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TMI Blog2019 (10) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 & CA No. 365/2019 in CP. No.518/2013 and for Dena Bank in CA No. 1047-48/2018 in CP No. 668/2014. Mr. Kunal Sabharwal, Adv. for applicant in CP 668/2014. Ms. Ruchi Sindhwani, Sr. Standing Counsel, Mr. Rishi Manchanda, Mr. Deepak Anand and Mr. D. Bhattacharyra, Standing Counsels with Mr. Amish Tandon & Ms. Megha Bharara, Advs. for the Official Liquidator. JAYANT NATH, J. 1. By this judgment I will dispose of all the applications filed by various parties/applicants for transfer of the present winding up petitions to National Company Law Tribunal (hereinafter referred to as the 'NCLT'). The details of the applications/ petitions are stated as follows: i) Co.Pet. No.518/2013, CA. Nos.1415/2018 & 1416/2018 (Hanung Toys & Textiles Ltd.) In this case on 12.07.2018, this court admitted the present petition and appointed the Official Liquidator as the Liquidator (hereinafter referred to as 'OL'). The Official Liquidator was directed to take all necessary steps including to take over all the assets, books of accounts and records of the respondent Company forthwith. The Official Liquidator was also directed to prepare a complete inventory of all the assets of the company when the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the present petition and C.A. No. 1048/2018 for transfer of the present proceedings before the NCLT. It is also stated by the petitioner by filling application C.A. No. 1366/2018, that he is supporting the application, namely, C.A. No.1048/2018 for transfer of the present proceedings before NCLT. Before NCLT, proceedings were initiated under section 7 of IBC by the said applicant. The NCLT vide order dated 25.09.2018, dismissed the petition filed by the applicant stating that the Provisional Liquidator has already been appointed by the company court. iv) Co.Pet.814/2016, CA. Nos.826, 980 & 984/2018 (Premia Projects Ltd.) On 12.03.2018, this court admitted the present petition and appointed the official liquidator as the provisional liquidator. Further, the official liquidator was directed to take all necessary steps including to take over all the assets, books of accounts, documents and records forthwith. The official liquidator was also directed, to make a complete inventory of all the assets of the company when the same are taken over and the premises in which they are shall be sealed. Mr. Rahul Joshi, being an allottee of a flat in the respondent's project has filed an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors themselves would have vested powers to determine the manner of recovery of monies from debtor company. It is the objective of IBC to revive that company at the first instance through Corporate Insolvency Resolution Process. Winding up procedure would be directed only in the event of failure of Corporate Insolvency Resolution Process. Reliance is placed on the judgment of the Supreme Court in the case of Swiss Ribbons Pvt. Ltd. & Anr. V. Union of India & Ors., 2019 4 SCC 17. ii) It is also pleaded that the judgment of the Supreme Court makes it clear that under proviso to section 434(c) of the Companies Act, this Court has to mandatorily transfer pending winding up petitions to NCLT. Reliance is placed on the judgment of the Supreme court in the case of Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd., 2019 SCC OnLine 87. Reliance is also placed on the judgment of the Supreme Court in the case of Jaipur Metals & Electricals Employees Organization v. Jaipur Metals & Electricals Ltd.,(2019) 4 SCC 227. iii) It is reiterated that this court has to transfer the matter where such an application is filed for transfer even if an order for winding up of the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. v. New Cawnpore flour Mills & Ors., (2008) 15 SCC 1 and judgment of the Division Bench of this court in Co.App. No.21/2018, decided on 18.03.2009, titled, 'Reinz Talbros Ltd. & Anr. vs Kostub Investment Ltd. & Ors. in support of the above plea. Reliance is also placed on the judgment of the Supreme Court in the case of Meghal Homes (P) Ltd. v. Shree Niwas Girni K.K.Samiti & Ors., (2007) 7 SCC 753. iv) It is further stated that the power to transfer such matters under proviso to section 434(1)(c) of the Companies Act, 2013 is purely discretionary. Reliance is also placed on the judgment of the Supreme Court in the case of Jaipur Metals & Electricals Employees Organisation v. Jaipur Metals & Electricals Ltd.(supra) to contend that the Supreme Court did not transfer the winding up petitions from the High Court. v) It is further pleaded that none of the applicants who have moved these applications for transfer are parties to the present proceedings. Hence, the matter cannot be transferred at their request. 