ACTION ISPAT AND POWER PVT. LTD. versus SHYAM METALICS AND ENERGY LTD. on 15 December 2020

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 ANDKRISHNA 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 uppetition – Held: In a winding up proceeding where the petition hasnot been served in terms of r.26 of the Rules, 1959 at a pre-admissionstage, given the beneficial result of the application of the Code,such winding up proceeding is compulsorily transferable to theNCLT to be resolved under the Code – Even post issue of noticeand pre admission, the same result would ensue – However, postadmission of a winding up petition and after the assets of thecompany sought to be wound up become in custodia legis and aretaken over by the Company Liquidator, s.290 of the Act, 2013 wouldindicate that the Company Liquidator may carry on the business ofthe company, so far as may be necessary, for the beneficial windingup of the company, and may even sell the company as a goingconcern – So long as no actual sales of the immovable or movableproperties have taken place, nothing irreversible is done whichwould warrant a Company Court staying its hands on a transferapplication made to it by a creditor or any party to the proceedings– It is only where the winding up proceedings have reached a stagewhere it would be irreversible, making it impossible to set the clockback that the Company Court must proceed with the winding up,instead of transferring the proceedings to the NCLT to now bedecided in accordance with the provisions of the Code – In theinstant case, the concurrent finding of the Company Judge and theDivision Bench is that despite the fact that the liquidator has takenpossession and control of the registered office of the appellantcompany and its factory premises and records and books, noirreversible steps towards winding up of the appellant company haveotherwise taken place – This being so, Company Court correctly A

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Aexercised 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 andBankruptcy Code, 2016 – s.7 – Company (Court) Rules, 1959 –r.26.

BDismissing the appeals, the Court

HELD: 1. So far as transfer of winding up proceedings isconcerned, the Code began tentatively by leaving proceedingsrelating to winding up of companies to be transferred to NCLT ata stage as may be prescribed by the Central Government. ThisCwas done by the Transfer Rules, 2016 which came into force witheffect from 15.12.2016. Rules 5 and 6 referred to three types ofproceedings. Only those proceedings which are at the stage ofpre-service of notice of the winding up petition stand compulsorilytransferred to the NCLT. The result therefore was that post noticeand pre admission of winding up petitions, parallel proceedingsDwould continue under both statutes, leading to a mostunsatisfactory state of affairs. This led to the introduction of the5th proviso to section 434(1)(c) which, as has been correctlypointed out in *Kaledonia, is not restricted to any particular stageof a winding up proceeding. Therefore, what follows as a matterEof law is that even post admission of a winding up petition, andafter the appointment of a Company Liquidator to take over theassets of a company sought to be wound up, discretion is vestedin 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 AxisFNirman & Industries Ltd. & Ors., 2020 SCC OnLineSC 943 – relied on

2. When a petition to wind up a company is presented beforethe Tribunal, the Tribunal is given the power under Section 273Gto dismiss it; to make any interim order as it thinks fit; to appointa provisional liquidator of the company till the making of a windingup order; to make an order for the winding up of the company; orto pass any other order as it thinks fit. Once a winding up orderis made, and a Company Liquidator is appointed, such liquidator H

is then to submit a report to the Tribunal under section 281. TheTribunal is then to consider the aforesaid report and fix a timelimit within which the proceedings shall be completed and thecompany dissolved. The company’s properties shall, on the orderof the Tribunal, be taken over by the Company Liquidator and bedeemed to be in custodia legis – see section 283(1) and 283(2).Thereafter, the Tribunal is to settle a list of contributories undersection 285. The Company Liquidator is then to make periodicalreports to the Tribunal with respect to the progress of the windingup proceedings. [Paras 12, 14-17][804-F-G; 805-C-D; 807-A-C]

3. Under section 292, subject to the provisions of theCompanies Act, 2013, the Company Liquidator shall, in theadministration of the assets of the company and the distributionthereof among its creditors, have regard to any directions whichmay be given by the resolution of the creditors or contributoriesat any general meeting. It is only when the affairs of the companyhave been completely wound up that an application is to be madeto the Tribunal to dissolve the company under section 302. [Paras19, 20][809-E-G]

4. Given the aforesaid scheme of winding up under ChapterXX of the Companies Act, 2013, it is clear that several stages arecontemplated, with the Tribunal retaining the power to controlthe proceedings in a winding up petition even after it is admitted.Thus, in a winding up proceeding where the petition has not beenserved in terms of Rule 26 of the Companies (Court) Rules, 1959at a pre-admission stage, given the beneficial result of theapplication of the Code, such winding up proceeding iscompulsorily transferable to the NCLT to be resolved under theCode. Even post issue of notice and pre admission, the sameresult would ensue. However, post admission of a winding uppetition and after the assets of the company sought to be woundup become in custodia legis and are taken over by the CompanyLiquidator, section 290 of the Companies Act, 2013 would indicatethat the Company Liquidator may carry on the business of thecompany, so far as may be necessary, for the beneficial windingup of the company, and may even sell the company as a going AB

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Aconcern. So long as no actual sales of the immovable or movableproperties have taken place, nothing irreversible is done whichwould warrant a Company Court staying its hands on a transferapplication made to it by a creditor or any party to the proceedings.It is only where the winding up proceedings have reached a stagewhere it would be irreversible, making it impossible to set theBclock back that the Company Court must proceed with the windingup, instead of transferring the proceedings to the NCLT to nowbe decided in accordance with the provisions of the Code.Whether this stage is reached would depend upon the facts andcircumstances of each case. [Para 22][810-D-H; 811-A]C5. In the facts of the present case, the concurrent finding ofthe Company Judge and the Division Bench is that despite thefact that the liquidator has taken possession and control of theregistered office of the appellant company and its factorypremises, records and books, no irreversible steps towardsDwinding up of the appellant company have otherwise taken place.This being so, the Company Court has correctly exercised thediscretion vested in it by the 5th proviso to section 434(1)(c).[Para 23][811-B-C]

Jaipur Metals & Electricals Employees Organization v.Jaipur Metals & Electricals Ltd., (2019) 4 SCCE227: [2018[ 14 SCR 926; Forech India Ltd. v. EdelweissAssets Reconstruction Co. Ltd., 2019 SCC OnLine SC87; Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India &Ors., (2019) 4 SCC 17: [2019] 3 SCR 535 – relied on Case Law Reference F[2018[ 14 SCR 926relied onPara 3[2019] 3 SCR 535relied onPara 4

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4041OF 2020

From the Judgment and Order dated 10.10.2019 of the High CourtGof Delhi (Division Bench) in Company Appeal No. 11 of 2019.With Civil Appeal Nos. 4042-4043 of 2020.

