring the proceedings to NCLT to be decided in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016. Since the Official Liquidator has not invited any claims from the creditors or workers of the company in liquidation, the transfer of proceedings to the NCLT would ensure speedier resolution of the corporate insolvency resolution process while also allowing for a more technical consideration of issues and that further proceedings before the NCLT allows for the creditors to be active and final determinants of how the insolvency resolution process would take place. This Court had also expressed apprehensions in respect of the claims of the workmen as the Official Liquidator had not invited any claims in respect of the creditors/workmen as per the requirement of Rule 148 of the said Rules. Mr.Khan for the Official Liquidator and Ms.Cheema for the Applicant have clarified that Section 53(1)(b) read with Section 15(1)(c) read with Regulations 6(2)(c) and 12(1) of the Insolvency and Bankruptcy Code, 2016 (the IBC ) would take care of the same. Therefore, in my view, exercise of power under the 5th proviso to Section 434(1)(c) would be appropriate. The Company Petition shall be treated by the NCLT as an application for initiation of the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016. The order of admission dated 28th September 2017 is recalled/revoked.
Issues Involved:
1. Transfer of Company Petition to the National Company Law Tribunal (NCLT) 2. Role and actions of the Official Liquidator 3. Discretionary power of the Court to transfer petitions 4. Impact of the Supreme Court's decisions on transfer applications 5. Consideration of creditors' and workers' claims 6. Costs and expenses related to liquidation Detailed Analysis: 1. Transfer of Company Petition to the National Company Law Tribunal (NCLT) The Interim Application sought an order to transfer Company Petition No. 317 of 2012 to the NCLT, Mumbai, under the 5th proviso to Section 434(1)(c) of the Companies Act, 2013. The Court noted that the transfer would ensure a speedier resolution of the corporate insolvency process and allow for a more technical consideration of issues. The Court exercised its discretion to transfer the petition, subject to the Applicant depositing Rs. 3 lakhs towards liquidation costs. 2. Role and Actions of the Official Liquidator The Official Liquidator had issued statutory notices and conducted meetings with ex-directors and other stakeholders to discuss the company's properties and assets. However, only one ex-director attended the meeting. The Official Liquidator had taken possession of the company's registered office, which was later handed over to Edelweiss Asset Reconstruction Company Limited. The Official Liquidator had not invited any claims from creditors or workers as required by Rule 148 of the Companies (Court) Rules, 1959. 3. Discretionary Power of the Court to Transfer Petitions The Court referred to the Supreme Court's decision in A. Navinchandra Steels Private Limited vs. SREI Equipment Finance Ltd., which emphasized that the power to transfer pending winding-up petitions to the NCLT is discretionary. The Court can exercise this power if no irreversible actions, such as the sale of immovable or movable properties, have taken place. The Court found that no irreversible steps had been taken in this case, making the transfer appropriate. 4. Impact of the Supreme Court's Decisions on Transfer Applications The Court relied on the Supreme Court's observations in A. Navinchandra Steels Private Limited vs. SREI Equipment Finance Ltd., Kaledonia Jute & Fibres (P) Ltd. vs. Axis Nirman & Industries Ltd., and Action Ispat and Power Private Limited vs. Shyam Metalics and Energy Limited. These decisions clarified that even post-admission of a winding-up petition, the Company Court has the discretion to transfer the proceedings to the NCLT, provided no irreversible actions have been taken. 5. Consideration of Creditors' and Workers' Claims The Court noted that the Official Liquidator had not invited any claims from creditors or workers. The transfer to the NCLT would allow for a more active and final determination of the insolvency resolution process by the creditors. The Court also expressed concerns about the claims of workmen, which were addressed by the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC), ensuring that these claims would be taken care of under Sections 53(1)(b), 15(1)(c), and related regulations. 6. Costs and Expenses Related to Liquidation The Court considered the submission by the Official Liquidator regarding liquidation expenses and costs. The Court directed the Applicant to deposit Rs. 3 lakhs with the Official Liquidator towards these costs before transferring the petition to the NCLT. Conclusion: The Court allowed the transfer of Company Petition No. 317 of 2012 to the NCLT, Mumbai, subject to the Applicant depositing Rs. 3 lakhs towards liquidation costs. The order of admission dated 28th September 2017 was revoked, and the Company Petition was to be treated as an application for the initiation of the Corporate Insolvency Resolution Process under the IBC. The company and its directors were restrained from selling or encumbering any assets until the NCLT initiated the resolution process.
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