8. Learned counsel for the Ex.Directors of the respondent company, namely, Shakti Bhog Foods Limited in Co.Pet. No.987/2015 have also opposed the present applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings of winding up pending before the Company Court in the High Court to NCLT. However, no such provision has been made by the Legislature either in The Companies Act, 2013 or in the Code. Hence the High Court while exercising powers under proviso to Section 434(i)(c) of the Companies Act has discretion to transfer or retain the proceedings before itself. (v) It is further stated that if the order of appointment of OL is withdrawn the management and assets of the respondent company will go back to the Ex.Management till the time an IRP is appointed by the NCLT. There may be a situation where NCLT may refuse appointment of IRP leading to anomaly. This could not have been the intention of the Legislature. 9. Learned senior counsel appearing for MVL Customers Association has also opposed the transfer application filed in Co.Pet. 668/2014 where the respondent company is MVL Limited. The transfer application is filed being CA 1048/2018 by Dena Bank. Apart from repeating the contentions raised by learned counsel appearing for the Ex.Management of Shakti Bhog Foods Limited learned senior counsel has submitted as follows:- (i) Dena Bank is not a party to the petition and hence canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CLT treating it as fresh application under section 7 or 9 of The IBC such proceedings will begin de novo and the entire effort of High Court of four years would be wasted. It is further stated that the infrastructure of the projects of the respondent company are more or less ready and some finishing work is left to be done. It would be in the interest of the company and its flat buyers that this court entrusts the Ex. Management with this task under strict supervision by appointment of Court Commissioner including preferably a Retired High Court Judge to supervise the whole affair. 10. The basic issue here is whether in exercise of powers under the proviso to Section 434 of the Companies Act, 2013, this court should transfer the present proceedings to NCLT. 11. Section 434 of the Companies Act, 2013 as amended (2019) reads as follows:- "Section 434 of the Companies Act, 2013 reads as follows: "434. Transfer of certain pending proceedings (1) On such date as may be notified by the Central Government in this 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) consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings 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 the Companies (Court) Rules, 1959. (2) The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this section." 12. I may note that the highlighted proviso (added in 2018) to section 434(c) of the Companies Act, 2013 was dealt with by this court in the judgment of Tata Capital Financial Services Ltd. v. Shree Shyam Pulp & Board Mills Ltd., 2018 SCC Online Del 11365. In that case the OL had been appointed as a provisional liquidator. This court held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solvency resolution. In case the same is successful, the same would be in the interest of creditors." 13. The Division Bench of this Court upheld the aforesaid judgment in the appeal titled Shree Shyam Pulp & Board Mills Ltd. v. Tata Capital Financial Services Ltd. & Ors., 2018 SCC OnLine Del 12777. The Division Bench held as follows: "27. The above submissions have been considered. The proviso to Section 434(1)(c) of the Act has already been reproduced hereinbefore. Although, Ms. Luthra may be technically right in contending that UCO Bank was not a party to any proceedings relating to the winding up which were pending in any Court, the fact remains that the OL was a party to the winding up proceedings. The OL had initially not opposed the prayer of UCO Bank. The OL's attempt to withdraw its consent to the transfer was negative by the Company Court. The OL has accepted the order of the Company Court in that regard. 28. .. 29. The fact of the matter is that despite pendency of the winding up petition for more than four years, no money has been able to be recovered by any of the creditors. At this juncture it is necessary for this Court to clarify that it is not expressing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(2) is plain enough, it has been argued before us that Rule 5 was substituted on 29-62017, as a result of which, Rule 5(2) has been omitted. The effect of the omission of Rule 5(2) is not to automatically transfer all cases under Section 20 of the SIC Act to NCLT, as otherwise, a specific rule would have to be framed transferring such cases to NCLT, as has been done in Rule 5(1). The real reason for omission of Rule 5(2) in the substituted Rule 5 is because it is necessary to state, only 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 29-6-2017 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 