K K Venugopal, AG, Sidharth Luthra, Sr. Adv., Ms. VarshaBanerjee, Milan Singh Negi, Ms. Garima Bajaj, Sumeer Sodhi, ArjunH

Nanda, Anuj Berry, Ms. Misha, Siddhant Kant, Ms. Anusha Ramesh,Ms. Prabh Simran Kaur, S. S. Shroff, Abhishek Singh, Jamal Anand,Ms. Aayushi Mishra, Sarvesh Singh, Ashok Mathur, Anil Kumar Sangal,Advs. for the appearing parties.

The Judgment of the Court was delivered by

R. F. NARIMAN, J.

1. Leave granted.

2. These appeals arise out of a judgment of the Division Bench ofthe Delhi High Court dated 10.10.2019 by which a Single Judge’s orderdated 14.01.2019 transferring a winding up proceeding pending beforethe High Court to the National Company Law Tribunal [“NCLT”] wasupheld. The brief facts necessary to appreciate the controversy involvedin these appeals are as follows:

2.1. A winding up petition under sections 433(e) and (f), 434 and439 of the Companies Act, 1956, being Co. Pet. No.731 of 2016 wasfiled by one Shyam Metalics and Energy Limited (Respondent No.1herein), seeking winding up of the appellant company inasmuch as forgoods supplied to the appellant company, a sum of Rs.4.55 crore wasstill due. The learned Company Judge in the Delhi High Court passedthe following order in the aforesaid petition on 27.08.2018:

“ORDER

27.08.2018

1. This petition is filed under sections 433(e) and (f), 434 and 439of the Company Act, 1956 (hereinafter referred to as ‘the Act’) seekingwinding up of the respondent company.

2. It has been pleaded in the petition that the respondent companyhad approached the petitioner company for supply of Iron Pellets. Aspecified quantity of 11612.34MTs of the goods was supplied to therespondent company. After making partial payment, a sum ofRs.4,55,00,000/- is due and payable by the respondent company to thepetitioner. The respondent company from time to time issued 17 post-dated cheques. However, 13 of the cheques when presented with itsbankers, were returned by the bankers unpaid. Statutory notice wasissued on 15.06.2016 but no payments have been received by thepetitioner.

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A3. No reply has been filed by the respondent. On the last date ofhearing, the learned counsel for the respondent had taken time to settlethe matter with the petitioner.

4. Today, the learned counsel for the respondent company submitsthat the respondent is not in a position to settle the matter on account ofBthe fact that the unit of the respondent is shut.

5. In these circumstances, the petition is admitted and the OfficialLiquidator attached to this Court is appointed as the Liquidator. He isdirected to take over all the assets, books of accounts and records of therespondent-company forthwith. The citations be published in the DelhiCeditions of the newspapers ‘Statesman’ (English) and ‘Veer Arjun’ (Hindi),as well as in the Delhi Gazette, at least 14 days prior to the next date ofhearing. The cost of publication is to be borne by the petitioner who shalldeposit a sum Rs.75,000/- with the Official Liquidator within 2 weeks,subject to any further amounts that may be called for by the liquidatorfor this purpose, if required. The Official Liquidator shall also endeavourDto prepare a complete inventory of all the assets of the respondent-company when the same are taken over; and the premises in which theyare kept shall be sealed by him. At the same time, he may also seek theassistance of a valuer to value all assets to facilitate the process ofwinding up. It will also be open to the Official Liquidator to seek policehelp in the discharge of his duties, if he considers it appropriate to do so.EThe Official Liquidator to take all further steps that may be necessary inthis regard to protect the premises and assets of the respondent-company.

6. List on 09.01.2019.

7. A copy of this order be given dasti under the signatures of theFcourt master.”

2.2. An application was then filed before the learned CompanyJudge by the State Bank of India [“SBI”] (Respondent No. 2 herein),being a secured creditor of the appellant company, seeking transfer ofthe winding up petition to the NCLT in view of the fact that SBI hadGfiled an application under section 7 of the Insolvency and BankruptcyCode, 2016 [“Code”] which was pending before the NCLT. By orderdated 14.01.2019, the learned Company Judge transferred the windingup petition as prayed for as follows:

“ORDER

14.01.2019

CA No.1240/2018

1. This application is filed seeking transfer of the present petitionbeing Co.Pet. No.731/2016 to NCLT. This application has been filed byState Bank of India stating that an application under section 7 of theIBC is pending before NCLT. It has been pleaded that the respondentcompany had failed to pay outstanding dues of about Rs.722 crores tothe applicant bank and hence this proceeding have been initiated beforeNCLT. The applicant bank is also a lead bank of the consortium ofbanks which have outstanding dues of about Rs.1100 crores.

2. This court had admitted the present winding up petition on27.08.2018 and appointed the OL as the provisional liquidator of therespondent company.

3. The learned counsel appearing for the OL submits that the OLhas already sealed the registered office of the respondent company atNew Delhi and factory premises at Orissa. He further submits that theOL has incurred heavy expenses in protecting the factory premises atOrissa in the given facts and circumstances.

4. The Ex. Management however objects to transfer of thispetition. They have submitted that they have had no opportunity to defendthe proceedings before NCLT.

5. Learned counsel for SBI states that the creditors will reimbursethe expenses of the OL.

6. Section 434 of the Companies Act, 2013 reads as follows:

“[434. Transfer of certain pending proceedings–(1) On such dateas may be notified by the Central Government in this behalf,—

(a) all matters, proceedings or cases pending before the Boardof Company Law Administration (herein in this section referredto as the Company Law Board) constituted under sub-section(1) of section 10E of the Companies Act, 1956 (1 of 1956),immediately before such date shall stand transferred to theTribunal and the Tribunal shall dispose of such matters,proceedings or cases in accordance with the provisions of thisAct; A

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(b) any person aggrieved by any decision or order of theCompany Law Board made before such date may file an appealto the High Court within sixty days from the date ofcommunication of the decision or order of the Company LawBoard to him on any question of law arising out of such order:Provided that the High Court may if it is satisfied that theappellant was prevented by sufficient cause from filing an appealwithin the said period, allow it to be filed within a further periodnot exceeding sixty days; and

(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 Courtor High Court, shall stand transferred to the Tribunal and theTribunal may proceed to deal with such proceedings from thestage before their transfer:

Provided that only such proceedings relating to thewinding up of companies shall be transferred to the Tribunalthat are at a stage as may be prescribed by the CentralGovernment.

