Summary
The Court upheld transfer of a winding-up proceeding to the NCLT for treatment under the Insolvency and Bankruptcy Code even after admission and appointment of a liquidator. The transfer power is not confined to a particular procedural stage, but its exercise depends on whether winding up has become irreversible. Mere custody of offices, factory premises and records did not reach that point in this case.
Issues
- Whether a winding-up proceeding may be transferred to the NCLT after admission and appointment of a liquidator.
- How the Company Court should exercise its transfer discretion as liquidation progresses.
Provisions considered
- Section 434(1)(c), fifth proviso, Companies Act, 2013The Company Court may transfer pending winding-up proceedings on a party’s application for treatment as a CIRP application; post-admission status alone does not exclude that discretion. (¶¶ 7–11, 22–23)
- Section 290, Companies Act, 2013The liquidator’s ability to continue business for beneficial winding up or sell the undertaking as a going concern informs whether the process has become irreversible. (¶¶ 18, 22)
- Section 238, Insolvency and Bankruptcy Code, 2016The overriding provision and the Code’s revival objective inform the relationship between insolvency proceedings and pending winding up. (¶ 4–10)
Held
- The fifth proviso is not restricted to a particular stage. Even after admission and appointment of a liquidator, the Company Court retains discretion to transfer. Creditors are within the parties entitled to seek transfer; the earlier procedural restrictions governing compulsory transfer do not exhaust this later power. (¶ 7–11)
- The governing consideration after admission is whether irreversible steps make it impossible to turn the clock back. Taking assets into custody alone need not do so. Where no actual sales have occurred, the process remains capable of transfer; if winding up has reached an irreversible stage, it must continue before the Company Court. The stage must be assessed on each case’s facts. (¶ 12–22)
- The liquidator had taken possession and control of the registered office, factory, records and books, but no other irreversible winding-up steps had occurred. The concurrent decision to transfer therefore properly exercised the statutory discretion. (¶ 23)
- The connected appeals also disclosed no ground for interference with the High Court’s transfer for verification of the relevant facts and circumstances by the NCLT before relief could be considered.
Result
All appeals dismissed; transfers to the NCLT left undisturbed.