2022 (3) TMI 333 - HC - Companies Law

Transfer of applications - Sanction of a scheme of compromise - Is it either obligatory or even appropriate, in exercise of discretion, for this Court to transfer the applications, as per Analog's request, to the NCLT? - principles of res-judicata - HELD THAT - Both Section 434 of CA 2013 and the Transfer Rules throw light on this issue. At the outset, it should be noticed that Section 434(1)(c) of CA 2013 deals with all proceedings under CA 1956, collectively, including proceedings for winding up or schemes of arrangement. To put it differently, only the provisos deal separately with winding up proceedings and other proceedings, and not the principal clause. Secondly, it should be noticed that the above provision deals with proceedings and not applications or even petitions - From Rule 3 of the Transfer Rules, it is evident that except proceedings reserved for orders, all other proceedings pending before the Companies Court are liable to be transferred. On the basis of this Rule, both Mr.Goklaney and Mr.Subramanian contended that since none of the pending applications are reserved for orders, they are liable to be transferred. Pursuant to the amendment to Section 434 by the introduction of the last proviso thereto, a party to the proceedings is entitled to file an application for transfer in retained matters. Applications for transfer were filed in those cases by resorting to such proviso. In contrast, in the present case, as indicated above, the Scheme was sanctioned by this Court and several applications were dealt with thereafter under Section 392 of CA 1956. Indeed, it bears repetition that the cut-off, as regards schemes of arrangement, is fixed at the advanced stage of reserving orders in the proceedings. Consequently, there is no provision analogous to the last proviso to Section 434(1) of CA 2013 to seek transfer of retained matters. In fine, these applications are completely misconceived and premised on the mistaken notion that CA 2013 provides for transfer of applications. The order dated 05.01.2017 does qualify as res judicata and is not erroneous in any respect - Application disposed off.

Summary

Issues Involved:
1. Transfer of applications to the National Company Law Tribunal (NCLT).
2. Jurisdiction of the High Court post-repeal of the Companies Act, 1956.
3. Implementation and supervision of the sanctioned scheme of compromise.
4. Res judicata and previous court orders.
5. Pending criminal proceedings and administrative actions.

Detailed Analysis:

1. Transfer of Applications to the NCLT:
Analog Financial Services Private Limited (Analog) filed applications seeking the transfer of specific applications to the NCLT, Chennai, based on amendments to the Companies Act, 2013 (CA 2013). The contention was supported by references to various Supreme Court judgments emphasizing the transfer of proceedings to the NCLT upon request by a party involved. However, the High Court concluded that the applications and proceedings related to the scheme of compromise are interconnected and should not be transferred piecemeal, as it would lead to fragmented adjudication and undermine the purpose of consolidation under one forum.

2. Jurisdiction of the High Court Post-Repeal of the Companies Act, 1956:
The High Court examined the applicability of Section 434(1)(c) and Section 465 of CA 2013. It was determined that these provisions should be interpreted harmoniously, allowing the High Court to retain jurisdiction over matters that were validly retained before the repeal of CA 1956. The court emphasized that the provisions of CA 1956 and the Companies (Court) Rules, 1959, continue to apply to retained matters, thus affirming the High Court's authority to adjudicate the current applications.

3. Implementation and Supervision of the Sanctioned Scheme of Compromise:
The scheme of compromise sanctioned on 30.04.2014 was not adhered to by either Analog or Viswapriya (India) Limited (Viswapriya). Consequently, the High Court appointed an Administrator to oversee the implementation. Given the failure to implement the scheme, the court retained jurisdiction to supervise and ensure compliance or order winding up if necessary. The court's role in supervising the scheme under Section 392 of CA 1956 was deemed crucial and not transferable to the NCLT.

4. Res Judicata and Previous Court Orders:
The High Court addressed the argument that a previous order dated 05.01.2017, which rejected the transfer of proceedings to the NCLT, operated as res judicata. The court found that the previous order was not erroneous and that the current applications for transfer were misconceived. The court reaffirmed its jurisdiction and authority to continue hearing the applications related to the scheme of compromise.

5. Pending Criminal Proceedings and Administrative Actions:
The court noted the ongoing criminal proceedings before the TNPID Court and the attachment of assets related to Viswapriya and its promoters. The Administrator had submitted multiple reports, and various applications by debenture holders were pending. The court emphasized the need to retain jurisdiction to effectively manage and adjudicate these interconnected matters, including the liquidation of Viswapriya and Analog if necessary.

Conclusion:
The High Court dismissed Company Application Nos. 413 and 414 of 2019 and Company Application No. 313 of 2021, retaining jurisdiction over all pending applications related to the scheme of compromise. The applicants were ordered to pay costs to the Tamil Nadu State Legal Services Authority. The Registry was directed to communicate the order to the NCLT, Chennai, in light of the pending application under Section 231(3) of CA 2013. The court scheduled further hearings for the pending applications.