TMI Blog2018 (12) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... . The writ petitions that are pending before the High Court have also to be disposed of in light of the fact that proceedings under the Code must run their entire course. We, therefore, allow the appeal and set aside the High Court s judgment. - CIVIL APPEAL NO. 12023 OF 2018 [ARISING OUT OF SLP(CIVIL) NO.18598 OF 2018] - - - Dated:- 12-12-2018 - R. F. Nariman And M. R. Shah, JJ. JUDGMENT R. F. NARIMAN, J. 1. Leave granted. 2. The present appeal has been filed by an employees union challenging the judgment of the High Court of Judicature for Rajasthan dated 01.06.2018, in which the High Court has refused to transfer winding up proceedings pending before it to the National Company Law Tribunal ( NCLT ), and has set aside an order dated 13.04.2018 of the NCLT by which order a financial creditor s petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ( Insolvency Code or Code ) has been admitted. 3. This case has had a chequered history. On 30.09.1997, the account of the Respondent No. 1 company had become a non-performing asset, and since the company s net worth had turned negative, a reference was made to the Board for Industrial and Financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d without jurisdiction. Accordingly, the writ petitions and the company petition were placed for further orders on 05.07.2018. On 16.07.2018, this Court issued notice and stayed the operation of the impugned judgment. 6. Shri Sidharth Luthra, learned Senior Advocate, appearing on behalf of the appellant, and Shri P. Chidambaram, learned Senior Advocate, appearing on behalf of Respondent No. 3, have argued that a perusal of the Eleventh Schedule of the Code and amendments made to the Companies Act, 2013, particularly to Section 434 therein, would show that all winding up proceedings pending before the High Court are to stand transferred to the NCLT at such stage as may be prescribed by the Central Government by rules made in this behalf. They then referred to Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016 ( 2016 Transfer Rules ), and in particular, to Rule 5(2) thereof. They then argued that as Rule 5(2) was not continued on and after 29.06.2017, it would be clear that winding up of companies that are initiated under the SIC Act cannot, after such omission, be continued to be dealt with by the High Court. According to them, the High Court judgment was incor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iminary objection raised by Shri Siddharth Dave. According to the learned counsel, an appeal against the judgment dated 01.06.2018 has been filed by Respondent No. 3, and since this appeal is still pending, we should not entertain an SLP filed at the behest of an employees union which is in cahoots with Respondent No. 3. Ordinarily, we would have relegated the appellant to the Division Bench, but since the questions raised are of importance generally, it is better that an authoritative decision be given at the earliest. It is for this reason that we have entertained this SLP directly against the order of a single Judge. Shri Luthra has also pointed out that it is incorrect to say that the client that he represents is a derecognized or unrecognized union in cahoots with Respondent No. 3, and has pointed out a certificate of registration of the said union. Be that as it may, since this SLP raises important questions of law which need to be decided at the earliest, we have disregarded this preliminary objection. 9. Section 255 of the Insolvency Code reads as follows: 255. Amendments of Act 18 of 2013.-The Companies Act, 2013 shall be amended in the manner specified in the Ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s behalf,- (a) all matters, proceedings or cases pending before the Board of Company Law Administration (herein in this section referred to as the Company Law Board) constituted under sub-section (1) of Section 10-E of the Companies Act, 1956, immediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act; (b) any person aggrieved by any decision or order of the Company Law Board made before such date may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may if it is satisfied that the appellant was prevented by sufficient cause from filing an appeal within the said period, allow it to be filed within a further period not exceeding sixty days; and (c) all proceedings under the Companies Act, 1956, including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Transfer of Pending Proceedings) Rules, 2016, came into force with effect from 01.04.2017. What is of relevance for decision in the present case is Rules 5 and 6 of the 2016 Rules, which are set out as follows: 5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.-(1) All petitions relating to winding up under clause (e) of Section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not been served on the respondent as required under Rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub-section (4) of Section 419 of the Act, exercising territorial jurisdiction and such petitions shall be treated as applications under Sections 7, 8 or 9 of the Code, as the case may be, and dealt with in accordance with Part II of the Code: Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with Rule 7, required for admission of the petition under Sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplications under Sections 7 or 8 or 9 of the Code, as the case may be, in accordance with the provisions of the Code: Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under this Rule and remains in the High Court and where there is another petition under clause (e) of Section 433 of the Act for winding up against the same company pending as on 15th December, 2016, such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent. 12. It is clear that under Section 434 as substituted by the Eleventh Schedule to the Code vide notification dated 15.11.2016, all proceedings under the Companies Act, 2013 which relate to winding up of companies and which are pending immediately before such date as may be notified by the Central Government in this behalf shall stand transferred to the NCLT. The stage at which such proceedings are to be transferred to the NCLT is such as may be prescribed by the Central Government. 13. When Rules 5 and 6 of the 2016 Transfer Rules (unamended) are read, it is clear that three types of proceedings are referred to. Under Rule 5(1), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once, on the repeal of the SIC Act, that proceedings under Section 20 of the SIC Act shall continue to be dealt with by the High Court. It was unnecessary to continue Rule 5(2) even after 29.06.2017 as on 15.12.2016, all pending cases under Section 20 of the SIC Act were to continue to be dealt with by the High Court before which such cases were pending. Since there could be no opinion by the BIFR under Section 20 of the SIC Act after 01.12.2016, when the SIC Act was repealed, it was unnecessary to continue Rule 5(2) as, on 15.12.2016, all pending proceedings under Section 20 of the SIC Act were to continue with the High Court and would continue even thereafter. This is further made clear by the amendment to Section 434(1)(c), with effect from 17.08.2018, where any party to a winding up proceeding pending before a Court immediately before this date may file an application for transfer of such proceedings, and the Court, at that stage, may, by order, transfer such proceedings to the NCLT. The proceedings so transferred would then be dealt with by the NCLT as an application for initiation of the corporate insolvency resolution process under the Code. It is thus clear that under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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