2019 (10) TMI 300 - HC - Companies Law

Transfer of the present winding up petitions to National Company Law Tribunal - whether in exercise of powers under the proviso to Section 434 of the Companies Act, 2013, this court should transfer the present proceedings to NCLT? HELD THAT - It is manifest that two functionaries, namely, OL under the Companies Act, 1956 and Liquidator under IBC cannot concurrently carry out their functions. Such a proposition would create a needless confusion. Once a liquidator is appointed by the company court in saved matters, the process of liquidation commences. Ordinarily, the liquidator takes time and efforts to consolidate the assets of the respondent company, to evaluate the same and put them for auction. He seeks to take other steps to dissolve the company. Once this process has started, no purpose is served by handing over the same to another liquidator who would also perform a similar function all over again. This would set the entire effort of the Official Liquidator at naught which would not have been intended. Normally, this court would transfer the matter to NCLT. This would also give an opportunity to try and revive the company by the Insolvency Resolution Process. There may be exceptional circumstances where the Liquidator has made much progress and the chances of Insolvency Resolution Process are very bleak then, in that eventuality this court may exercise its discretion and not transfer such a matter. Application disposed off.

Issues Involved:
1. Transfer of winding up petitions to National Company Law Tribunal (NCLT).
2. Appointment and role of Official Liquidator (OL) and Provisional Liquidator.
3. Discretion of the High Court under Section 434 of the Companies Act, 2013.
4. Conflicts between proceedings under the Companies Act and the Insolvency and Bankruptcy Code (IBC).

Detailed Analysis:

1. Transfer of Winding Up Petitions to NCLT:
The primary issue is whether the winding up petitions should be transferred to NCLT under the proviso to section 434(c) of the Companies Act, 2013. The applicants argue that it is mandatory for the court to transfer these petitions to NCLT, citing the objective of the IBC to empower financial creditors to determine the recovery of monies from corporate debtors and the precedence of special laws over general laws.

2. Appointment and Role of Official Liquidator and Provisional Liquidator:
The court examined the roles of the OL and Provisional Liquidator under the Companies Act, 1956, and IBC. It was noted that the OL’s appointment initiates the liquidation process, which involves consolidating assets, evaluating them, and taking steps to dissolve the company. The court emphasized that once the OL is appointed as the Liquidator, the process should not be transferred to NCLT as it would negate the efforts already made by the OL.

3. Discretion of the High Court under Section 434 of the Companies Act, 2013:
The court held that the proviso to Section 434(c) of the Companies Act, 2013 is discretionary and not mandatory. The court has the discretion to transfer matters to NCLT, especially where the OL has not been appointed as the Liquidator. However, where the OL has been appointed, such matters would normally not be transferred to NCLT.

4. Conflicts between Proceedings under the Companies Act and the IBC:
The court addressed the potential conflicts between proceedings under the Companies Act and the IBC. It was noted that concurrent jurisdiction by OL and Liquidator under IBC would create confusion. The court referred to several judgments, including those of the Supreme Court, which emphasized that once an OL is appointed as the Liquidator, the matter should not be transferred to NCLT. The court also noted that the issue of whether an application under Section 7 or Section 9 of IBC can be initiated before NCLT once the OL is appointed as a Liquidator is pending before the Supreme Court.

Issue-wise Judgment Analysis:

i) Co.Pet. No.518/2013 (Hanung Toys & Textiles Ltd.):
The OL was appointed as the Liquidator on 12.07.2018. PNB’s application for transfer to NCLT was dismissed as the OL had already been appointed, and no proceedings were pending before NCLT.

ii) Co.Pet. No.987/2015 (Shakti Bhog Foods Ltd.):
The OL was appointed as the Liquidator on 18.01.2018. SBI’s application for transfer to NCLT was dismissed as the OL had already been appointed, and NCLT had dismissed SBI’s application under Section 7 of the IBC.

iii) Co.Pet. No.668/2014 (MVL Ltd.):
The OL was appointed as the Provisional Liquidator on 05.07.2018. Dena Bank’s application for transfer to NCLT was dismissed as no IRP had been appointed by NCLT, and transferring the matter would not be in the creditors' interest.

iv) Co.Pet. No.814/2016 (Premia Projects Ltd.):
The OL was appointed as the Provisional Liquidator on 12.03.2018. The court transferred the petition to NCLT as the proceedings were at an initial stage, and an attempt to revive the company would be in the creditors' interest.

Conclusion:
The court exercised its discretion under the proviso to Section 434(c) of the Companies Act, 2013, and decided not to transfer the petitions where the OL had been appointed as the Liquidator. However, in cases where the proceedings were at an initial stage, the court transferred the petitions to NCLT to explore the possibility of reviving the companies through the Insolvency Resolution Process.

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