Edelweiss Asset Reconstruction Company Limited v. Sukhmani Financial Advisors Pvt. Ltd.
Delhi High Court·20 Sep 2023·2023:DHC:6936
Prathiba M. Singh
CO.PET. 229/2016
2023:DHC:6936
corporateappeal_allowedSignificant
AI Summary
The Delhi High Court directed transfer of pending winding up petitions under the Companies Act, 1956 to the NCLT in accordance with the Insolvency and Bankruptcy Code, 2016, as the proceedings were not at an advanced stage.
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CO.PET. 229/2016 & connected matters HIGH COURT OF DELHI Date of Decision: 20th September, 2023
CO.PET. 229/2016 and CO.APPL. 967/2016, 968/2016 EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED ..... Petitioner Through: None.
FIREPRO WIRELESS AND TECHNOLOGIES PVT. LTD. ..... Respondent C4
CO.PET. 233/2016 and CO.APPL. 981/2016, 982/2016
VERSUS
IRON TRADERS PVT. LTD. ..... Respondent C5
WITH
CO.PET. 235/2016 and CO.APPL. 987/2016, CO.APPL. 988/2016
VERSUS
CEDAR INFONET PVT. LTD. ..... Respondent
CORAM:
JUSTICE PRATHIBA M. SINGH Prathiba M. Singh, J.(Oral)
JUDGMENT
1. This hearing has been done through hybrid mode.
2. None appears for either of the parties.
3. These petitions seek winding up of the Respondent Companies. The dispute relates to certain corporate guarantees dated 17th June, 2013 issued by the Respondents in lieu of credit facilities availed of by M/s. Tulip Telecom Ltd. The details of the petitions against whom winding up is sought are as under: Writ Petition Respondent Company CO.PET. 229/2016 Sukhmani Financial Advisors Pvt. Ltd. CO.PET. 231/2016 Sharad Enterprises Pvt. Ltd. CO.PET. 232/2016 Firepro Wireless and Technologies Pvt. Ltd. CO.PET. 233/2016 Iron Traders Pvt. Ltd. CO.PET. 235/2016 Cedar Infonet Pvt. Ltd.
4. Notice was issued in this petition initially in 2016 and an interim order was passed on 19th April 2016 to the following effect: “Till the next date of hearing, the Respondent company shall not dispose off or alienate or encumber either directly or indirectly, or otherwise part with possession of any assets of the company to the tune of Rs. 680 crores, except in the ordinary course of business and for the payment of salaries and statutory dues.” Thereafter pleadings have been completed in the matters. The petitions are yet to be heard.
5. The debt of the ICICI Bank Ltd. came to be been assigned to Edelweiss Asset Reconstruction Company Ltd vide assignment deed dated 29th June, 2016.
6. In the present case, the substitution of ICICI Ltd to Edelweiss was allowed on 15th December 2017. On 13th March 2023, the Petitioner prayed that the matters deserve to be transferred to NCLT. On the said date an adjournment was sought on behalf of the Respondents.
7. Today, none appears for the parties.
8. During the pendency of these petitions, the Insolvency and Bankruptcy Code, 2016 has been enacted, and pending proceedings under Section 434 of the Companies Act, 1956 are to be transferred to the National Company Law Tribunal (NCLT). The said section reads as under:
“434. Transfer of certain pending proceedings
(1) On such date as may be notified by the Central
Government in this behalf,-
(a) all matters, proceedings or cases pending before the Board of Company Law Administration (herein in this section referred to 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 the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act;
(b) any person aggrieved by any decision or order of the Company Law Board made before such date may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may if it is satisfied that the appellant was prevented by sufficient cause from filing an appeal within the said period, allow it to be filed within a further period not 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 Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer: Provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government.
Provided further that only such proceedings relating to cases other than winding-up, for which orders for allowing or otherwise of the proceedings are not reserved by the High Courts shall be transferred to the Tribunal [Provided also that]-
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(i) all proceedings under the Companies Act, 1956 other than the cases relating to winding up of companies that are reserved for orders for allowing or otherwise such proceedings; or
(ii) the proceedings relating to winding up of companies which have not been transferred from the High Courts; shall be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.] Provided also that proceedings relating to cases of voluntary winding up of a company where notice of the resolution by advertisement has been given under subsection (1) of section 485 of the Companies Act, 1956 but the Company has not been dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.”
