TMI Blog2020 (12) TMI 535X X X X Extracts X X X X X X X X Extracts X X X X ..... UPREME COURT] , is not restricted to any particular stage of a winding up proceeding - Therefore, what follows as a matter of law is that even post admission of a winding up petition, and after the appointment of a Company Liquidator to take over the assets of a company sought to be wound up, discretion is vested in the Company Court to transfer such petition to the NCLT. The question that arises before us in this case is how is such discretion to be exercised? The Companies Act, 2013 deals with winding up of companies in a separate chapter, being Chapter XX. When a petition to wind up a company is presented before the Tribunal, the Tribunal is given the power under Section 273 to dismiss it; to make any interim order as it thinks fit; to appoint a provisional liquidator of the company till the making of a winding up order; to make an order for the winding up of the company; or to pass any other order as it thinks fit [section 273(1)] - The Companies Act, 2013 deals with winding up of companies in a separate chapter, being Chapter XX. When a petition to wind up a company is presented before the Tribunal, the Tribunal is given the power under Section 273 to dismiss it; to make an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 OF 2020 (ARISING OUT OF SLP (CIVIL) NO.26415 OF 2019) , CIVIL APPEAL Nos. 4042-4043 OF 2020 (ARISING OUT OF SLP (CIVIL) NOS.2033-2034 OF 2020) - - - Dated:- 15-12-2020 - JUSTICE ROHINTON FALI NARIMAN, JUSTICE K.M. JOSEPH And JUSTICE KRISHNA MURARI For the Petitioner : Mr. Sidharth Luthra, Sr. Adv. Ms. Garima Bajaj, AOR Ms. Varsha Banerjee, Adv. Mr. Sumeer Sodhi, AOR Mr. Arjun Nanda, Adv. For the Respondent : Ms. Abhishek Singh, Adv. Mr. J Amal Anand, Adv. Ms. Aayushi Mishra, Adv. Mr. Sarvesh Singh, AOR Mr. Anuj Berry, Adv. Ms. Misha, Adv.Mr. Siddhant Kant, Adv. Ms. Anusha Ramesh, Adv. Ms. Prabh Simran Kaur, Adv. Mr. S. S. Shroff, AOR Mr. Anil Kumar Sangal, AOR Mr. Ashok Mathur, AOR JUDGMENT R.F. Nariman, J.s 1. Leave granted. 2. These appeals arise out of a judgment of the Division Bench of the Delhi High Court dated 10.10.2019 by which a Single Judge s order dated 14.01.2019 transferring a winding up proceeding pending before the High Court to the National Company Law Tribunal [ NCLT ] was upheld. The brief facts necessary to appreciate the controversy involved in these appeals are as follows: 2.1. A winding up petition under sections 433(e) and (f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets of the respondent- company when the same are taken over; and the premises in which they are kept shall be sealed by him. At the same time, he may also seek the assistance of a valuer to value all assets to facilitate the process of winding up. It will also be open to the Official Liquidator to seek police help in the discharge of his duties, if he considers it appropriate to do so. The Official Liquidator to take all further steps that may be necessary in this regard to protect the premises and assets of the respondent- company. 6. List on 09.01.2019. 7. A copy of this order be given dasti under the signatures of the court master. 2.2. An application was then filed before the learned Company Judge by the State Bank of India [ SBI ] (Respondent No. 2 herein), being a secured creditor of the appellant company, seeking transfer of the winding up petition to the NCLT in view of the fact that SBI had filed an application under section 7 of the Insolvency and Bankruptcy Code, 2016 [ Code ] which was pending before the NCLT. By order dated 14.01.2019, the learned Company Judge transferred the winding up petition as prayed for as follows: ORDER 14.01.2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w it to be filed within a further period not exceeding sixty days; and (c) all proceedings under the Companies Act, 1956 (1 of 1956), including proceedings relating to arbitration, compromise, arrangements and 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 any party or parties to any proceedings relating to the winding up of companies pending before any Court immediately before the commencement of the Insolvency and Bankruptcy Code (Amendment) 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 Bankru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince the liquidation was at its initial stage and the learned Company Judge was fully competent to do so. After the passing of the winding up order, the OL had not proceeded to take any effective or irreversible steps towards liquidation of the assets of the appellant company. All that he appears to have done is to take possession and control of the registered office of the appellant company and its factory premises and its records and books. 42. Pertinently, the respondent No. 2 has already initiated proceedings before the NCLT in respect of the appellant company which, in any event, would continue. The continuation of the liquidation proceedings at the hands of the OL in terms of the order passed by this Court would be incongruous with the proceedings that the NCLT has undertaken and would undertake under the IBC. Continuation of two parallel proceedings one before the Company Court for liquidation, and the other before the 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 tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding up. Even post admission, according to the learned Attorney General, if no irreversible steps have been taken, then a combined reading of the 5th proviso to section 434(1)(c) and section 238 of the Code would lead to the result that the winding up proceeding be transferred to the NCLT, as not only is the Code a special enactment with a non-obstante clause which would, in cases of conflict, do away with the Companies Act, 2013, but also that, given the judgment of this Court in Swiss Ribbons Pvt. Ltd. Anr. v. Union of India Ors., (2019) 4 SCC 17 [ Swiss Ribbons ], winding up is a last resort after all efforts to revive a company fail. According to him, the discretion exercised by the Company Court and the Division Bench has been judiciously and correctly exercised, warranting no interference at our hands. 