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TMI Blog2023 (8) TMI 944X X X X Extracts X X X X X X X X Extracts X X X X ..... alogously. The principal issue raised in this appeal by the appellants is: Whether the company court can Suo Motu transfer a proceeding relating to winding up to NCLT or can such transfer only be made pursuant to an application by one of the parties? Mr. Ratnanko Banerjee the learned Senior Advocate appearing on behalf of the appellants/petitioners in M/s. Abhijeet Projects Limited, (in Liquidation) and M/s Corporate Ispat Alloys Limited (in Liquidation) has assailed the judgment on the ground that having regard to the clear mandate of Section 434(1)(c) last proviso of the Companies Act, 2013 read with Rules 5 and 6 of companies (Transfer of Pending Proceedings) Rules, 2016, the direction to transfer the company petition to the National Company Law Tribunal Kolkata is without jurisdiction. It is submitted that the learned Single Judge on a complete misreading of the amended provision of the companies Act, 2013 and the decisions in Action Ispat and Power Pvt. Ltd. Vs. Shyam Metalics and Energy Ltd. reported in 2021(2) SCC 641 and A. Navinchandra Steels Private Limited vs. Srei Equipment Finance Limited & Ors., reported in AIR 2021 SC 1180 directed transfer of the Company petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id Sections have completely ousted the jurisdiction of the Civil Curt in clear terms unlike Section 434 of the Companies Act. Mr. Moloy Kumar Sil the learned Counsel representing UCO Bank, a secured creditors of M/s Corporate Ispat Alloys Ltd. (in liquidation), has submitted that in view of the statement and object of the Companies Act, 2013 and having regard to the judgment of the Hon'ble Supreme Court in Action Ispat and Power Pvt. Ltd. (supra) read with Section 434 (1)(c) of the Companies Act, 2013 one can safely conclude that in so far as postadmission winding up matters are concerned, there is an element of discretion which the Company Court retains in respect of pending proceedings whether to exercise the power to transfer or not depending on the facts and circumstances of each case. The only test as laid down by the Hon'ble Supreme Court of India is whether any irreversible situation has arisen warranting the Court to stay its hands and not to transfer the proceeding to the NCLT. However, the clear legislative intent is to oust the jurisdiction of the Court and transfer all proceedings to the Tribunal (except in limited cases) with the ultimate object to resuscitate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government: Provided further that only such proceedings relating to cases other than winding up, for which orders for allowing or otherwise of the proceedings are not reserved by the High Courts shall be transferred to the Tribunal: [Provided also that-] (i) all proceedings under the Companies Act, 1956 other than the cases relating to winding up of companies that are reserved for orders for allowing or otherwise such proceedings, or (ii) the proceedings relating to winding up of companies which have not been transferred from the High Courts; shall be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959] [Provided also that proceedings relating to cases of voluntary winding up of a company where notice of the resolution by advertisement has been given under sub-section (1) of Section 485 of the Companies Act. 1956 but the company has not been dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956 and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for Industrial and Financial Reconstruction, for winding up of a company to a High Court and where no appeal is pending, the proceedings for winding up initiated under the Act, pursuant to section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 shall continue to be dealt with by such High Court in accordance with the provisions of the Act. The said rule was notified on 29th June, 2017. The fifth proviso to Section 434(1)(c) introduced by Act 26 of 2018 with effect from 6th June, 2018 was primarily to tide over the difficulties and the conflict that are likely to arise by reason of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018. By reason of IBC there could be a possibility of initiation of proceeding under Sections 7 and 8 of IBC in relation to a company against whom a winding up petition is pending. The reading of the provisions of IBC with the Companies Act, 2013 undoubtedly would show that the provision of IBC would have primacy in case of conflict over the Companies Act, 2013 as the ultimate object of IBC is to resuscitate the corporate debtors who are in the red. This approach is also in some cases necessary to transfer th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding up of companies to be transferred to NCLT at a stage as may be prescribed by the Central Government. 14.2. This was done by the Transfer Rules, 2016 (supra) which came into force with effect from 15-12-2016. Rules 5 and 6 referred to three types of proceedings. Only those proceedings which are at the stage of preservice of notice of the winding-up petition stand compulsorily transferred to NCLT. 14.3. The result therefore was that post notice and pre-admission of winding-up petitions, parallel proceedings would continue under both statutes, leading to a most unsatisfactory state of affairs. This led to the introduction of the 5th proviso to Section 434(1)(c) which, as has been correctly pointed out in Kaledonia, is not restricted to any particular stage of a winding-up proceeding. 