Summary
The Supreme Court restored an independently admitted insolvency proceeding against a company whose winding-up matter remained before the High Court. Omission of the transfer rule concerning BIFR references did not automatically transfer those matters. That issue did not defeat the financial creditor’s separate application made before any winding-up order. The Insolvency Code prevailed, and the NCLT proceeding was to resume.
Issues
- Whether omission of Rule 5(2) automatically transferred BIFR-origin winding-up proceedings to the NCLT.
- Whether the pending High Court winding-up proceeding barred the creditor’s independent insolvency application before a winding-up order.
Provisions considered
- Rules 5(2) and 6, including the 2017 substitution of Rule 5, Companies (Transfer of Pending Proceedings) Rules, 2016The BIFR-reference category fell under former Rule 5(2), rather than Rule 6. Its omission did not automatically transfer the pending matters. (¶¶ 10, 11, 13, 14, 15)
- Section 434(1)(c), as amended in 2018, Companies Act, 2013The Court explained the route for seeking transfer of the pending winding-up proceeding, distinguishing it from an independently initiated insolvency case. (¶¶ 9, 15, 16, 17)
- Section 238, Insolvency and Bankruptcy Code, 2016The Code overrode inconsistent provisions of the Companies Act and supported continuation of the independently admitted insolvency proceeding. (¶¶ 17, 18)
Held
- Winding-up proceedings arising from BIFR opinions formed a distinct category under former Rule 5(2). Omission of that provision did not itself transfer them; the High Court’s reliance on Rule 6 was mistaken, although its retention conclusion was supportable on the alternative statutory reasoning. (¶¶ 13, 14, 15, 16)
- The creditor’s section 7 application was independent of transfer of the High Court proceeding. It could be made before a winding-up order, and no such order had been passed in this case. (¶¶ 4, 17)
- Although amended through the Code’s Eleventh Schedule, section 434 remained part of the Companies Act. Inconsistency with the Code was governed by section 238; the NCLT’s admission was within jurisdiction. (¶ 18)
- The NCLT proceeding was to continue from the stage reached. The High Court company petition could not proceed further in view of section 238, and the pending writ petitions were to be disposed of consistently with the insolvency process running its course. (¶ 18)
Result
Appeal allowed; High Court judgment set aside. NCLT insolvency proceedings to resume, with the pending High Court proceedings governed by the directions in paragraph 18.