Case Note & Summary
The Bombay High Court allowed the transfer of winding-up proceedings against Patheja Forgings & Auto Parts Manufacturing Ltd. to the National Company Law Tribunal under Section 434(1)(c) of the Companies Act, 2013. The Applicant, having acquired over 50% of financial debt, sought transfer to enable corporate insolvency resolution under the Insolvency and Bankruptcy Code, 2016. The Court applied the irreversible stage test established by Supreme Court precedents, finding that the winding-up had not reached an irreversible stage nor had the company reached corporate death. Despite 17 years of proceedings, the Official Liquidator had taken limited steps, sold only one property, and claims verification was ongoing. The Court emphasized the IBC's objective of maximizing value, ensuring equitable treatment, and preserving employment, and directed transfer to NCLT for resolution under the IBC framework.
Headnote
The High Court of Judicature at Bombay considered an application under Section 434(1)(c) of the Companies Act, 2013 for transfer of winding-up proceedings to the National Company Law Tribunal (NCLT) -- The Applicant, M/s. Sahjun Impex Trading Pvt Ltd., having acquired debts representing more than 50% of financial debt, sought transfer to facilitate resolution under the Insolvency and Bankruptcy Code, 2016 (IBC) -- The Court examined whether the winding-up had reached an irreversible stage or corporate death -- Relying on Supreme Court precedents in Action Ispat and Power Private Limited v. Shyam Metalics and Energy Limited (2021) 2 SCC 641 and A. Navinchandra Steels Private Limited v. SREI Equipment Finance Limited (2021) 4 SCC 435, the Court held that mere admission of winding-up petition, appointment of provisional liquidator, or possession of assets by liquidator does not constitute irreversible position -- The decisive test for refusal is only when the Court reaches irresistible conclusion that company had reached stage of corporate death, rendering revival impossible -- The Court found that Official Liquidator had taken limited steps, sold only one property, and verification of claims was ongoing -- No irreversible or irretrievable steps had been taken -- The Company had not reached stage of corporate death -- The IBC, being later special enactment with rehabilitative framework, should prevail -- Transfer allowed to NCLT for resolution under IBC framework
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Issue of Consideration: Whether the winding-up proceedings against Patheja Forgings & Auto Parts Manufacturing Ltd. should be transferred to the National Company Law Tribunal under Section 434(1)(c) of the Companies Act, 2013
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Final Decision
The High Court allowed the Company Application and directed transfer of winding-up proceedings to National Company Law Tribunal under Section 434(1)(c) of Companies Act, 2013