[Provided further that any party or parties to anyproceedings relating to the winding up of companies pendingbefore any Court immediately before the commencement ofthe Insolvency and Bankruptcy Code (Amendment) Ordinance,2018, may file an application for transfer of such proceedingsand the Court may by order transfer such proceedings to theTribunal and the proceedings so transferred shall be dealt withby the Tribunal as an application for initiation of corporateinsolvency resolution process under the Insolvency andBankruptcy Code, 2016.”

7. This court has already in CP 152/2016 vide decision dated27.9.2018 in Rajni Anand vs. Cosmic Structures Limited heldthat the power under section 434(1)(c) of the Companies Act,2013 for transfer of a petition to NCLT is discretionary andhas to be exercised in the facts and circumstances of the caseso as to expeditiously deal with the proceedings/winding up.

8. In my opinion, it would be in the interest of justice and in theinterest of the respondent company and the creditors that the matter be transferred to NCLT in exercise of the discretionarypowers of the court under section 434 of the Companies Act,1956. The order appointing the OL is a recent order and notmuch time has elapsed since then. The OL has only takensteps to seize the office of the respondent company and thefactory premises and further exercise is yet to be carried out.The application is allowed as above. The present petition istransferred to NCLT.

CO.PET. 731/2016

9. In view of the above order, the present petition is transferredto NCLT. All pending applications, if any, stand disposed of.The order admitting the petition and appointing the OL as theprovisional liquidator dated 27.08.2018 stands revoked.

10. The OL will give details of necessary expenses to SBI.The costs/expenses will be borne by SBI and also consortiumof banks. The OL will hand over the possession of the assetsas directed by NCLT.

11. Parties to appear before NCLT on 04.02.2019.”

2.3. It is from this order that the appellant company’s appeal tothe Division Bench has been dismissed by the impugned order in whichthe learned Division Bench held as follows:

“41. The process under IBC is meant to find the best possiblesolution in a given case, which is beneficial to the companyconcerned as well as its creditors and other stakeholders.Therefore, in the interest of equity and justice, and keeping inmind the special nature of the IBC, if the Learned Company Judgehas found it fit to transfer the winding up petition to NCLT on theapplication of respondent No. SBI– who is a secured creditor,this Court would not ordinarily interfere with the judgment of theLearned Company Judge, and that too, on the asking of theerstwhile management. The Learned Company Judge rightlyrecalled the order of appointment of Official Liquidator andadmission of petition, since the liquidation was at its initial stageand the learned Company Judge was fully competent to do so.After the passing of the winding up order, the OL had notproceeded to take any effective or irreversible steps towardsliquidation of the assets of the appellant company. All that he AB

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appears to have done is to take possession and control of theregistered office of the appellant company and its factory premisesand its records and books.

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42. Pertinently, the respondent No. 2 has already initiatedproceedings before the NCLT in respect of the appellant companyBwhich, in any event, would continue. The continuation of theliquidation proceedings at the hands of the OL in terms of theorder passed by this Court would be incongruous with theproceedings that the NCLT has undertaken and would undertakeunder the IBC. Continuation of two parallel proceedings – onebefore the Company Court for liquidation, and the other beforeCthe IBC for resolution/ revival, would serve no useful purpose.The statutory scheme found in Section 434(1)(c) clearly is thatthe proceedings for winding up pending before the Company Courtcould be transferred to the NCLT and there is no provision fortransfer of proceedings from the NCLT to the Company Court.

43. We, thus uphold the impugned order passed by the Ld.Company Judge in C.A. No. 1240/2018, dated 14.01.2019 anddismiss the appeal.”

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3. Shri Sidharth Luthra, learned Senior Advocate appearing onbehalf of the appellant company, referred to three judgments of thisCourt, namely, Jaipur Metals & Electricals EmployeesEOrganization v. Jaipur Metals & Electricals Ltd., (2019) 4 SCC227 [“Jaipur Metals”], Forech India Ltd. v. Edelweiss AssetsReconstruction Co. Ltd., 2019 SCCOnLine SC 87 [“Forech”], andM/s Kaledonia Jute & Fibres Pvt. Ltd. v. M/s Axis Nirman &Industries Ltd. & Ors., 2020 SCCOnLine SC 943 [“Kaledonia”].FAccording to him, none of the judgments apply to the facts of the presentcase inasmuch as, on the facts in the present case, once a winding uporder has been passed by the Company Judge, winding up proceedingsalone must continue before the High Court and parallel proceedings underthe Code cannot continue. He argued that Jaipur Metals (supra) makesit clear that even independent proceedings under the Code can onlyGcontinue when the stage is before a winding up order is passed, whichwas the case on the facts before the Court. Likewise, in Forech (supra)also, the stage of the winding up proceeding was post service of noticeof the winding up petition and before a winding up order was passed, asa result of which the 5th proviso to section 434(1)(c) of the Companies

HAct, 2013 was applied. Likewise, in Kaledonia (supra), though a winding up order had been passed on the facts of that case, the aforesaid orderhad been kept in abeyance. On facts therefore, these three cases areentirely distinguishable and would have no application to a scenario inwhich a winding up order has been passed and the Official Liquidatorhas in fact seized the assets of the company in order to begin the processof distribution to creditors and others which would ultimately result indissolution of the company.

4. Shri K.K. Venugopal, learned Attorney General for Indiaappearing on behalf of SBI, countered all these submissions. Accordingto him, this Court has unequivocally laid down that the 5th proviso tosection 434(1)(c) of the Companies Act, 2013 now makes it clear that adiscretion is vested in the Company Court to transfer winding upproceedings to the NCLT without reference to the stage of winding up.Even post admission, according to the learned Attorney General, if noirreversible steps have been taken, then a combined reading of the 5thproviso to section 434(1)(c) and section 238 of the Code would lead tothe result that the winding up proceeding be transferred to the NCLT, asnot only is the Code a special enactment with a non-obstante clausewhich would, in cases of conflict, do away with the Companies Act,2013, but also that, given the judgment of this Court in Swiss RibbonsPvt. Ltd. & Anr. v. Union of India & Ors., (2019) 4 SCC 17 [“SwissRibbons”], winding up is a last resort after all efforts to revive a companyfail. According to him, the discretion exercised by the Company Courtand the Division Bench has been judiciously and correctly exercised,warranting no interference at our hands.