5. In Swiss Ribbons (supra), this Court had occasion to deal with the raison d tre for the enactment of the Code. The judgment of this Court referred to the Statement of Objects and Reasons for the Code as follows: 25. The Statement of Objects and Reasons for the Code have been referred to in Innoventive Industries [Innoventive Industries Ltd. v. ICICI Bank, (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ects. The Code also seeks to provide for establishment of the Insolvency and Bankruptcy Board of India (Board) for regulation of insolvency professionals, insolvency professional agencies and information utilities. Till the Board is established, the Central Government shall exercise all powers of the Board or designate any financial sector regulator to exercise the powers and functions of the Board. Insolvency professionals will assist in completion of insolvency resolution, liquidation and bankruptcy proceedings envisaged in the Code. Information Utilities would collect, collate, authenticate and disseminate financial information to facilitate such proceedings. The Code also proposes to establish a fund to be called the Insolvency and Bankruptcy Fund of India for the purposes specified in the Code. 4. The Code seeks to provide for amendments in the Indian Partnership Act, 1932, the Central Excise Act, 1944, Customs Act, 1962, the Income Tax Act, 1961, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Finance Act, 1994, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Sick Industrial Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor's assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends. Having so held, the Court ended stating: Epilogue 120. The Insolvency Code is a legislation which deals with economic matters and, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s gone up from a total of INR 14,530.47 crores in 2016-2017, to INR 18,469.25 crores in 2017-2018, and to INR 18,798.20 crores in the first six months of 2018-2019. These figures show that the experiment conducted in enacting the Code is proving to be largely successful. The defaulter's paradise is lost. In its place, the economy's rightful position has been regained. The result is that all the petitions will now be disposed of in terms of this judgment. There will be no order as to costs. 6. Viewed in this backdrop, let us now examine some of the judgments of this Court dealing with transfer of winding up petitions from the Company Court to be tried by the NCLT under the Code. 7. Section 255 of the Code reads as follows: 255. Amendments of Act 18 of 2013.-The Companies Act, 2013 shall be amended in the manner specified in the Eleventh Schedule. In pursuance of this section, the Eleventh Schedule to the Code made various amendments to the Companies Act, 2013. They have been set out in detail in Jaipur Metals (supra) in paragraphs 10 and 11. Suffice it to say that the first step to transferring winding up proceedings to the NCLT was taken by the Companies ( ..... 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 29-6-2017 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 amendment to Section 434(1)(c), with effect from 17-8- 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 NCLT. The proceedings so transferred would then be dealt with by NCLT as an application for initiation of the corporate insolvency resolution process under the Code. It is thus clear that under the scheme of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 [Jaipur Metals and Electricals Ltd., In re, 2018 SCC OnLine Raj 1472]. 9. In Forech (supra), this Court, after setting out the aforesaid Rules and the 5th proviso to section 434(1)(c), then held: 16. We are of the view that Rules 26 and 27 clearly refer to a pre-admission scenario as is clear from a plain reading of Rules 26 and 27, which make it clear that the notice contained in Form No. 6 has to be served in not less than 14 days before the date of hearing. Hence, the expression was admitted in Form No. 6 only means that notice has been issued in the winding up petition which is then fixed for hearing before the Company Judge on a certain day. Thus, the Madras High Court view is plainly incorrect whereas the Bombay High Court view is correct in law. