TMI Blog2021 (8) TMI 1413X X X X Extracts X X X X X X X X Extracts X X X X ..... hose proceedings which were at the stage of pre-service of notice of the winding up Petition stood compulsorily transferred to the NCLT. The result thereof 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. It is for this reason that the 5th proviso to Section 434 (1) (c) was introduced on the Statute book. After the insertion of the 5th proviso, even post admission of a winding up Petition and even after an order of the Court appointing an Official Liquidator to take over the assets of the Company sought to be wound up, the Company Court has the discretion to transfer such Petition to the NCLT. The only question that would arise is as to how this discretion is to be exercised in the facts and circumstances of a given case. As far as the exercise of discretion under the 5th proviso to section 434(1)(c) is concerned, it is found that this issue is no longer res integra. The Supreme Court in the case of Action Ispat and Power [ 2020 (12) TMI 535 - SUPREME COURT ] has clearly laid down as to how the discretion may be exercised - the Hon ble Supreme Court had clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is ordered that the above Company Petition is transferred to the NCLT, Mumbai. The NCLT, Mumbai is directed to treat the above Petition as an application for initiation of the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016. In order to enable the NCLT, Mumbai to initiate the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016, the order of admission of the above Petition is recalled/revoked - application disposed off. - B. P. COLABAWALLA,J. Mr. Karl Tamboly a/w Vinod Kothari, Sonal Sanap i/b. M/s. Apex Law Partners, for the Petitioner. Mr. Karl Shroff a/w Sheetal Prakash i/b. Kunal Chheda for the Respondent (Sunil Kotecha-Director / Applicant). Mr. Rashmin Khandekar, Karishni Khanna i/b. Amit Tungare, Jill Rodricks, for the Applicant in IA(L)/5444/2020. Mr. Girish Godbole a/w Shivani Samel i/b. Aditya P. Shirke, for the Applicant in IA(L)/7730/2020. Mr. Janak Dwarkadas, Senior Advocate a/w Chirag Kamdar i/b. Nikhil Kulkarni, for Chandrakant Baliram Sonawane. Mr. Aditya Pimple a/w Mahendhar Aithe, for the Official Liquidator. P. C.: 1. Interim Application Lodg No.13530 of 2021 is filed by the Applicant - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present application is filed seeking a transfer of the above Company Petition to the NCLT. 4. In this factual backdrop, Mr. Shroff, the learned counsel appearing on behalf of the Applicant - Company (Original Respondent Company), submitted that it is a well settled position in law that an application for transfer of the Company Petition can be made even by the Company that is being wound up. It is at the discretion of this Court to grant or refuse the same. Mr. Shroff submitted that on a consideration of the law as applicable, the Applicant - Company has now considered its position and decided that it would prefer filing the present transfer application having regard to inter alia (a) the law permitting the transfer of pending winding up Petitions to the NCLT; (b) the remedy available to the Petitioner in the NCLT not being in any way barred or hindered; (c) the Applicant - Company s bonafide defense; and (d) keeping in mind the objective of the Insolvency and Bankruptcy Code, 2016 (for short the IBC ), which is to try to restructure the Applicant - Company rather than to wind it up. 5. Mr. Shroff submitted that the primary focus of the IBC is to ensure the revival and continua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been served in terms of Rule 26 of the Companies (Court) Rules, 1959 (at a pre-admission stage), such winding up proceedings are compulsorily transferable to the NCLT and are to be resolved under the provisions of the Code. Even post the issuance of a notice (under Rule 26) and pre-admission of a Company Petition, the same result would ensue. However, post admission of a winding up Petition and/or after the assets of a company sought to be wound up become custodia-legis and are taken over by the Official Liquidator, and nothing irreversible is done which would warrant the Company Court staying its hands on a transfer application, the same ought to be transferred to the NCLT. It is only in cases where winding up proceedings having reached an irreversible stage and making it impossible to set the clock back, that the Company Court must proceed with the winding up of the Company, instead of transferring the proceedings to the NCLT. He submitted that given the objective sought to be achieved by the IBC, in the absence of an irresistible conclusion that corporate death is inevitable, every effort ought to be made to resuscitate the Corporate Debtor keeping in mind the larger public inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheets from the year 2014 onwards that the Applicant - Company (Original Respondent) has clearly admitted the debts due to the Original Petitioner. In order to dodge the liability owed to the Petitioner and avoid an order of winding up that the present application is filed, was the submission of Mr. Tamboly. 