9. The issue of transfer of winding up petitions to the NCLT has also been dealt with in the notification dated 7th December, 2016 passed by the Ministry of Corporate Affairs where in respect of pending proceedings for winding up, Rule 5 states as under:-
“5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts. (1) All petitions relating to winding up under clause (e) of section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not been served on the respondent as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the
Tribunal established under sub-section (4) of section 419 of the Act, exercising territorial jurisdiction and such petitions shall be treated as applications under sections 7, 8 or 9 of the Code, as the case may be, and dealt with in accordance with Part II of the Code: Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with Rule 7, required for admission of the petition under Sections 7,[8] or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal within sixty days from the date of this notification, failing which the petition shall abate. Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with rule 7, required for admission of the petition under sections 7,[8] or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal upto 15th day of July, 2017, failing which the petition shall stand abated: Provided further that any party or parties to the petitions shall, after the 15th day of July, 2017, be eligible to file fresh applications under sections 7 or 8 or 9 of the Code, as the case may be, in accordance with the provisions of the Code: Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under this rule and remains in the High Court and where there is another petition under clause (e) of section 433 of the Act for winding up against the same company pending as on 15th December, 2016, such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent.”
10. The issue of transfer of pending cases has been considered by this Court in Co. Pet 446/2013 titled Citicorp International Limited v. Shiv- Vani Oil & Gas Exploration Services Limited wherein the Court relying on the decision in Action Ispat and Power Limited v. Shyam Metalics and Energy Limited ( 2021) 2 SCC 641 has observed as under:
“20. As per the proviso highlighted above, upon the application being filed by any of the parties to the proceedings, the transfer may be made by the Court in terms of the second proviso of Section 434 (1) of the Companies Act, 1956. In Action Ispat (supra), if the winding up is not at an advanced stage, the High Court may transfer the matter to the NCLT. The relevant portion of the said judgement is set out below: 31. Given the aforesaid scheme of winding up under Chapter XX of the Companies Act, 2013, it is clear that several stages are contemplated, with the Tribunal retaining the power to control the proceedings in a winding up petition even after it is admitted. Thus, in a winding up proceeding where the petition has not been served in terms of Rule 26 of the Companies (Court) Rules, 1959 at a pre-admission stage, given the beneficial result of the application of the Code, such winding up proceeding is compulsorily transferable to the NCLT to be resolved under the Code. Even post issue of notice and pre admission, the same result would ensue. However, post admission of a winding up petition and after the assets of the company sought to be wound up become in custodia legis and are taken over by the Company Liquidator, section 290 of the Companies Act, 2013 would indicate that the Company Liquidator may carry on the business of the company, so far as may be necessary, for the beneficial winding up of the company, and may even sell the company as a going concern. So long as no
actual sales of the immovable or movable properties have taken place, nothing irreversible is done which would warrant a Company Court staying its hands on a transfer 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 where it would be irreversible, making it impossible to set the clock back that the Company Court must proceed with the winding up, instead of transferring the proceedings to the NCLT to now be decided in accordance with the provisions of the Code. Whether this stage is reached would depend upon the facts and circumstances of each case.”
21. In the present case, the Provisional Liquidator was appointed in 2017. However, the winding up is not at an advanced stage. No auction has been conducted, no claims have been invited. Clearly the winding up process could consume considerable time. Accordingly, the present company petition is transferred to the NCLT. The entire record of the present petition shall also be remitted in the electronic form to the Registrar, NCLT, and the same shall be listed before the NCLT. All the parties appearing before the Court are also permitted to appear before the NCLT on 3rd August, 2023. The OL shall continue to exercise the control over all the properties of the Company under liquidation, subject to any orders that the NCLT may pass in future.”
11. A conjoint reading of Rule 5 of the notification dated 7th December, 2016 along with the aforementioned decision would show that in cases where the petition is not at an advanced stage, the matter is to be transferred to the NCLT.
12. In the present petitions, apart from issuance of notice, no steps have been taken. None appear for the parties as well. Accordingly, the present petitions are directed to be transferred to the NCLT.
13. List before the NCLT on 1st November 2023. The interim order granted by this Court dated 19th April 2016 shall continue to operate till the matters are taken up and considered by the NCLT.
14. The electronic records of this Court shall be transmitted to the
15. The petitions, along with all pending applications, are disposed of in the above terms.
PRATHIBA M. SINGH
JUDGE
SEPTEMBER 20, 2023
Rahul/kt
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