14.4. Therefore, what follows as a matter of law is that even post admission of a winding-up petition, and after the appointment of a Company Liquidator to take over the assets of a company sought to be wound up, discretion is vested in the Company Court to transfer such petition to NCLT. The question that arises before us in this case is how is such discretion to be exercised?" What would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) the ratio in Action Ispat and Power Pvt. Ltd. (supra) was clarified and applied. It was held that: "25. A conspectus of the aforesaid authorities would show that a petition either Under Section 7 or Section 9 of the IBC is an independent proceeding which is unaffected by winding up proceedings that may be filed qua the same company. Given the object sought to be achieved by the IBC, it is clear that only where a company in winding up is near corporate death that no transfer of the winding up proceeding would then take place to the NCLT to be tried as a proceeding under the IBC. Short of an irresistible conclusion that corporate death is inevitable, every effort should be made to resuscitate the corporate debtor in the larger public interest, which includes not only the workmen of the corporate debtor, but also its creditors and the goods it produces in the larger interest of the economy of the country. It is, thus, not possible to accede to the argument on behalf of the Appellant that given Section 446 of the Companies Act, 1956/Section 279 of the Companies Act, 2013, once a winding up petition is admitted, the winding up petition should trump any subsequent attempt at revi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the provisions of the Code. In paragraph 25 of the Judgment it has been clearly stated that only where a company in winding up is near corporate death that no transfer of the winding up proceeding would then take place to the NCLT to be tried as a proceeding under the IBC. Short of an irresistible conclusion that corporate death is inevitable, every effort should be made to resuscitate the corporate debtor in the larger public interest, which includes not only the workmen of the corporate debtor, but also its creditors and the goods it produces in the larger interest of the economy of the country. The aforesaid judgments thus, clearly spell out that unless the court is convinced that the company is to suffer an inevitable corporate death the first choice would to be to make an all out attempt to revive the company and this procedure has been elaborately laid down in IBC. The Companies Act, 2013 is not suited for such situation. This is clearly reflected from the amended and substituted Section 434 of the Companies Act, 2013 read with Sections 7 and 8 of the IBC and the objects and reasons of both the statutes. There is no conflict between the two provisions. In the light of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed an affidavit disclosing the deliberations and minutes. The relevant paragraphs are reproduced below: "6. That on 31st July, 2023, the proposed meeting was convened virtually with the secured creditors wherein only IDBI bank Ltd, Indian Overseas Bank and Central Bank of India have been represented. An extensive discussion was undertaken with regard to transfer of the proceedings to NCLT as directed by the Hon'ble Single Judge on 20th December, 2022. In the said meeting, some of the secured expressed their initial consent for transfer of the proceedings to NCLT and some of them sought for the time. to place the issue before their higher authority to provide the written view in that regard. Such request of the secured creditors was considered with an instruction to convey their views by Monday ie 31st July, 2023. 7. That the minutes of the meeting was being sent to all the secured creditors on the same day with a request for trail mail confirmation of their views in regard to transfer of the proceedings to NCLT. A copy of the minutes dated 31st July, 2023 is annexed with this affidavit as exhibit 2. 8. That the Official Liquidator has so far received and or obtained the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v TJ Joseph, AIR 1963 SC 1561] The secured creditors unlike Action Ispat and Power Pvt. Ltd. (supra) did not file any application under Section 7 and 8 of IBC. In the event such applications were filed the company court could have been justified in transferring the proceeding to the Tribunal following Action Ispat and Power Pvt. Ltd. (supra) on a satisfaction being recorded that the corporate death of the company is not inevitable and NCLT would be the preferred choice. The court exercises its jurisdiction only upon an application being filed for transfer. In absence of any application it has to be presumed that all had agreed and willing to proceed with the winding up before the Company court. All the secured creditors have the opportunity to file an application for transfer. They have not done so far, on the contrary, IDBI had opposed such transfer. There was no parallel proceeding either. On such facts discretion could not have been exercised in favour of transferring the proceeding to NCLT. The creditors were not heard. Under such circumstances the order impugned is set aside. The Company Court shall proceed with the winding up of the company. APO 12 of 2023 with I.A. No. AC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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