11. Mr. Tamboly then pointed out the conduct of the Applicant - Company to contend that the present application ought to be dismissed. Mr. Tamboly submitted that the Petitioner made supplies to the Applicant - Company under a work order dated 15th January, 2014. The Petitioner also raised invoices thereunder aggregating to approximately Rs. 22 Crores. Out of this entire amount (of Rs.22 crores), between the period May 2014 and September 2015, the Applicant - Company paid a sum of approximately Rs. 6 Crores to the Petitioner leaving a principal balance sum of approximately Rs. 15.98 Crores. In fact, certain cheques were also issued between August 2014 and May 2015 which were dishonoured. He further submitted that the balance-sheet of the Applicant - Company as on 31st March, 2015 disclosed the Petitioner as a creditor of the Applicant - Company for a sum of Rs. 13.09 Cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no money in the bank account of the Applicant - Company. This Court, therefore, noted that the Applicant - Company and its Director were trying to play a fraud upon the Court and/or the Petitioner which lead to the final winding up order being passed on 7th August, 2019. 14. Mr. Tamboly then submitted that this order of winding up was challenged by the Applicant Company by filing Appeal No. 13 of 2020. This Appeal was heard on several occasions and the Applicant Company (the Appellant) sought to file an application stating that they have now got a Demand Draft in the sum of Rs. 1.45 Crores issued in the name of the Prothonotary and Senior Master. Mr. Tamboly stated that upon receiving a copy of the same, the Petitioner made enquiries and found that the Demand Draft which the Applicant Company (the Appellant) was trying to pass off as in their custody was in fact issued by one of their Contractors and the same had not yet been released by him and would not be released unless the Applicant Company (the Appellant) cleared the dues of the said contractor. When this was pointed out to the Appeal Court, it called upon the Applicant Company (the Appellant) to produce the origina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appeal Court to have the Petition heard finally by the Company Judge. That was the very basis on which the Appeal was disposed of and the matter was remanded. At that stage, had the Appellant disclosed any intention of getting the matter transferred to the NCLT, then, the Petitioner would not have consented to the remand and would have pressed for the Appeal to be dismissed, both on merits and in view of the dishonest conduct of the Applicant - Company (the Appellants before the Appeal Court). He submitted that the present application makes a mockery of the order passed by the Appeal Court and is yet another attempt by the Applicant Company to play fast and loose with the Court. Mr. Tamboly submitted that having consented to proceed with the final hearing of the Company Petition, the Applicant - Company is now precluded from moving the present application for transfer. 17. Apart from the conduct of the Applicant - Company, Mr. Tamboly submitted that even otherwise, in the facts of the present case, this Court ought not to exercise its discretion in favour of the Applicant - Company as irreversible events have occurred as contemplated in the judgment of the Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tamboly, is inevitable in view of the several admissions made by the Applicant - Company. 19. Mr. Tamboly submitted that there is yet another reason as to why the matter ought not to be transferred to the NCLT. He submitted that Section 43 of the IBC deals with preferential transactions and stipulates that where the liquidator or the resolution professional, as the case may be, is of the opinion that the corporate debtor, has at the relevant time, given a preference in such transactions and in such manner as laid down in sub-section (2), to any persons as referred to in sub-section (4), he shall apply to the Adjudicating Authority for avoidance of the said preferential transactions and for, one or more of the orders referred to in Section 44. He submitted that if preference is given to a related party, during the period of two years preceding the insolvency commencement date, or given to a person other than a related party during the period of one year preceding the insolvency commencement date, the Liquidator or the resolution professional, as the case may be, can make an application to avoid such a transaction/s. He submitted that in the facts of the present case, if the matter i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ...... (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.... Provided that.... Provided that.... Provided that.... Provided further that any party or parties to any proceedings relating to the winding up of companies pending before the 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 Bankruptcy Code, 2016 (31 of 2016). 22. As can be seen from the aforesaid proviso, any party or parties to any proceedings relating to the winding up of companies pending before any Court imme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , with the Tribunal retaining the power to control the proceedings in a winding-up petition even after it is admitted. Thus, in a winding-up proceeding where the petition has not been served in terms of Rule 26 of the Companies (Court) Rules, 1959 at a pre-admission stage, given the beneficial result of the application of the Code, such winding-up proceeding is compulsorily transferable to NCLT to be resolved under the Code. Even post issue of notice and preadmission, the same result would ensue. However, post admission of a winding-up petition and after the assets of the company sought to be wound up become in custodia legis and are taken over by the Company Liquidator, Section 290 