TMI Blog2020 (11) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies (Transfer of Pending Proceedings) Rules 2016, fix the stage of service of notice under Rule 26 of the Companies (Court) Rules, 1959, as the stage at which a winding up proceeding can be transferred. This is because the first proviso under Clause (c) of Subsection (1) of Section 434 enables the Central Government to prescribe the stage at which proceedings for winding up can be transferred and subsection (2) of section 434 confers rule making power on the Central Government. The right to invoke the 5th proviso is specifically conferred only upon the parties to the proceedings. Therefore, on a literal interpretation, such a right should be held to be confined only to the parties to the proceedings. Who are the parties to the winding up proceedings? - HELD THAT:- The Companies Act, 1956 does not define the expression party . The Companies (Court) Rules, 1959 also does not define the expression party . The Companies Act 2013 does not define the expression party . The Companies (Transfer of pending proceedings) Rules, 2016 also does not define the expression party . Even the IBC, 2016 does not define the expression party . Thus, the proceedings for winding up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent herein, but the 1st respondent failed to appear before the Company Court. 5. Therefore, by an order dated 08.01.2016 the Company Court ordered the admission of the Company Petition and also directed publication of the advertisement of the petition in accordance with Rule 24 of the Companies (Court) Rules, 1959. Pursuant to the said order, the 2nd respondent herein (petitioning creditor) effected a publication of the advertisement in the Official Gazette in Form No. 48 on 30.01.2016. Newspaper publications were also made, indicating the date of hearing of the Company Petition as 29.02.2016. 6. Thereafter, the Company Court passed an order dated 10.03.2016 directing the winding up of the 1st respondent Company on the ground that the Company has been unable to pay its debts and that it was just and equitable to wind up the 1st respondent Company. 7. By the aforesaid order dated 10.03.2016, the Company Court appointed the official liquidator attached to the High Court of Allahabad as the Liquidator and directed him to take over the assets and books of accounts of the Company. The order of winding up was also directed to be advertised in Form 53 in two newspapers, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e NCLT and (ii) at whose instance, such transfer could be ordered. Discussion 14. Though the Companies Act, 2013 (Act 18 of 2013) received the assent of the President on 29.08.2013 and it was published in the Gazette of India dated 30.08.2013 and corrected through corrigenda published on 01.01.2014, various provisions of the Act came into force on various dates. While some of the provisions came into force w.e.f. 12.09.2013, some other provisions came into force w.e.f. 01.04.2014. 15. Clauses (a) and (b) of Subsection (1) of Section 434 as well as Subsection (2) of Section 434 came into force w.e.f. 01.06.2016 vide S.O.1934 (E) dated 01.06.2016. Clause (c) of Subsection (1) of Section 434 came into force on 15.12.2016 vide S.O. 3677(E) dated 01.12.2016. 16. It may be noted here that Section 434 as it originally stood when the Companies Act, 2013 was enacted, was different from what it is today. Section 434 as it was incorporated originally in the Companies Act, 2013, was actually substituted by the Insolvency and Bankruptcy Code, 2016 (Act 31 of 2016), which came into force on 15.11.2016. 17. Section 434 as it stood originally in the Companies Act, 2013 (Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h such appeal or reference or inquiry stands abated under this clause may make a reference to the Tribunal under this Act within one hundred and eighty days from the commencement of this Act in accordance with the provisions of this Act: Provided further that no fees shall be payable for making such reference under this Act by a company whose appeal or reference or inquiry stands abated under this clause. (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 court, to the Tribunal under this section. [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) constituted under subsection (1) of section 10E of the Companies Act, 1956 (1 of 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ordinance, 2018, may file an application for transfer of such proceedings and the Court may by order transfer such proceedings to the Tribunal and the proceedings so transferred shall be dealt with by the Tribunal as an application for initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (31 of 2016).] (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.] 