5. In Swiss Ribbons (supra), this Court had occasion to dealwith the raison d’être for the enactment of the Code. The judgment ofthis Court referred to the Statement of Objects and Reasons for theCode as follows:

“25. The Statement of Objects and Reasons for the Code havebeen referred to in Innoventive Industries [InnoventiveIndustries Ltd. v. ICICI Bank, (2018) 1 SCC 407 : (2018) 1 SCC(Civ) 356] which states: (SCC pp. 421-22, para 12)

“12. … The Statement of Objects and Reasons of the Codereads as under:

‘Statement of Objects and Reasons.—There is no singlelaw in India that deals with insolvency and bankruptcy. Provisions AB

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relating to insolvency and bankruptcy for companies can be foundin the Sick Industrial Companies (Special Provisions) Act, 1985,the Recovery of Debts Due to Banks and Financial InstitutionsAct, 1993, the Securitisation and Reconstruction of Financial Assetsand Enforcement of Security Interest Act, 2002 and the CompaniesAct, 2013. These statutes provide for creation of multiple forasuch as Board of Industrial and Financial Reconstruction (BIFR),Debts Recovery Tribunal (DRT) and National Company LawTribunal (NCLT) and their respective Appellate Tribunals.Liquidation of companies is handled by the High Courts. Individualbankruptcy and insolvency is dealt with under the PresidencyTowns Insolvency Act, 1909, and the Provincial Insolvency Act,1920 and is dealt with by the courts. The existing frameworkfor insolvency and bankruptcy is inadequate, ineffective andresults in undue delays in resolution, therefore, the proposedlegislation.

2. The objective of the Insolvency and Bankruptcy Code,2015 is to consolidate and amend the laws relating toreorganisation and insolvency resolution of corporate persons,partnership firms and individuals in a time-bound mannerfor maximisation of value of assets of such persons, to promoteentrepreneurship, availability of credit and balance theinterests of all the stakeholders including alteration in thepriority of payment of government dues and to establish anInsolvency and Bankruptcy Fund, and matters connectedtherewith or incidental thereto. An effective legal frameworkfor timely resolution of insolvency and bankruptcy wouldsupport development of credit markets and encourageentrepreneurship. It would also improve Ease of DoingBusiness, and facilitate more investments leading to highereconomic growth and development.

3. The Code seeks to provide for designating NCLT andDRT as the adjudicating authorities for corporate persons andfirms and individuals, respectively, for resolution of insolvency,liquidation and bankruptcy. The Code separates commercialaspects of insolvency and bankruptcy proceedings from judicialaspects. The Code also seeks to provide for establishment of theInsolvency and Bankruptcy Board of India (Board) for regulationof insolvency professionals, insolvency professional agencies and information utilities. Till the Board is established, the CentralGovernment shall exercise all powers of the Board or designateany financial sector regulator to exercise the powers and functionsof the Board. Insolvency professionals will assist in completion ofinsolvency resolution, liquidation and bankruptcy proceedingsenvisaged in the Code. Information Utilities would collect, collate,authenticate and disseminate financial information to facilitate suchproceedings. The Code also proposes to establish a fund to becalled the Insolvency and Bankruptcy Fund of India for thepurposes specified in the Code.

4. The Code seeks to provide for amendments in the IndianPartnership Act, 1932, the Central Excise Act, 1944, CustomsAct, 1962, the Income Tax Act, 1961, the Recovery of DebtsDue to Banks and Financial Institutions Act, 1993, the FinanceAct, 1994, the Securitisation and Reconstruction of Financial Assetsand Enforcement of Security Interest Act, 2002, the Sick IndustrialCompanies (Special Provisions) Repeal Act, 2003, the Paymentand Settlement Systems Act, 2007, the Limited Liability PartnershipAct, 2008, and the Companies Act, 2013.

5. The Code seeks to achieve the above objectives.’”

(emphasis in original)

The Court then went on to state:

“27. As is discernible, the Preamble gives an insight into what issought to be achieved by the Code. The Code is first and foremost,a Code for reorganisation and insolvency resolution of corporatedebtors. Unless such reorganisation is effected in a time-boundmanner, the value of the assets of such persons will deplete.Therefore, maximisation of value of the assets of such persons sothat they are efficiently run as going concerns is another veryimportant objective of the Code. This, in turn, will promoteentrepreneurship as the persons in management of the corporatedebtor are removed and replaced by entrepreneurs. When,therefore, a resolution plan takes off and the corporate debtor isbrought back into the economic mainstream, it is able to repay itsdebts, which, in turn, enhances the viability of credit in the handsof banks and financial institutions. Above all, ultimately, theinterests of all stakeholders are looked after as the corporate debtoritself becomes a beneficiary of the resolution scheme—workers AB

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Aare paid, the creditors in the long run will be repaid in full, andshareholders/investors are able to maximise their investment.Timely resolution of a corporate debtor who is in the red, by aneffective legal framework, would go a long way to support thedevelopment of credit markets. Since more investment can bemade with funds that have come back into the economy, businessBthen eases up, which leads, overall, to higher economic growthand development of the Indian economy. What is interesting tonote is that the Preamble does not, in any manner, refer toliquidation, which is only availed of as a last resort if there iseither no resolution plan or the resolution plans submitted are notCup to the mark. Even in liquidation, the liquidator can sell thebusiness of the corporate debtor as a going concern. (SeeArcelorMittal [ArcelorMittal (India) (P) Ltd. v. Satish KumarGupta, (2019) 2 SCC 1] at para 83, fn 3).

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28. It can thus be seen that the primary focus of the legislation isDto ensure revival and continuation of the corporate debtor byprotecting the corporate debtor from its own management andfrom a corporate death by liquidation. The Code is thus a beneficiallegislation which puts the corporate debtor back on its feet, notbeing a mere recovery legislation for creditors. The interests ofthe corporate debtor have, therefore, been bifurcated andEseparated from that of its promoters/those who are in management.Thus, the resolution process is not adversarial to the corporatedebtor but, in fact, protective of its interests. The moratoriumimposed by Section 14 is in the interest of the corporate debtoritself, thereby preserving the assets of the corporate debtor duringFthe resolution process. The timelines within which the resolutionprocess is to take place again protects the corporate debtor’sassets from further dilution, and also protects all its creditors andworkers by seeing that the resolution process goes through asfast as possible so that another management can, through itsentrepreneurial skills, resuscitate the corporate debtor to achieveGall these ends.”

