LexJAIPUR METALS & ELECTRICALS EMPLOYEES ORGANIZATION THROUGH GENERAL SECRETARY MR. TEJ RAM MEENA versus JAIPUR METALS & ELECTRICALS LTD. THROUGH ITS MANAGING DIRECTOR & ORS.
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A B C D E F G H 926 SUPREME COURT REPORTS [2018] 14 S.C.R. JAIPUR METALS & ELECTRICALS EMPLOYEES ORGANIZATION THROUGH GENERAL SECRETARY MR. TEJ RAM MEENA v. JAIPUR METALS & ELECTRICALS LTD. THROUGH ITS MANAGING DIRECTOR & ORS. (Civil Appeal No. 12023 of 2018) DECEMBER 12, 2018 [R. F. NARIMAN AND M. R. SHAH, JJ.] Insolvency and Bankruptcy Code, 2016 – ss.7, 238 – Respondent No.1-company became a non-performing asset – Board for Industrial and Financial Reconstruction (BIFR) was of prima facie opinion that the company ought to be wound up and same was forwarded to the High Court – High Court registered the case as a Company Petition – Respondent No.3 acquired financial debts of Respondent No.1 – After some time, respondent no.3 filed application u/s.7 of the Code before the National Company Law Tribunal (NCLT) stating that it had an assigned debt owed to it by the respondent No.1 – NCLT by order dated 13.04.2018 referred to the non-obstante clause contained in s.238 of the Code and held that it was satisfied that the conditions of s.7 had been fulfilled and therefore, admitted the application – High Court in company petition and other connected matters refused to transfer the winding up proceedings pending before it, and set aside the NCLT order dated 13.04.2018, stating that it had been passed without jurisdiction – Propriety of – Held: Though s.434 of the Companies Act, 2013, which relates to transfer of certain proceedings, was substituted by the Eleventh Schedule of the Code, yet Section 434, as substituted, appears only in the Companies Act, 2013 and is part and parcel of that Act – This being so, if there is any inconsistency between s.434 as substituted and the provisions of the Code, the latter must prevail – NCLT was absolutely correct in applying s.238 of the Code to an independent proceeding instituted by a secured financial creditor, namely, respondent no.3 – High Court was not right in stating that the proceedings before the NCLT were without jurisdiction – Proceedings before NCLT to be continued from the stage at which they had been left off – On this score, therefore, the High Court judgment set aside – Furthermore, the company petition pending [2018] 14 S.C.R. 926 926 A B C D E F G H 927 before the High Court cannot be proceeded with in view of s.238 of the Code – Thus, other connected matters that are pending before the High Court disposed of in light of the fact that proceedings under the Code, 2016 must run their entire course – Companies Act, 2013 – s.434 (as amended w.e.f 17.08.2018) – Sick Industrial Companies (Special Provisions) Act, 1985 – s.20 – Companies (Transfer of Pending Proceedings) Rules, 2016 – rr. 5(2) and 6. Allowing the appeal, the Court HELD: 1. It is clear that under Section 434 of the Companies Act, 2013 as substituted by the Eleventh Schedule to the Insolvency and Bankruptcy Code, 2016 vide notification dated 15.11.2016, all proceedings under the Act, which relate to winding up of companies and which are pending immediately before such date as may be notified by the Central Government in this behalf shall stand transferred to the NCLT. The stage at which such proceedings are to be transferred to the NCLT is such as may be prescribed by the Central Government. [Para 12][938-C-D] 2. When Rules 5 and 6 of the 2016 Transfer Rules (un- amended) are read, it is clear that three types of proceedings are referred to. Under Rule 5(1), petitions which relate to winding up under clause (e) of Section 433 of the Companies Act, 1956 on the ground of inability to pay debts that are pending before the High Court are to be transferred to the NCLT in case the petition has not been served on the respondent. They shall then be treated as applications under Sections 7, 8, or 9 of the Code and dealt with in accordance with Part II of the Code. Similarly, all petitions filed under clauses (a) and (f) of Section 433 of the Companies Act, 1956 pending before the High Court, in which the petition has not been served on the respondents, shall be transferred to the NCLT. Only such petitions will continue to be treated as petitions under the provisions of the Companies Act, 2013. The third category of cases dealt with by Rules 5 and 6 is contained in Rule 5(2). This category relates to cases where the BIFR has forwarded an opinion to the High Court to wind up a company under Section 20 of the SIC Act. All such cases, whatever be the stage, shall continue to be dealt with by
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