1-12-2016, 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 ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itor moved the NCLT under Section 7 of the Insolvency & Bankruptcy Code in 2017. In May - June, 2017 the said petition was admitted. Against the said order, an appeal was filed by the appellant before NCLAT i.e. the Appellate Tribunal. It was held by NCLAT that since there was no winding up order passed by the High Court, the financial creditor's petition would be maintainable. As a result the appeal was dismissed. This order of NCLAT was impugned in the Supreme Court. The relevant submission of the appellant was that the winding up proceedings before the High Court should continue and not proceedings filed by the other creditors under the Code. The Supreme Court in those facts held as follows: - "17. The resultant position in law is that, as a first step, when the Code was enacted, only winding up petitions, where no notice under Rule 26 of the Companies (Court) Rules was served, were to be transferred to the NCLT and treated as petitions under the Code. However, on a working of the Code, the Government realized that parallel proceedings in the High Courts as well as before the adjudicating authority in the Code would stultify the objective sought to be achieved by the Code, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een Section 434 as substituted and the provisions of the Code, the latter must prevail. We are of the view that the NCLT was absolutely correct in applying Section 238 of the Code to an independent proceeding instituted by a secured financial creditor, namely, the Alchemist Asset Reconstruction Company Ltd. This being the case, it is difficult to comprehend how the High Court could have held that the proceedings before the NCLT were without jurisdiction. On this score, therefore, the High Court judgment has to be set aside. The NCLT proceedings will now continue from the stage at which they have been left off. Obviously, the company petition pending before the High Court cannot be proceeded with further in view of Section 238 of the Code. 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." 19. Mr. Sen also referred us to a judgment of the learned Single Judge of the High Court of Bombay reported, in (2018) 2 AIR Bom R 350 in PSL Limited v. Jotun India Private Limited. The Learned Single Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisional liquidator has not been appointed. In that case in March, 2017 the winding up petition was admitted but the OL was not appointed as provisional liquidator. In May, 2017 an application was filed in NCLT, Ahmedabad under section 10 of the IBC. NCLT reserved the matter for orders. On the same date, the petitioner before the High Court filed an application seeking appointment of a provisional liquidator. The company court in Bombay High Court passed orders restraining NCLT from continuing with the IBC application. In those facts, the Single Bench of the Bombay High Court held as follows: "70. It is clear from the above that the winding up petitions retained by the High Court are being decided under the Companies Act, 1956 only as a transitional provision. It only provides that winding up proceedings under Section 433 (1) (e) pending in the High Court would continue in the High Court - Prasanta Kumar Mitra (Supra). 71. Furthermore, this transitional provision cannot in any way affect the remedies available to a person under IBC, vis-à-vis the company against whom a winding up petition is filed and retained in the High Court, as the same would amount to treating IB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an application for transfer is filed, the High Court must transfer such proceedings to NCLT which will then deal with the same as an application for initiation of corporate insolvency resolution process. This view was reiterated by the Supreme Court in the case of Forech India Ltd. vs. Edelweiss Assets Reconstruction Co. Ltd.(supra). In the case of Jotun India Private Limited vs. PSL Limited(surpa), the judgment of which case was approved by the Supreme Court, the Division Bench of the Bombay High Court noted the likelihood of conflict and confusion in case both the forums, namely, the Company Court and NCLT are allowed to go ahead with the liquidation proceedings. In those circumstances, the Division Bench held that in a case where the NCLT fails to revive the company using the resolution plan, the Company Court which was seized of the winding up proceedings would then exercise appropriate jurisdiction and deal with the petition, as per law. 22. For completeness, reference may also be had to some of the judgments of the other High Courts on this aspect. The Calcutta High Court in the case of New Central Jute Mills Shramik Sangh & Ors. v. Shalimar Industries Ltd. & Ors., [2019] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... length. In