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Having so held, the Court ended stating:

“Epilogue

120. The Insolvency Code is a legislation which deals withHeconomic matters and, in the larger sense, deals with the economy of the country as a whole. Earlier experiments, as we have seen,in terms of legislations having failed, “trial” having led to repeated“errors”, ultimately led to the enactment of the Code. Theexperiment contained in the Code, judged by the generality of itsprovisions and not by so-called crudities and inequities that havebeen pointed out by the petitioners, passes constitutional muster.To stay experimentation in things economic is a grave responsibility,and denial of the right to experiment is fraught with seriousconsequences to the nation. We have also seen that the workingof the Code is being monitored by the Central Government byExpert Committees that have been set up in this behalf.Amendments have been made in the short period in which theCode has operated, both to the Code itself as well as to subordinatelegislation made under it. This process is an ongoing process whichinvolves all stakeholders, including the petitioners.

121. We are happy to note that in the working of the Code, theflow of financial resource to the commercial sector in India hasincreased exponentially as a result of financial debts being repaid.Approximately 3300 cases have been disposed of by theadjudicating authority based on out-of-court settlements betweencorporate debtors and creditors which themselves involved claimsamounting to over INR 1,20,390 crores. Eighty cases have sincebeen resolved by resolution plans being accepted. Of these eightycases, the liquidation value of sixty-three such cases is INR29,788.07 crores. However, the amount realised from theresolution process is in the region of INR 60,000 crores, which isover 202% of the liquidation value. As a result of this, ReserveBank of India has come out with figures which reflect these results.Thus, credit that has been given by banks and financial institutionsto the commercial sector (other than food) has jumped up fromINR 4952.24 crores in 2016-2017, to INR 9161.09 crores in 2017-2018, and to INR 13,195.20 crores for the first six months of2018-2019. Equally, credit flow from non-banks has gone up fromINR 6819.93 crores in 2016-2017, to INR 4718 crores for thefirst six months of 2018-2019. Ultimately, the total flow ofresources to the commercial sector in India, both bank and non-bank, and domestic and foreign (relatable to the non-food sector)has gone up from a total of INR 14,530.47 crores in 2016-2017, toINR 18,469.25 crores in 2017-2018, and to INR 18,798.20 croresin the first six months of 2018-2019. These figures show that the AB

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Aexperiment conducted in enacting the Code is proving to be largelysuccessful. The defaulter’s paradise is lost. In its place, theeconomy’s rightful position has been regained. The result is thatall the petitions will now be disposed of in terms of this judgment.There will be no order as to costs.”

B6. Viewed in this backdrop, let us now examine some of thejudgments of this Court dealing with transfer of winding up petitionsfrom the Company Court to be tried by the NCLT under the Code.

7. Section 255 of the Code reads as follows:

“255. Amendments of Act 18 of 2013.—The CompaniesCAct, 2013 shall be amended in the manner specified in the EleventhSchedule.”

In pursuance of this section, the Eleventh Schedule to the Codemade various amendments to the Companies Act, 2013. They have beenset out in detail in Jaipur Metals (supra) in paragraphs 10 and 11.DSuffice it to say that the first step to transferring winding up proceedingsto the NCLT was taken by the Companies (Transfer of PendingProceedings) Rules, 2016 [“Transfer Rules, 2016”], which compulsorilytransferred all winding up proceedings pending before High Courts tothe NCLT at a stage prior to the service of the petition in terms of Rule26 of the Companies (Court) Rules, 1959. By an amendment made onE17.08.2018, the 5th proviso to section 434(1)(c) was added which statesas follows:

“434. Transfer of certain pending proceedings.—(1) On suchdate as may be notified by the Central Government in this behalf,—

F(a) xxx xxx xxx

(b) xxx xxx xxx

(c) all proceedings under the Companies Act, 1956, includingproceedings relating to arbitration, compromise, arrangements andreconstruction and winding up of companies, pending immediatelyGbefore such date before any District Court or High Court, shallstand transferred to the Tribunal and the Tribunal may proceed todeal with such proceedings from the stage before their transfer:

xxx xxx xxx

Provided further that any party or parties to any proceedingsHrelating to the winding up of companies pending before any Court

immediately before the commencement of the Insolvency andBankruptcy Code (Amendment) Ordinance, 2018, may file anapplication for transfer of such proceedings and the Court mayby order transfer such proceedings to the Tribunal and theproceedings so transferred shall be dealt with by the Tribunal asan application for initiation of corporate insolvency resolutionprocess under the Insolvency and Bankruptcy Code, 2016(31 of 2016).”

8. The Court in Jaipur Metals (supra) was directly concernedwith a special category of cases dealt with by Rule 5(2) of the aforesaidTransfer Rules which was omitted later on. Despite the omission, theCourt applied this Rule, read with the amendment made to section 434of the Companies Act, 2013 on 17.08.2018, stating:

“17. However, though the language of Rule 5(2) is plain enough,it has been argued before us that Rule 5 was substituted on 29-6-2017, as a result of which, Rule 5(2) has been omitted. The effectof the omission of Rule 5(2) is not to automatically transfer allcases under Section 20 of the SIC Act to NCLT, as otherwise, aspecific rule would have to be framed transferring such cases toNCLT, as has been done in Rule 5(1). The real reason for omissionof Rule 5(2) in the substituted Rule 5 is because it is necessary tostate, only once, on the repeal of the SIC Act, that proceedingsunder Section 20 of the SIC Act shall continue to be dealt with bythe High Court. It was unnecessary to continue Rule 5(2) evenafter 29-6-2017 as on 15-12-2016, all pending cases under Section20 of the SIC Act were to continue to be dealt with by the HighCourt before which such cases were pending. Since there couldbe no opinion by the BIFR under Section 20 of the SIC Act after1-12-2016, when the SIC Act was repealed, it was unnecessaryto continue Rule 5(2) as, on 15-12-2016, all pending proceedingsunder Section 20 of the SIC Act were to continue with the HighCourt and would continue even thereafter. This is further madeclear by the amendment to Section 434(1)(c), with effect from17-8-2018, where any party to a winding-up proceeding pendingbefore a court immediately before this date may file an applicationfor transfer of such proceedings, and the Court, at that stage,may, by order, transfer such proceedings to NCLT. The proceedingsso transferred would then be dealt with by NCLT as an applicationfor initiation of the corporate insolvency resolution process under A

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the Code. It is thus clear that under the scheme of Section 434(as amended) and Rule 5 of the 2016 Transfer Rules, allproceedings under Section 20 of the SIC Act pending before theHigh Court are to continue as such until a party files an applicationbefore the High Court for transfer of such proceedings post 17-8-2018. Once this is done, the High Court must transfer suchproceedings to NCLT which will then deal with such proceedingsas an application for initiation of the corporate insolvency resolutionprocess under the Code.

