ACTION ISPAT AND POWER PVT. LTD. versus SHYAM METALICS AND ENERGY LTD.

Citation: [2020] 13 S.C.R. 783 · Decided: 15-12-2020 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Dismissed

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Judgment (excerpt)

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ACTION ISPAT AND POWER PVT. LTD.
v.
SHYAM METALICS AND ENERGY LTD.
(Civil Appeal No. 4041 of 2020)
DECEMBER 15, 2020
[ROHINTON FALI NARIMAN, K.M. JOSEPH AND
KRISHNA MURARI, JJ.]
Companies Act, 2013: s.434(1)(c), fifth proviso; s.290 –
Transfer of winding up proceedings from Company Court to NCLT
– Permissibility of, at the stage of post admission of winding up
petition – Held: In a winding up proceeding where the petition has
not been served in terms of r.26 of the 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 the
NCLT to be resolved under the Code – Even post issue of notice
and pre admission, 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, s.290 of the 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 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 the NCLT to now be
decided in accordance with the provisions of the Code – In the
instant case, the concurrent finding of the Company Judge and the
Division Bench is that despite the fact that the liquidator has taken
possession and control of the registered office of the appellant
company and its factory premises and records and books, no
irreversible steps towards winding up of the appellant company have
otherwise taken place – This being so, Company Court correctly
[2020] 13 S.C.R. 783
783
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SUPREME COURT REPORTS
[2020] 13 S.C.R.
exercised discretion vested in it by the 5th proviso to s.434(1)(c)
and transferred the winding up petition to NCLT – Companies
(Transfer of Pending Proceedings) Rules, 2016 – Insolvency and
Bankruptcy Code, 2016 – s.7 – Company (Court) Rules, 1959 –
r.26.
Dismissing the appeals, the Court
HELD: 1. So far as transfer of winding up proceedings is
concerned, the Code began tentatively by leaving proceedings
relating to winding up of companies to be transferred to NCLT at
a stage as may be prescribed by the Central Government. This
was done by the Transfer Rules, 2016 which came into force with
effect from 15.12.2016. Rules 5 and 6 referred 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. 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, 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.
[Para 11][804-A-E]
*M/s Kaledonia Jute & Fibres Pvt. Ltd. v. M/s Axis
Nirman & Industries Ltd. & Ors., 2020 SCC OnLine
SC 943 – relied on
2. 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. Once a winding up order
is made, and a Company Liquidator is appointed, such liquidator
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is then to submit a report to the Tribunal under section 281. The
Tribunal is then to consider the aforesaid report and fix a time
limit within which the proceedings 

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