The Hon’ble High Court of Bombay on an interim application under 5th proviso to Section 434(1)(c) held that it is only where the winding up proceedings have reached the 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.
The Hon’ble High Court relied on Hon’ble Supreme Court’s decision in Navinchandra Steels Private Limited v. SREI Euipment Finance Ltd. & Others (Civil Appeal Nos.4230-4234 of 2020) wherein the Hon'ble Supreme Court had observed that as long as nothing irreversible is done which would warrant a Company Court staying its hand on a transfer application made to it by a creditor or any other party to the proceeding, the Company Court can go ahead and transfer the said proceedings to the NCLT. The Hon’ble High Court took note that the power to transfer the pending petitions, even after an order of winding up under Section 434 of the Companies Act is a discretionary power and that the High Court may exercise the same, if deemed appropriate.
Relying on the above decision the Hon’ble High Court opined that 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 Court further stated that the question that arises before us in this case is how is such discretion to be exercised?
Therefore, the Hon’ble High Court, on factual Consideration that no notice inviting claims of creditors/workers etc. under Rule 148 of the Companies (Court) Rules, 1959 has been published, and no steps have been taken by the Official Liquidator which can be said to be irreversible, such that the winding up proceedings have to be proceeded with by this Court, transferred company petition to the Hon'ble National Company Law Tribunal and directed the same to be treated as an application for initiation of the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016.
The Hon’ble High Court thus concluded that it is only where the winding up proceedings have reached the 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 be decided in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016.
ICICI Bank Ltd. v. Classic Diamonds (India) Ltd.
[2024] 162 taxmann.com 427 (Bombay)
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