18. The High Court judgment, therefore, though incorrect inapplying Rule 6 of the 2016 Transfer Rules, can still be supportedon this aspect with a reference to Rule 5(2) read with Section 434of the Companies Act, 2013, as amended, with effect from 17-8-2018.”

In a significant passage, the Court then went on to hold:

“19. However, this does not end the matter. It is clear thatRespondent 3 has filed a Section 7 application under the Code on11-1-2018, on which an order has been passed admitting suchapplication by NCLT on 13-4-2018. This proceeding is anindependent proceeding which has nothing to do with the transferof pending winding-up proceedings before the High Court. It wasopen for Respondent 3 at any time before a winding-up order ispassed to apply under Section 7 of the Code. This is clear from areading of Section 7 together with Section 238 of the Code whichreads as follows:

“238. Provisions of this Code to override otherlaws.—The provisions of this Code shall have effect,notwithstanding anything inconsistent therewith contained inany other law for the time being in force or any instrumenthaving effect by virtue of any such law.”

The Court therefore finally held:

“20. … We are of the view that NCLT was absolutely correct inapplying Section 238 of the Code to an independent proceedinginstituted by a secured financial creditor, namely, the AlchemistAsset Reconstruction Company Ltd. This being the case, it isdifficult to comprehend how the High Court could have held thatthe proceedings before NCLT were without jurisdiction. On this score, therefore, the High Court judgment has to be set aside.NCLT proceedings will now continue from the stage at whichthey have been left off. Obviously, the company petition pendingbefore the High Court cannot be proceeded with further in viewof Section 238 of the Code. The writ petitions that are pendingbefore the High Court have also to be disposed of in light of thefact that proceedings under the Code must run their entire course.We, therefore, allow the appeal and set aside the High Court’sjudgment [Jaipur Metals and Electricals Ltd., In re, 2018 SCCOnLine Raj 1472].”

9. In Forech (supra), this Court, after setting out the aforesaidRules and the 5th proviso to section 434(1)(c), then held:

“16. We are of the view that Rules 26 and 27 clearly refer to apre-admission scenario as is clear from a plain reading of Rules26 and 27, which make it clear that the notice contained in FormNo. 6 has to be served in not less than 14 days before the date ofhearing. Hence, the expression “was admitted” in Form No. 6only means that notice has been issued in the winding up petitionwhich is then “fixed for hearing before the Company Judge” on acertain day. Thus, the Madras High Court view is plainly incorrectwhereas the Bombay High Court view is correct in law.

17. The resultant position in law is that, as a first step, when theCode was enacted, only winding up petitions, where no noticeunder Rule 26 of the Companies (Court) Rules was served, wereto be transferred to the NCLT and treated as petitions under theCode. However, on a working of the Code, the Governmentrealized that parallel proceedings in the High Courts as well asbefore the adjudicating authority in the Code would stultify theobjective sought to be achieved by the Code, which is to resuscitatethe corporate debtors who are in the red. In accordance with thisobjective, the Rules kept being amended, until finally Section 434was itself substituted in 2018, in which a proviso was added bywhich even in winding up petitions where notice has been servedand which are pending in the High Courts, any person could applyfor transfer of such petitions to the NCLT under the Code, whichwould then have to be transferred by the High Court to theadjudicating authority and treated as an insolvency petition underthe Code. This statutory scheme has been referred to, albeit in AB

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the context of Section 20 of the SICA, in our judgment which iscontained in Jaipur Metals & Electricals EmployeesOrganization Through General Secretary Mr. Tej RamMeena v. Jaipur Metals & Electricals Ltd. Through itsManaging Director, being a judgment by a Division Bench ofthis Court dated 12.12.2018.”

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Resultantly, the Court thereafter held:

“22. This Section is of limited application and only bars a corporatedebtor from initiating a petition under Section 10 of the Code inrespect of whom a liquidation order has been made. From areading of this Section, it does not follow that until a liquidationCorder has been made against the corporate debtor, an InsolvencyPetition may be filed under Section 7 or Section 9 as the casemay be, as has been held by the Appellate Tribunal. Hence, anyreference to Section 11 in the context of the problem before us iswholly irrelevant. However, we decline to interfere with theDultimate order passed by the Appellate Tribunal because it is clearthat the financial creditor’s application which has been admittedby the Tribunal is clearly an independent proceeding which mustbe decided in accordance with the provisions of the Code.

23. Though, we are not interfering with the Appellate Tribunal’sEorder dismissing the appeal, we grant liberty to the appellant beforeus to apply under the proviso to Section 434 of the CompaniesAct (added in 2018), to transfer the winding up proceeding pendingbefore the High Court of Delhi to the NCLT, which can then betreated as a proceeding under Section 9 of the Code.”

10. In Kaledonia (supra), the question which arose before theFCourt arose after a winding up order had been passed, but which hadbeen kept in abeyance by the Company Court. The vexed question beforethe Court was whether the expression “any person could apply for transfer…” contained in paragraph 17 of the judgment of this Court in Forech(supra) would refer to persons who are not parties to the proceeding.GThis Court, after setting out section 278 of the Companies Act, 2013,then held:

“44. Thus, the proceedings for winding up of a company areactually proceedings in rem to which the entire body of creditorsis a party. The proceeding might have been initiated by one ormore creditors, but by a deeming fiction the petition is treated as H

a joint petition. The official liquidator acts for and on behalf of theentire body of creditors. Therefore, the word “party” appearingin the 5th proviso to Clause (c) of Sub-section (1) of section 434cannot be construed to mean only the single petitioning creditor orthe company or the official liquidator. The words “party or parties”appearing in the 5th proviso to Clause (c) of Sub-section (1) ofSection 434 would take within its fold any creditor of the companyin liquidation.

45. The above conclusion can be reached through another methodof deductive logic also. If any creditor is aggrieved by any decisionof the official liquidator, he is entitled under the 1956 Act tochallenge the same before the Company Court. Once he doesthat, he becomes a party to the proceeding, even by the plainlanguage of the section. Instead of asking a party to adopt such acircuitous route and then take recourse to the 5th proviso to section434(1)(c), it would be better to recognise the right of such a partyto seek transfer directly.

