Court Can Transfer Winding-Up Proceedings To NCLT; Main Consideration Is Whether Corporate Death Of Company Is Inevitable: Himachal Pradesh High Court

The appeal before the High Court was filed against the order passed by the Company Judge, whereby the company petition was ordered to be transferred to the National Company Law Tribunal (NCLT).

The Division Bench of Justice Tarlok Singh Chauhan and Justice Sushil Kukreja held, “No doubt, the Court has the discretion to transfer proceedings depending upon the stage of the proceedings. Obviously, the main consideration that would weigh before the Court as to whether the corporate death of the company is inevitable, then it would exercise its jurisdiction not to transfer such proceedings and where nothing can said to have become irretrievable in the sense as mentioned in para 25 of the Action Ispat and Power Pvt. Ltd. (supra), then the Court would normally transfer such proceedings.”

Advocate V. D. Khidtta represented the Appellant while Senior Advocate Sunil Mohan Goel represented the Respondent.

Factual Background

The appellant had filed a Petition for winding up of the respondent company on the ground that the respondent company failed and neglected to make the payment of the outstanding amount of Rs 3,25,78,000. It was averred that the respondent company became commercially insolvent and was unable to make payment of the amount due to the petitioner company.

During the pendency of the company-petition, the respondent moved an application under Section 434(1)(c) of the Companies Act for transferring the case to the NCLT at Chandigarh and the same was allowed.

Reasoning

The Bench referred to the fifth provision of Section 434(1)(c) introduced by Act 26 of 2018, which was primarily introduced to tide over the difficulties and the conflict that were likely to arise because of the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (IBC). Because of IBC, there could be a possibility of initiation of proceedings under Sections 7 and 8 of IBC in relation to a company against whom a winding-up petition is pending, the Bench noted and further said, “A reading of the provisions of IBC with the Companies Act, 2013 undoubtedly would have primacy over the Companies Act, in case, there is a conflict 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 the winding up proceeding to NCLT to prevent parallel proceedings.”

Reference was made to the judgment in Action Ispat and Power Pvt. Ltd. vs. Shyam Metalics and Energy Limited (2021) wherein it has been observed that 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.

The Bench noted that there was nothing that could be said to have irretrievable in the instant case in the sense mentioned in Action Ispat Judgment (supra), wherein it was clarified that so long as no actual sales of the immovable or movable properties had taken place, nothing irreversible is done which would warrant a Company Court staying its hands on a transfer application made to it by a creditor or any party to the proceedings. It is only where the winding up proceedings have reached a stage where it would be irreversible, making it impossible to set the clock back, that the Company Court must proceed with the winding up, instead of transferring the proceedings to the NCLT To be decided in accordance with the provisions of the Code.

Thus, finding no reason to interfere with the view taken by the Company Judge, the Bench dismissed the appeal.

Cause Title: Elecon Engineering Company Limited v. M/s Inox Wind Limited & Anr. (Neutral Citation: 2025:HHC:11215)

Appearance:

Appellant: Advocates V. D. Khidtta, Nishan Khidtta

Respondent: Senior Advocate Sunil Mohan Goel, Advocates Vipul Sharda, Radiya Katochi

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