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TMI Blog2019 (10) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... pany Judge in Application - C.A. No. 1240/2018, in Co. Pet. No. 731/2016. By the impugned order, the Ld. Company Judge allowed the said Application preferred by respondent No.2 - SBI, and directed transfer of the Company Petition to the National Company Law Tribunal (NCLT). The Learned Company Judge revoked the order dated 27.08.2018 admitting the winding up petition and appointing the Official Liquidator as the provisional Liquidator. 2. Shyam Metalics & Energy Ltd., Respondent No.1, filed the aforesaid winding up petition under Sections 433(e) and 433(f) of the Companies Act, 1956 before the Ld. Company Judge, on the ground of appellant's inability to pay its debts. On 22.08.2016, notice of the winding up petition was duly served on the appellant. However, no representation was made in its behalf. The matter was adjourned to 7.11.2016. Thereafter, attempts were made to settle the issue before the Delhi High Court Mediation and Conciliation Centre. However, on 26.02.2018, the failure of mediation was reported to the Ld. Company Judge. 3. On 27.08.2018, the winding up petition was admitted and Official Liquidator (hereinafter "OL") was appointed in respect of the appellant compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the appellant company. 6. While the winding up proceedings were still at the nascent stage - as taken note of hereinabove, respondent No. 2 preferred Application No. 1240/2018 on or about 08.10.2018 before the Ld. Company Judge, seeking transfer of the winding up proceedings (in Co. Pet. 731/2016) to the NCLT. Additionally, Respondent No. 2 filed an impleadment application bearing No. 1241/2018 in the pending winding up petition. The application for transfer was opposed by the ex-management and by the Official Liquidator (OL) as well. The OL claimed that he had already sealed the registered office of the company at New Delhi and the factory premises at Orissa, and had incurred heavy expenditure in securing the factory premises. 7. The Ld. Company Judge vide the impugned order dated 14.01.2019 held that the power to transfer a petition to NCLT under Section 434(1)(c) of the Companies Act, 2013 is 'discretionary' and 'has to be exercised in the facts and circumstances of the case so as to expeditiously deal with the proceedings/winding up'. The court observed that liquidation was at the initial stage since after the appointment of the OL, the office and factory premises of appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the Liquidator and file their respective claims. Reliance is placed on Jaipur Metals & Electricals Employees Organisation v. Jaipur Metals & Electricals Ltd. Civil Appeal No. 12023 of 2018, wherein the Supreme Court held: "However, this does not end the matter. It is clear that Respondent No.3 has filed a Section 7 application under the Code on 11.01.2018, on which an order has been passed admitting such application by the NCLT on 13.04.2018. This proceeding is an independent proceeding which has nothing to do with the transfer of pending winding up proceedings before the High Court. It was open for Respondent No.3 at any time before a winding up order is passed to apply under section 7 of the Code..." (emphasis supplied) 12. Ms. Dhir also questions the power of the Ld. Company Judge to recall a winding up order. 13. Ms. Dhir has emphasized upon the distinction between a winding up order, and a dissolution order. After the dissolution order is passed under section 481 of the Act, 1956, the Company ceases to exist. She submits that the Supreme Court in Jaipur Metals (supra), consciously referred to the stage of winding up, and not the stage of dissolution, while holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercise jurisdiction in case revival efforts by NCLT fails." (emphasis supplied) 18. Ld. counsel submitted that the Companies (Transfer of Pending Proceeding) Rules, 2016 have been framed by virtue of the Rule making power conferred under Section 239 of IBC, 2016. These Rules are an integral part of Companies Act, 2013, and IBC 2016. Therefore, the non-obstante clause contained in Section 238 of the IBC is not applicable to these Rules. It was further submitted that the legislative intent was to harmonize the Companies Act and IBC. 19. Per contra, Ld. Senior Counsel for the Respondent No.2 SBI submitted that the transfer was fully in compliance with the provisions of law, and the Ld. Company Judge had rightly transferred the matter to NCLT, Delhi in view of the IBC, that paves the way for corporate insolvency resolution process; resolution of the debts, and; revival of the corporate debtor. 20. Mr. Srinivasan submits that the object of IBC was aimed towards the protection of interests of the creditors; the corporate debtor, and, to maximize the value of the assets of the corporate debtor. Hence, proceedings before the NCLT for initiation of corporate insolvency resolution proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer: Provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government. Provided further that only such proceedings relating to cases other than winding up, for which orders for allowing or otherwise of the proceedings are not reserved by the High Courts shall be transferred to the Tribunal: Provided also that- (i) all proceedings under the Companies Act,1956 other than the cases relating to winding up of companies that are reserved for orders for allowing or otherwise such proceedings; or (ii) the proceedings 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 notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." (emphasis supplied) Reasons and Conclusion 27. At the outset, we may observe that the locus standi of the appellant - who is masquerading himself as the company under winding up, but is, in fact, the erstwhile management of the said company is itself in doubt in relation to the issue of transfer of the winding up proceedings to the NCLT, particularly, when the same is juxtapositioned with the locus standi of the respondent No. 2 - State Bank of India - a secured creditor of the appellant company. Since the winding up order had been passed by the learned Company Judge, which would lead to the process of liquidation and dissolution of the appellant company, it was the creditors - more particularly t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge as may be prescribed by the Central Government. The third proviso, inter alia, provides that proceedings relating to winding up of companies which have not been transferred from High Court to the Tribunal (NCLT), shall be dealt with in accordance with the provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959. The fifth proviso enables any party or parties to proceedings relating to winding up of companies pending before any Court before commencement of the Code, to file an application for transfer of such proceedings, and the Court "may" transfer such proceedings to the Tribunal. Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, which is referable to the first proviso to Section 434(1)(c), states that a petition for winding up on the ground of inability to pay debts, which has not been served on the respondent under Rule 26 of the Company (Court) Rules 1959, "shall be transferred to the Bench of the Tribunal... ... ... ... ...". Conjoint reading of Section 434(1)(c) and Rule 5(1) of the Companies (Transfer of Pending Proceedings) Rules shows that petitions for winding up filed on grounds of inability to pay debts (i.e. under clause (e) of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtue of its non-obstante clause employed in Section 238, which reads as follows: "238. Provisions of this Code to override other laws.-The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. 33. In Jotun (supra), decided by the Bombay High Court, which has been affirmed by the Supreme Court in Forech India (supra), the Bombay High Court held that the IBC is a special statute vis a vis the Companies Act, 1956, and even if the two statues are held to be special statues in the field that they operate in, IBC is a later enactment, and keeping in view the statement and objects and the purpose for which it was enacted, the provisions relating to revival/ resolution of the company - incorporated in Chapter II, would have to be given primacy over the provisions of winding up, contained in the Companies Act. In Jotun (supra), the Bombay High Court held as follows: "35. The general legal principles of interpretation of statute state that the general law should yield to the special law. In the context of the present statute i.e. IBC 2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar lines and held as under: "18. Shri Dave's ingenious argument that since Section 434 of the Companies Act, 2013 is amended by the Eleventh Schedule of the Code, the amended Section 434 must be read as being part of the Code and not the Companies Act, 2013, must be rejected for the reason that though Section 434 of the Companies Act, 2013 is substituted by the Eleventh Schedule of the Code, yet Section 434, as substituted, appears only in the Companies Act, 2013 and is part and parcel of that Act. This being so, if there is any inconsistency between 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. .... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uses (a) to (i) of Section 433 are satisfied, and with a view to achieve the liquidation of the assets; settlement of the claims of the creditors and shareholders of the company, and; eventually to dissolve the company, the liquidator is appointed. Winding up of a company is a process, and it is not achieved merely upon an order for winding up being passed. When an order is passed by the Company Court directing a company to be wound up, and a liquidator is appointed for that purpose, the Company Court only sets the ball rolling. The process of winding up entails liquidation of the assets, invitation of claims of creditors, adjudication of the claims made upon the company, and; their settlement in accordance with the formula that the Court may evolve considering the overall position of the liquidated assets versus the nature and quantum of claims presented before the Court. On the day when the winding up order is passed, the company does not stand dissolved. Such an order of winding up can be re-called by the Company Court in exercise of the inherent power of the Court recognized in Rule 9 of the Company Court Rules, 1959. The said Rule 9 reads as follows: "Rule 9. Inherent Powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residuary powers to the Company Court, in the absence of any specific prohibition in the Act itself, is purposely to leave it to the discretion of the Company Court concerned to pass appropriate orders, to meet the situations and facts arising before it from time to time. There are no restrictions, inhibitions or prohibition enacted in the Act and the Rules. Therefore, the powers of this court are not restricted in any manner and are plenary in nature... x x x x x x x x x 39. The legal position therefore which emerges is, that there is no prohibition or restraint on the Company Court to recall the winding up order if the facts and circumstances requiring such a recall are established by any of the applicants..." (emphasis supplied) 39. Aforesaid being the position, merely because the learned Company Judge had ordered the winding up of the appellant company on 03.08.2004, it does not follow that the appellant company should necessarily be liquidated and dissolved. The other options available, namely to resolve/ revive the appellant company can and should always be explored for which purpose the NCLT is invested with jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he IBC for resolution/ revival, would serve no useful purpose. The statutory scheme found in Section 434(1)(c) clearly is that the proceedings for winding up pending before the Company Court could be transferred to the NCLT and there is no provision for transfer of proceedings from the NCLT to the Company Court. 43. We, thus uphold the impugned order passed by the Ld. Company Judge in C.A. No. 1240/2018, dated 14.01.2019 and dismiss the appeal. 44. C.M. No. 34726/2019 had been preferred for release of sum of Rs. 84,57, 615/- in respect of expenses incurred by 'Manasvi Security Services' for providing security guards in the concerned premises on the directions of the OL for the period of September 2018 to May 2019. Another application, i.e. C.M. No. 31047/2019 was made by Respondent No. 2 (SBI) for the release of mortgaged property, in view of the SARFAESI proceedings with respect to the portion of the property sealed by the OL appointed in the instant case. 45. Since the matter stands transferred to NCLT, the prayers made by Manasvi Security Services would be considered by the NCLT after verification of all the necessary facts & circumstances of the case. So far as the applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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