46. As observed by this Court in Forech India Limited (supra),the object of IBC will be stultified if parallel proceedings areallowed to go on in different fora. If the Allahabad High Court isallowed to proceed with the winding up and NCLT is allowed toproceed with an enquiry into the application under Section 7 IBC,the entire object of IBC will be thrown to the winds.

47. Therefore, we are of the considered view that the petitioner-herein will come within the definition of the expression “party”appearing in the 5th proviso to Clause (c) of Sub-section (1) ofSection 434 of the Companies Act, 2013 and that the petitioner isentitled to seek a transfer of the pending winding up proceedingsagainst the first respondent, to the NCLT. It is important to notethat the restriction under Rules 5 and 6 of the Companies(Transfer of Pending Proceedings) Rules, 2016 relating tothe stage at which a transfer could be ordered, has noapplication to the case of a transfer covered by the5th proviso to clause (c) of sub-section (1) of Section 434.Therefore, the impugned order of the High court rejecting thepetition for transfer on the basis of Rule 26 of the Companies(Court) Rules, 1959 is flawed.”

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A11. What becomes clear upon a reading of the three judgments ofthis Court is the following:

(i) So far as transfer of winding up proceedings is concerned, theCode began tentatively by leaving proceedings relating to winding up ofcompanies to be transferred to NCLT at a stage as may be prescribedBby the Central Government.

(ii) This was done by the Transfer Rules, 2016 (supra) whichcame into force with effect from 15.12.2016. Rules 5 and 6 referred tothree types of proceedings. Only those proceedings which are at thestage of pre-service of notice of the winding up petition stand compulsorilyCtransferred to the NCLT.

(iii) The result therefore was that post notice and pre admissionof winding up petitions, parallel proceedings would continue under bothstatutes, leading to a most unsatisfactory state of affairs. This led to theintroduction of the 5th proviso to section 434(1)(c) which, as has beenDcorrectly pointed out in Kaledonia (supra), is not restricted to anyparticular stage of a winding up proceeding.

(iv) Therefore, what follows as a matter of law is that even postadmission of a winding up petition, and after the appointment of aCompany Liquidator to take over the assets of a company sought to beEwound up, discretion is vested in the Company Court to transfer suchpetition to the NCLT. The question that arises before us in this case ishow is such discretion to be exercised?

12. The Companies Act, 2013 deals with winding up of companiesin a separate chapter, being Chapter XX. When a petition to wind up aFcompany is presented before the Tribunal, the Tribunal is given the powerunder 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 awinding up order; to make an order for the winding up of the company;or to pass any other order as it thinks fit – see section 273(1).

13. Sections 278 and 279 of the Companies Act, 2013 then follow,Gwhich state:

“278. Effect of winding-up order.—The order for the winding-up of a company shall operate in favour of all the creditors and allcontributories of the company as if it had been made out on thejoint petition of creditors and contributories.”

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“279. Stay of suits, etc., on winding-up order.—(1) When awinding-up order has been passed or a provisional liquidator hasbeen appointed, no suit or other legal proceeding shall becommenced, or if pending at the date of the winding-up order,shall be proceeded with, by or against the company, except withthe leave of the Tribunal and subject to such terms as the Tribunalmay impose:

Provided that any application to the Tribunal seeking leave underthis section shall be disposed of by the Tribunal within sixty days.

(2) Nothing in sub-section (1) shall apply to any proceeding pendingin appeal before the Supreme Court or a High Court.”

14. Once a winding up order is made, and a Company Liquidatoris appointed, such liquidator is then to submit a report to the Tribunalunder section 281 as follows:

“281. Submission of report by Company Liquidator.—

(1) Where the Tribunal has made a winding-up order or appointeda Company Liquidator, such liquidator shall, within sixty days fromthe order, submit to the Tribunal, a report containing the followingparticulars, namely:—

(a) the nature and details of the assets of the companyincluding their location and value, stating separately thecash balance in hand and in the bank, if any, and thenegotiable securities, if any, held by the company:

Provided that the valuation of the assets shall be obtainedfrom registered valuers for this purpose; (b) amount of capital issued, subscribed and paid-up;

(c) the existing and contingent liabilities of the companyincluding names, addresses and occupations of itscreditors, stating separately the amount of secured andunsecured debts, and in the case of secured debts,particulars of the securities given, whether by thecompany or an officer thereof, their value and the dateson which they were given; (d) the debts due to the company and the names, addressesand occupations of the persons from whom they are A

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due and the amount likely to be realised on accountthereof; (e) guarantees, if any, extended by the company; (f) list of contributories and dues, if any, payable by themand details of any unpaid call; (g) details of trademarks and intellectual properties, if any,owned by the company; (h) details of subsisting contracts, joint ventures andcollaborations, if any;

(i) details of holding and subsidiary companies, if any; (j) details of legal cases filed by or against the company;and (k) any other information which the Tribunal may direct orthe Company Liquidator may consider necessary toinclude.

(2) The Company Liquidator shall include in his report the mannerin which the company was promoted or formed and whether inhis opinion any fraud has been committed by any person in itspromotion or formation or by any officer of the company in relationto the company since the formation thereof and any other matterswhich, in his opinion, it is desirable to bring to the notice of theTribunal.

(3) The Company Liquidator shall also make a report on theviability of the business of the company or the steps which, in hisopinion, are necessary for maximising the value of the assets ofthe company.

(4) The Company Liquidator may also, if he thinks fit, make anyfurther report or reports.

(5) Any person describing himself in writing to be a creditor or acontributory of the company shall be entitled by himself or by hisagent at all reasonable times to inspect the report submitted inaccordance with this section and take copies thereof or extractstherefrom on payment of the prescribed fees.”

15. The Tribunal is then to consider the aforesaid report and fix atime limit within which the proceedings shall be completed and thecompany dissolved, which time limit may be revised – see section 282(1).

16. Importantly, the company’s properties shall, on the order ofthe Tribunal, be taken over by the Company Liquidator and be deemedto be in custodia legis – see section 283(1) and 283(2).

17. Thereafter, the Tribunal is to settle a list of contributories undersection 285. The Company Liquidator is then to make periodical reportsto the Tribunal with respect to the progress of the winding up proceedingsas follows:

“288. Submission of periodical reports to Tribunal.—(1) The

Company Liquidator shall make periodical reports to the Tribunaland in any case make a report at the end of each quarter withrespect to the progress of the winding-up of the company in suchform and manner as may be prescribed.