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he NCLT, which can then be treated as a proceeding under Section 9 of the Code. 10. In Kaledonia (supra), the question which arose before the Court arose after a winding up order had been passed, but which had been kept in abeyance by the Company Court. The vexed question before the Court was whether the expression any person could apply for transfer contained in paragraph 17 of the judgment of this Court in Forech (supra) would refer to persons who are not parties to the proceeding. This Court, after setting out section 278 of the Companies Act, 2013, then held: 44. Thus, the proceedings for winding up of a company are actually proceedings in rem to which the entire body of creditors is a party. The proceeding might have been initiated by one or more creditors, but by a deeming fiction the petition is treated as a joint petition. The official liquidator acts for and on behalf of the entire body of creditors. Therefore, the word party appearing in the 5th proviso to Clause (c) of Sub-section (1) of section 434 cannot be construed to mean only the single petitioning creditor or the company or the official liquidator. The words party or parties appearing in the 5th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to three types of proceedings. Only those proceedings which are at the stage of pre-service of notice of the winding up petition stand compulsorily transferred to the NCLT. (iii) The result therefore was that post notice and pre admission of winding up petitions, parallel proceedings would continue under both statutes, leading to a most unsatisfactory state of affairs. This led to the introduction of the 5th proviso to section 434(1)(c) which, as has been correctly pointed out in Kaledonia (supra), is not restricted to any particular stage of a winding up proceeding. (iv) Therefore, what follows as a matter of law is that even post admission of a winding up petition, and after the appointment of a Company Liquidator to take over the assets of a company sought to be wound up, discretion is vested in the Company Court to transfer such petition to the NCLT. The question that arises before us in this case is how is such discretion to be exercised? 12. The Companies Act, 2013 deals with winding up of companies in a separate chapter, being Chapter XX. When a petition to wind up a company is presented before the Tribunal, the Tribunal is given the power under Section 273 to dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r value and the dates on which they were given; (d) the debts due to the company and the names, addresses and occupations of the persons from whom they are due and the amount likely to be realised on account thereof; (e) guarantees, if any, extended by the company; (f) list of contributories and dues, if any, payable by them and details of any unpaid call; (g) details of trademarks and intellectual properties, if any, owned by the company; (h) details of subsisting contracts, joint ventures and collaborations, if any; (i) details of holding and subsidiary companies, if any; (j) details of legal cases filed by or against the company; and (k) any other information which the Tribunal may direct or the Company Liquidator may consider necessary to include. (2) The Company Liquidator shall include in his report the manner in which the company was promoted or formed and whether in his opinion any fraud has been committed by any person in its promotion or formation or by any officer of the company in relation to the company since the formation thereof and any other matters which, in his opinion, it is desirable to bring to the notice of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty and actionable claims of the company 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; (d) to sell the whole of the undertaking of the company as a going concern; (e) to raise any money required on the security of the assets of the company; (f) to institute or defend any suit, prosecution or other legal proceeding, civil or criminal, in the name and on behalf of the company; (g) to invite and settle claim of creditors, employees or any other claimant and distribute sale proceeds in accordance with priorities established under this Act; (h) to inspect the records and returns of the company on the files of the Registrar or any other authority; (i) to prove rank and claim in the insolvency of any contributory for any balance against his estate, and to receive dividends in the insolvency, in respect of that balance, as a separate debt due from the insolvent, and rateably with the other separate creditors; (j) to draw, accept, make and endorse any negotiable instruments including cheque, bill of exchange, hundi or promissory note in the name and on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company have been completely wound up, the Company Liquidator shall make an application to the Tribunal for dissolution of such company. (2) The Tribunal shall on an application filed by the Company Liquidator under sub-section (1) or when the Tribunal is of the opinion that it is just and reasonable in the circumstances of the case that an order for the dissolution of the company should be made, make an order that the company be dissolved from the date of the order, and the company shall be dissolved accordingly. (3) The Tribunal shall, within a period of thirty days from the date of the order,- (a) forward a copy of the order to the Registrar who shall record in the register relating to the company a minute of the dissolution of the company; and (b) direct the Company Liquidator to forward a copy of the order to the Registrar who shall record in the register relating to the company a minute of the dissolution of the company. 21. Where a company has been dissolved, such dissolution may be set aside within a period of two years from the date of such dissolution under section 356 of the Companies Act, 2013. 22. Given the aforesaid scheme of winding up ..... X X X X Extracts X X X X X X X X Extracts X X X X
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