18. It is important to note that what is extracted in the right hand side column of the above Table includes, apart from what was substituted by Act 31 of 2016, a couple of amendments made to Section 434. Those amendments were made under: (i) The Companies (Removal of Difficulties) Fourth Order, 2016 published on 07.12.2016, which came into effect on 15.12.2016; (ii) The Companies (Removal of Difficulties) Order, 2017 published on 29.06.2017 which came into effect on the same date; and (iii) The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 namely 26 of 2018, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings pending before the High Courts, are classified by Section 434 into two categories namely: (a)Proceedings for voluntary winding up where notice of resolution by advertisement has been given under Section 485(1) of the Companies Act, 1956, but the company has not been dissolved before 01.04.2017; and (b) Other types of winding up proceedings. 24. The first of the above 2 categories of cases are covered by the fourth proviso under Clause (c) of Subsection (1) of Section 434, which states: 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 subsection (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 . Such cases of voluntary winding up covered by the above proviso shall continue to be dealt with by the High court. It is only (i) cases of voluntary winding up falling outside the scope of the 4th Proviso and (ii) other types of winding up proceedings, that can be transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 professional to the Tribunal upto 15th day of July, 2017, failing which the petition shall stand abated. Provided further that any party or parties to the petitions shall, after the 1st day of July, 2017, be eligible to file fresh applications 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. 31. Rule 6 of the aforesaid Rules deals with transfer of proceedings for winding up, on grounds other than inability to pay debts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, required under Rule 26 to be served along with the copy of the petition, should be in Form No.6, due to the mandate of Rule 27. 36. Due to the usage of the words was admitted in Form No.6, there was a confusion as to whether the service referred to in Rule 26, is of a preadmission notice or postadmission notice, in a winding up proceeding. Different High Courts took different views. Eventually, this Court settled the position in Forech India Ltd. vs. Edelweiss Assets Reconstruction Co. Ltd. 2019 (2) SCR 477 by holding that Rules 26 and 27 clearly refer to a preadmission scenario. 37. After so interpreting Rules 26 and 27 of the Companies (Court) Rules, 1959, this Court pointed out in Forech India Ltd. (supra) that when the Code was enacted, only winding up petitions where no notice under Rule 26 was served, were to be transferred to NCLT and treated as petitions under the Code . However, after Section 434 was substituted by a new provision under Act 31 of 2016 and the 5th proviso was inserted by Act 26 of 2018, the transfer of the winding up proceedings, even at the instance of the party or parties to the proceedings became permissible. This change of position was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simultaneously in a tabular column: Section 447 of 1956 Act Section 278 of 2013 Act Effect of winding up order. An order for winding up a company shall operate in favour of all the creditors and of all the contributories of the company as if it has been made on the joint petition of a creditor and of a contributory. Effect of winding up order. The order for the winding up of a company shall operate in favour of all the creditors and all contributories of the company as if it had been made out on the joint petition of creditors and contributories. Section 278 of the 2013 Act shows that any petition by a single creditor or contributory is actually treated as a joint petition of creditors and contributories, so that the order of winding up operates in favour of all the creditors and all the contributories. (ii) Under Section 454 (6) of the 1956 Act, any person stating himself in writing to be a creditor shall be entitled to inspect the statement of affairs submitted to the official liquidator. If the claim of such a person to be a creditor turns out to be untrue, such a person is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... method of deductive logic also. If any creditor is aggrieved by any decision of the official liquidator, he is entitled under the 1956 Act to challenge the same before the Company Court. Once he does that, he becomes a party to the proceeding, even by the plain language of the section. Instead of asking a party to adopt such a circuitous route and then take recourse to the 5th proviso to section 434(1)(c), it would be better to recognise the right of such a party to seek transfer directly. 45. As observed by this Court in Forech India Limited (supra), the object of IBC will be stultified if parallel proceedings are allowed to go on in different fora. If the Allahabad High Court is allowed to proceed with the winding up and NCLT is allowed to proceed with an enquiry into the application under Section 7 IBC, the entire object of IBC will be thrown to the winds. 46. Therefore, we are of the considered view that the petitionerherein will come within the definition of the expression party appearing in the 5th proviso to Clause (c) of Subsection (1) of Section 434 of the Companies Act, 2013 and that the petitioner is entitled to seek a transfer of the pending winding up proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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