(2) The Tribunal may, on an application by the Company Liquidator,review the orders made by it and make such modifications as itthinks fit.”

18. Section 290 is important because it lays down the powers andduties of the Company Liquidator as follows:

“290. Powers and duties of Company Liquidator.—

(1) Subject to directions by the Tribunal, if any, in this regard, theCompany Liquidator, in a winding-up of a company by the Tribunal,shall have the power—

(a) to carry on the business of the company so far as maybe necessary for the beneficial winding-up of thecompany; (b) to do all acts and to execute, in the name and on behalfof the company, all deeds, receipts and other documents,and for that purpose, to use, when necessary, thecompany’s seal;

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[2020] 13 S.C.R.

to any person or body corporate, or to sell the same inparcels; (d) to sell the whole of the undertaking of the company as agoing concern; (e) to raise any money required on the security of the assetsof the company; (f) to institute or defend any suit, prosecution or other legalproceeding, civil or criminal, in the name and on behalfof the company; (g) to invite and settle claim of creditors, employees or anyother claimant and distribute sale proceeds in accordancewith priorities established under this Act; (h) to inspect the records and returns of the company onthe files of the Registrar or any other authority;

(i) to prove rank and claim in the insolvency of anycontributory for any balance against his estate, and toreceive dividends in the insolvency, in respect of thatbalance, as a separate debt due from the insolvent, andrateably with the other separate creditors; (j) to draw, accept, make and endorse any negotiableinstruments including cheque, bill of exchange, hundi orpromissory note in the name and on behalf of thecompany, with the same effect with respect to the liabilityof the company as if such instruments had been drawn,accepted, made or endorsed by or on behalf of thecompany in the course of its business; (k) to take out, in his official name, letters of administrationto any deceased contributory, and to do in his officialname any other act necessary for obtaining payment ofany money due from a contributory or his estate whichcannot be conveniently done in the name of the company,and in all such cases, the money due shall, for the purposeof enabling the Company Liquidator to take out the lettersof administration or recover the money, be deemed tobe due to the Company Liquidator himself;

(l) to obtain any professional assistance from any personor appoint any professional, in discharge of his duties,obligations and responsibilities and for protection of theassets of the company, appoint an agent to do anybusiness which the Company Liquidator is unable to dohimself; (m) to take all such actions, steps, or to sign, execute andverify any paper, deed, document, application, petition,affidavit, bond or instrument as may be necessary,—

(i) for winding-up of the company;

(ii) for distribution of assets;

(iii) in discharge of his duties and obligations andfunctions as Company Liquidator; and (n) to apply to the Tribunal for such orders or directions asmay be necessary for the winding-up of the company.

(2) The exercise of powers by the Company Liquidator undersub-section (1) shall be subject to the overall control of the Tribunal.

(3) Notwithstanding the provisions of sub-section (1), the CompanyLiquidator shall perform such other duties as the Tribunal mayspecify in this behalf.”

19. Under section 292, subject to the provisions of the CompaniesAct, 2013, the Company Liquidator shall, in the administration of theassets of the company and the distribution thereof among its creditors,have regard to any directions which may be given by the resolution ofthe creditors or contributories at any general meeting – see section 292(1).

20. It is only when the affairs of the company have been completelywound up that an application is to be made to the Tribunal to dissolve thecompany under section 302, which is set out hereinbelow:

“302. Dissolution of company by Tribunal.—(1) When theaffairs of a company have been completely wound up, theCompany Liquidator shall make an application to the Tribunal fordissolution of such company.

(2) The Tribunal shall on an application filed by the CompanyLiquidator under sub-section (1) or when the Tribunal is of the opinion

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Athat it is just and reasonable in the circumstances of the case that anorder for the dissolution of the company should be made, make an orderthat the company be dissolved from the date of the order, and the companyshall be dissolved accordingly.

(3) The Tribunal shall, within a period of thirty days from the dateBof the order,—

(a) forward a copy of the order to the Registrar who shall recordin the register relating to the company a minute of thedissolution of the company; and (b) direct the Company Liquidator to forward a copy of the orderCto the Registrar who shall record in the register relating tothe company a minute of the dissolution of the company. “

21. Where a company has been dissolved, such dissolution maybe set aside within a period of two years from the date of such dissolutionunder section 356 of the Companies Act, 2013.D

22. Given the aforesaid scheme of winding up under Chapter XXof the Companies Act, 2013, it is clear that several stages arecontemplated, with the Tribunal retaining the power to control theproceedings in a winding up petition even after it is admitted. Thus, in awinding up proceeding where the petition has not been served in termsEof Rule 26 of the Companies (Court) Rules, 1959 at a pre-admissionstage, given the beneficial result of the application of the Code, suchwinding up proceeding is compulsorily transferable to the NCLT to beresolved under the Code. Even post issue of notice and pre admission,the same result would ensue. However, post admission of a winding upFpetition and after the assets of the company sought to be wound upbecome in custodia legis and are taken over by the Company Liquidator,section 290 of the Companies Act, 2013 would indicate that the CompanyLiquidator may carry on the business of the company, so far as may benecessary, for the beneficial winding up of the company, and may evensell the company as a going concern. So long as no actual sales of theGimmovable or movable properties have taken place, nothing irreversibleis done which would warrant a Company Court staying its hands on atransfer 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 whereit would be irreversible, making it impossible to set the clock back thatthe Company Court must proceed with the winding up, instead ofH

transferring the proceedings to the NCLT to now be decided inaccordance with the provisions of the Code. Whether this stage is reachedwould depend upon the facts and circumstances of each case.

23. In the facts of the present case, the concurrent finding of theCompany Judge and the Division Bench is that despite the fact that theliquidator has taken possession and control of the registered office ofthe appellant company and its factory premises, records and books, noirreversible steps towards winding up of the appellant company haveotherwise taken place. This being so, the Company Court has correctlyexercised the discretion vested in it by the 5th proviso to section 434(1)(c).Resultantly, civil appeal arising out of SLP (Civil) No.26415 of 2019stands dismissed.

Civil Appeal Nos. 4042-4043 of 2020 (arising out of SLP(Civil) Nos. 2033-2034 of 2020):

Given the fact that the matter has been transferred by the HighCourt to the NCLT to verify the necessary facts and circumstances ofthe case, after which relief can be given to the appellant herein, we donot find any reason to interfere with the aforesaid order. The appealsare therefore dismissed.

Devika Gujral

Appeals dismissed

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