fact, both the parties before filing of the present application completed nearly all the arguments on merits of the case. The Court had also placed all its queries to counsels for both the parties. Therefore, I do not find the request made at this stage to be a bona fide request. Having argued the matter at length and having faced the queries, it is most inappropriate on part of the respondents to move such an application, that too without any reasons, what to say of strong reasons. Such application or request could have been made any time after 06.06.2018, when the proviso came in force, till the times the arguments in the case were initiated. Such a request also could have been made before initiating the arguments as a preliminary request. To raise such a request, after the conclusion of arguments on merits, cannot be called bona fide. Further, since nothing is said in the application, I find no reason to allow the application. The request of SIFCL for transfer of case under the second proviso is rejected. 24. The above judgment of the Allahabad High Court was also noted by the Karnataka High Court in the case of Milestone Real Estate Fund vs. Prisha Properties India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 434 (1) (c) of the Companies Act is that a discretion has been granted to the High Court to transfer matters at the request of any party to the NCLT. Where the Official Liquidator has not been appointed as the Liquidator, the Company Court would transfer such matters to the NCLT on receipt of an appropriate request by a party. However, where a Liquidator has been appointed, such matters would normally not be transferred to NCLT. 26. I am fortified by the above conclusion based on the provisions of the Companies Act, 1956 which deal with dissolution of a Company and also by the observations of the Division Bench of the Bombay High Court in the case of Jotun India Private Limited & Ors. v. PSL Limited(supra) which judgment was approved by the Supreme Court in Forech India Ltd. v. Edelweiss Assets Reconstruction Co.Ltd.(supra). 27. I may have a look at some of the provisions regarding the liquidator under the Companies Act, 1956. The functions and powers of the Official Liquidator are described in section 448 to section 481 of the Companies Act, 1956. Some relevant provisions read as follows: "448. Appointment of Official Liquidator:- (1) For the purposes of this Act, so far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate debt due from the insolvent, and rateably with the other separate creditors; (iii) to draw, accept, make and endorse any bill of exchange, hundi or promissory note in the name and on behalf of the company, with the same effect with respect to the liability of the company as if the bill, hundi, or note had been drawn, accepted, made or indorsed by or on behalf of the company in the course of its business; (iv) to take out, in his official name, letters of administration to any deceased contributory and to do in his official name any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the company, and in all such cases, the money due shall, for the purpose of enabling the liquidator to take out the letters of administration or recover the money, be deemed to be due to the liquidator himself: Provided that nothing herein empowered shall be deemed to affect the rights, duties and privileges of any Administrator-General; (v) to appoint an agent to do any business which the liquidator is unable to do himself. (2A) The liquidator shall - (a) appoint security guards to protect the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act, the winding up has to be either stayed altogether or for a limited time, on such terms and conditions as the court thinks fit in terms of Section 466 of the Act. If no such stay is granted, the proceedings have to go on and the court has to finally pass an order under Section 481 of the Act dissolving the Company. In other words, when the affairs of the Company had been completely wound up or the court finds that the Official Liquidator cannot proceed with the winding up of the Company for want of funds or for any other reason, the court can make an order dissolving the Company from the date of that order. This puts an end to the winding up process. xxxxxxxx 47. When a Company is ordered to be wound up, the assets of it, are put in possession of the Official Liquidator. The assets become custodia legis. The follow up, in the absence of a revival of the Company, is the realization of the assets of the company by the Official Liquidator and distribution of the proceeds to the creditors, workers, and contributories of the company ultimately resulting in the death of the company by an order under Section 481 of the Act, being passed. But, nothing stands in the wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l have the following powers and duties, namely:- (a) to