of the Companies Act, 2013 would indicate that the Company Liquidator may carry on the business of the company, so far as may be necessary, for the beneficial winding up of the company, and may even sell the company as a going concern. So long as no actual sales of the immovable or movable properties have taken place, nothing irreversible is done which would warrant a Company Court staying its hands on a transfer application made to it by a creditor or any party to the proceedings. It is only where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teels (supra). The Supreme Court, after considering its decision in Action Ispat (as well as other decisions), inter alia held as under: - 24. In Action Ispat [Action Ispat Power (P) Ltd. v. Shyam Metalics Energy Ltd., (2021) 2 SCC 641] , this Court was faced with a proceeding in which a winding-up petition had been admitted by the High Court and then transferred to NCLT to be tried as a proceeding under the IBC. After referring to the judgments in Jaipur Metals [Employees Organization v. Jaipur Metals Electricals Ltd., (2019) 4 SCC 227] , Forech [Forech (India) Ltd. v. Edelweiss Assets Reconstruction Co. Ltd., (2019) 18 SCC 549 : (2020) 4 SCC (Civ) 286] , and Kaledonia [Kaledonia Jute Fibres (P) Ltd. v. Axis Nirman Industries Ltd., (2021) 2 SCC 403] , and after setting out various sections dealing with winding up of companies under the Companies Act, 2013, this Court then held : (Action Ispat case [Action Ispat Power (P) Ltd. v. Shyam Metalics Energy Ltd., (2021) 2 SCC 641] , SCC pp. 659 663-64, paras 14 and 25) 14. What becomes clear upon a reading of the three judgments of this Court is the following: 14.1. So far as transfer of winding-up proceedings is concerned, the Code bega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell the company as a going concern. So long as no actual sales of the immovable or movable properties have taken place, nothing irreversible is done which would warrant a Company Court staying its hands on a transfer application made to it by a creditor or any party to the proceedings. It is only where the winding-up proceedings have reached a stage where it would be irreversible, making it impossible to set the clock back that the Company Court must proceed with the winding up, instead of transferring the proceedings to NCLT to now be decided in accordance with the provisions of the Code. Whether this stage is reached would depend upon the facts and circumstances of each case. 25. A conspectus of the aforesaid authorities would show that a petition either under Section 7 or Section 9 IBC is an independent proceeding which is unaffected by winding-up proceedings that may be filed qua the same company. Given the object sought to be achieved by the IBC, it is clear that only where a company in winding up is near corporate death that no transfer of the winding-up proceeding would then take place to NCLT to be tried as a proceeding under the IBC. Short of an irresistible conclusion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am Metalics Energy Ltd., (2021) 2 SCC 641]. 27. Applying the test laid down by the Supreme Court in the aforesaid decisions, I have to now see whether any irreversible event has taken place which would warrant me to stay my hands and not transfer the above Company Petition to the NCLT. At the outset, and before I proceed further, I would like to mention that from the facts narrated above, the conduct of the Applicant - Company, through its Ex-Director-Mr. Sunil Kotecha, is reprehensible, to say the least. Their conduct has been recorded in several orders passed by this Court. I also find that the Applicant Company has clearly admitted its liability (at least to the extent of Rs.9.6 crores) as recorded by this Court in its order dated 18th September, 2018. 28. Be that as it may, and dehors the conduct of the Applicant Company, I have to decide whether or not the above Company Petition should be transferred to the NCLT in order to give the Applicant Company one last opportunity to be revived. In the facts of the present case, I am unable to agree with Mr. Tamboly that simply because the Applicant - Company entered into certain transactions after the presentation of the winding up pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not think that these contentions would in any way hinder this Court from transferring the above Company Petition to the NCLT. 29. In view of the foregoing discussion, Interim Application Lodg No.13530 of 2021 is allowed and it is ordered that the above Company Petition, namely Company Petition No. 708 of 2016 is transferred to the NCLT, Mumbai. The NCLT, Mumbai is directed to treat the above Petition as an application for initiation of the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016. In order to enable the NCLT, Mumbai to initiate the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016, the order of admission of the above Petition is recalled/revoked. 30. I must mention that the Division Bench of this Court, whilst remanding the above Company Petition to the learned single Judge for hearing and final disposal (by its order dated 7th May, 2021), had passed certain protective directions. In my opinion, those will have to be continued. It is accordingly directed that subject to any order passed by the NCLT, Mumbai:- (i) The Applicant - Company / its Directors shall not sell, alienate, encumber, part with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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