Case Note & Summary
The Supreme Court dismissed appeals by Action Ispat and Power Pvt. Ltd. against the Delhi High Court's order transferring a winding up petition to the National Company Law Tribunal (NCLT). The winding up petition under Sections 433(e), (f), 434, and 439 of the Companies Act, 1956 was filed by Shyam Metalics and Energy Ltd. for recovery of Rs. 4.55 crore. On August 27, 2018, the Company Judge admitted the petition and appointed the Official Liquidator (OL). Subsequently, State Bank of India (SBI), a secured creditor with dues of about Rs. 722 crore, filed an application under Section 7 of the Insolvency and Bankruptcy Code (IBC) before NCLT and sought transfer of the winding up petition. The Company Judge, by order dated January 14, 2019, allowed the transfer, recalling the earlier admission and appointment of OL. The Division Bench upheld this order. The appellant argued that once a winding up order was passed, proceedings must continue in the High Court and parallel IBC proceedings cannot coexist. The Supreme Court held that the Company Court's discretion under Section 434(1)(c) of the Companies Act, 2013 was properly exercised. The winding up was at an initial stage; the OL had only taken possession and sealed premises, with no irreversible steps like sale of assets. Transferring the case to NCLT avoided parallel proceedings and allowed a unified resolution process under IBC, which is beneficial for the company and creditors. The Court found no reason to interfere with the concurrent orders of the High Court.
Headnote
A) Company Law - Transfer of Winding Up Proceedings - Section 434(1)(c) Companies Act, 2013 - Discretion of Company Court - The Company Court has discretionary power to transfer a winding up petition to NCLT even after admission and appointment of Official Liquidator, provided no irreversible steps have been taken. In this case, the winding up order was recent, the OL had only taken possession and sealed premises, and no assets had been sold or distributed. The transfer was held to be in the interest of justice and to avoid parallel proceedings under IBC. (Paras 2.2-2.3, 41-43) B) Insolvency and Bankruptcy Code - Parallel Proceedings - Avoidance of - Section 7 IBC - Where a secured creditor has initiated CIRP under IBC, continuation of winding up proceedings before the Company Court would be incongruous. Transfer to NCLT ensures a unified resolution process beneficial to all stakeholders. (Para 42) C) Company Law - Recall of Winding Up Order - Power of Company Court - The Company Court has inherent power to recall its order of admission and appointment of Official Liquidator when transferring the petition to NCLT, as the liquidation was at an initial stage and no effective or irreversible steps had been taken. (Paras 2.2, 41)
Issue of Consideration
Whether the High Court, in exercise of its discretion under Section 434(1)(c) of the Companies Act, 2013, could transfer a winding up petition to the National Company Law Tribunal after the petition had been admitted and an Official Liquidator appointed, but before any irreversible steps towards liquidation were taken.
Final Decision
The Supreme Court dismissed the appeals, upholding the orders of the Delhi High Court transferring the winding up petition to the National Company Law Tribunal.
Law Points
- Section 434(1)(c) Companies Act
- 2013
- transfer of winding up proceedings
- discretion of Company Court
- Insolvency and Bankruptcy Code
- 2016
- parallel proceedings
- stage of liquidation
