M/S KALEDONIA JUTE AND FIBRES PVT. LTD. versus M/S AXIS NIRMAN AND INDUSTRIES LTD. & ORS.

Citation: [2020] 11 S.C.R. 800 · Decided: 19-11-2020 · Supreme Court of India · Bench: S.A. BOBDE, A.S. BOPANNA, V. RAMASUBRAMANIAN · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2020] 11 S.C.R.
M/S KALEDONIA JUTE AND FIBRES PVT. LTD.
v.
M/S AXIS NIRMAN AND INDUSTRIES LTD. & ORS.
(Civil Appeal No. 3735 of 2020)
NOVEMBER 19, 2020
[S. A. BOBDE, CJI, A. S. BOPANNA AND
V. RAMASUBRAMANIAN, JJ.]
Companies (Transfer of Pending Proceedings) Rules 2016:
rr.5 and 6 – Application seeking transfer of the winding up petition
pending before High Court to the National Company Law Tribunal
(NCLT) – Refusal by Company Court (High Court) – Correctness
of – Second respondent filed a company petition against the first
respondent for winding up on the ground that first respondent was
not able to pay its debts – Winding up order – Thereafter first
respondent sought for recalling the order of winding up and in
order to prove bonafides paid the entire amount due to the petitioning
creditor (second respondent) – Petitioning creditor had no objection
to recall the order – But the official liquidator opposed to recall the
order on the ground that the first respondent owed money to various
other creditors to the tune of Rs.27 Crores and that unless the said
amount was paid, the order of winding up could not be recalled –
The Official Liquidator also submitted that he had already taken
over charge of the assets of the Company – Company Court passed
an order keeping the winding up in abeyance, however, directed
the Official Liquidator to continue to be in custody of the assets of
the Company – Appellant claiming to be a creditor of the first
respondent moved an application before the NCLT under s.7 of the
IBC, 2016 on the ground that the first respondent was due and
liable to pay a sum of Rs.32 lakhs and that it failed to pay despite
repeated demands – Thereafter, the appellant moved an application
before the Company Court seeking transfer of the winding up petition
to the NCLT – Company Court refused transfer on the sole ground
that the requirement of r.24 had already been complied with and
that a winding up order had already been passed – Instant appeal
filed by appellant-financial creditor – The main issues that arose
for consideration were: (i) what are the circumstances under which
a winding up proceeding pending on the file of a High Court could
[2020] 11 S.C.R. 800
800
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be transferred to the NCLT and (ii) at whose instance, such transfer
could be ordered – Held: If the winding up petition has already
been served on the respondent in terms of r.26 of the 1959 Rules,
the proceedings are not liable to be transferred – But if service of
the winding up petition on the respondent in terms of r.26 had not
been completed, such winding up proceedings, whether they are
under Clause (c) of s.433 or under Clauses (a) and (f) of s.433,
shall peremptorily be transferred to the NCLT – In other words, rr.5
and 6 of the Companies (Transfer of Pending Proceedings) Rules
2016, fix the stage of service of notice under r.26, as the stage at
which a winding up proceeding can be transferred – This is because
the first proviso under Clause (c) of Sub-section (1) of s.434 enables
the Central Government to prescribe the stage at which proceedings
for winding up can be transferred and sub-section (2) of s.434
confers rule making power on the Central Government – As regards
the second question as to who are the parties to the winding up
proceedings, 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 – The word “party” appearing in the fifth proviso
to Clause (c) of Sub-section (1) of s.434 cannot be construed to
mean only the single petitioning creditor or the company or the
official liquidator and would take within its fold any creditor of the
company in liquidation – Therefore, appellant will come within the
definition of the expression “party” appearing in the 5th proviso to
Clause (c) of Sub-section (1) of s.434 of the Companies Act, 2013
and that the petitioner is entitled to seek a transfer of the pending
winding up proceedings against the first respondent, to the NCLT –
Thus, proceedings for winding up pending before the Company
Court against the first respondent is ordered to be transferred to
the NCLT, to be taken up along with the application of the appellant
under s.7 of the IBC – Co

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