verify claims of all the creditors; (b) to take into his custody or control all the assets, property, effects and actionable claims of the corporate debtor; (c) to evaluate the assets and property of the corporate debtor in the manner as may be specified by the Board and prepare a report; (d) to take such measures to protect and preserve the assets and properties of the corporate debtor as he considers necessary; (e) to carry on the business of the corporate debtor for its beneficial liquidation as he considers necessary; (f) subject to Section 52, to sell the immovable and movable property and actionable claims of the corporate debtor in liquidation by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell the same in parcels in such manner as may be specified: [Provided that the liquidator shall not sell the immovable and movable property or actionable claims of the corporate debtor in liquidation to any person who is not eligible to be a resolution applicant.] (g) to draw, accept, make and endorse any negotiable instruments including bill of excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that two functionaries, namely, OL under the Companies Act, 1956 and Liquidator under IBC cannot concurrently carry out their functions. Such a proposition would create a needless confusion. Once a liquidator is appointed by the company court in saved matters, the process of liquidation commences. Ordinarily, the liquidator takes time and efforts to consolidate the assets of the respondent company, to evaluate the same and put them for auction. He seeks to take other steps to dissolve the company. Once this process has started, no purpose is served by handing over the same to another liquidator who would also perform a similar function all over again. This would set the entire effort of the Official Liquidator at naught which would not have been intended. Further the matter at that stage mostly comprises of matters where there is no prospect of Insolvency Resolution Process. Hence, once this court has appointed the Official Liquidator as the liquidator, normally such petition would not be transferred to NCLT. 33. I may hasten to add that the issue as to whether an application under Section 7 or Section 9 of IBC can be initiated before NCLT once the OL is appointed as a Liquidator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that of an official liquidator." (emphasis added) 37. However, keeping in view the observations of the Supreme Court in the case of Forech India Ltd. v. Edelweiss Assets Reconstruction Co.Ltd. (supra) where the judgment of the Bombay High Court in the case of Jotun India Private Limited & Ors. v. PSL Limited (supra) was approved, this contention of the learned senior standing counsel for the Official Liquidator cannot be accepted. Further, in my opinion, once an Official Liquidator is appointed as a Provisional Liquidator, normally the whole exercise would still be at an initial stage. In these circumstances, normally, this court would transfer the matter to NCLT. This would also give an opportunity to try and revive the company by the Insolvency Resolution Process. There may be exceptional circumstances where the Liquidator has made much progress and the chances of Insolvency Resolution Process are very bleak then, in that eventuality this court may exercise its discretion and not transfer such a matter. 38. Based on the above findings, I will now deal with the various applications filed for impleadment/transfer to NCLT. Co. Pet. 518/2013 (Hanung Toys & Textiles Ltd.) and CA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed the said petition as the OL had already been appointed by this court. NCLAT also dismissed the appeal vide order dated 12.03.2018. As noted above, an appeal is filed in the Supreme Court being CA No.4536/2018 and is pending consideration. The application for appointment of IRP filed by SBI has already been rejected by NCLT. Further the OL has been appointed by this court as the Liquidator. There are no reasons to transfer these proceedings to NCLT. CA Nos. 718/2018 and 1444/2018 are accordingly dismissed. Co. Pet. 668/2014 (MVL Ltd.) and CA Nos. 1047/2018 (for impleadment) and 1048/2018 & 1366/2018 (for transfer to NCLT) 40. In the present petition, the respondent is MVL Ltd. In this case, the petition was admitted and the OL was appointed as the Provisional Liquidator on 05.07.2018. CA Nos. 1047/2018 and 1048/2018 have been filed by Dena Bank for impleadment and transfer of these proceedings to NCLT respectively. The petitioner in this matter is also supporting the plea of Dena Bank for transfer of proceedings to NCLT and has filed an application being CA No. 1366/2018 in this regard. In this case the proceedings initiated by Dena Bank under Section 7 of the IBC were dism ..... X X X X Extracts X X X X X X X X Extracts X X X X
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