Summary
The Court ordered transfer of pending winding-up proceedings from the Allahabad High Court to NCLT on a financial creditor’s application. A creditor was a party for purposes of the fifth proviso to Section 434(1)(c), even though not the original petitioning creditor. The service-stage limits governing automatic transfers under Rules 5 and 6 did not bar this party-initiated transfer. NCLT was to consider the matter with the creditor’s Section 7 application.
Issues
- Whether a creditor other than the original petitioner could seek transfer under the fifth proviso to Section 434(1)(c).
- Whether the service and winding-up stage barred such transfer.
Provisions considered
- Section 434(1)(c), fifth proviso, Companies Act, 2013Held that any creditor qualified as a party entitled to seek transfer and distinguished this route from automatic stage-based transfers. (¶¶ 17, 26, 37, 38, 39, 40, 42, 43, 44, 45, 46, 47)
- Rules 5 and 6, Companies (Transfer of Pending Proceedings) Rules, 2016Confined their service-stage restrictions to the transfers they govern, holding those restrictions inapplicable to a transfer under the fifth proviso. (¶¶ 30, 31, 32, 33, 46)
- Section 447; Section 278 respectively, Companies Act, 1956; Companies Act, 2013Used the collective effect of a winding-up order to interpret party status as extending to the entire body of creditors. (¶¶ 42, 43)
Held
- The fifth proviso confers the right on parties to the winding-up proceedings, rather than every unrelated person. Winding-up proceedings are in rem, however, and the petition and ensuing order operate for the entire body of creditors. The expression therefore includes any creditor of the company, not only the original petitioning creditor, company or official liquidator. (¶¶ 38, 39, 40, 41, 42, 43, 44, 46)
- Rules 5 and 6 use service under Rule 26 as the stage controlling automatic transfer. Their restrictions do not apply to a party’s application under the fifth proviso to Section 434(1)(c); the High Court’s reliance on the service stage to reject this application was erroneous. (¶¶ 30, 31, 32, 33, 34, 35, 36, 37, 46)
- Allowing the High Court winding-up proceedings and the NCLT Section 7 enquiry to proceed in parallel would frustrate the Code’s object. On these facts, the winding-up matter had to be transferred and considered with the appellant creditor’s pending insolvency application. (¶¶ 45, 46, 47)
Result
Appeal allowed without costs. Refusal to transfer set aside; winding-up proceedings ordered transferred to NCLT to be taken up with the appellant’s Section 7 IBC application.