ACTION ISPAT AND POWER PRIVATE LIMITED Vs. SHYAM METALICS AND ENERGY LIMITED
LAWS(SC)-2020-12-35
SUPREME COURT OF INDIA (FROM: DELHI)
Decided on December 15,2020

Action Ispat And Power Private Limited Appellant
VERSUS
Shyam Metalics And Energy Limited Respondents


Referred Judgements :-

JAIPUR METALS AND ELECTRICALS LTD.,IN RE [REFERRED TO]
FORECH INDIA LTD. V. EDELWEISS ASSETS RECONSTRUCTION CO. LTD [REFERRED TO]
M/S KALEDONIA JUTE AND FIBRES PVT. LTD. V. M/S AXIS NIRMAN AND INDUSTRIES LTD. AND ORS [REFERRED TO]
M/S. INNOVENTIVE INDUSTRIES LTD. VS. ICICI BANK & ANR. [REFERRED TO]
ARCELORMITTAL INDIA PRIVATE LIMITED VS. SATISH KUMAR GUPTA & ORS [REFERRED TO]
JAIPUR METALS AND ELECTRICALS EMPLOYEES ORGANIZATION VS. JAIPUR METALS AND ELECTRICALS LTD. [REFERRED TO]
SWISS RIBBONS PVT LTD VS. UNION OF INDIA [REFERRED TO]



Cited Judgements :-

ALAKNANDA SPONGE PRIVATE LIMITED VS. OFFICIAL LIQUIDATOR [LAWS(CAL)-2022-5-117] [REFERRED TO]
LALITABEN GOVINDBHAI PATEL VS. GUJARAT STATE FINANCIAL CORPORATION & 8 OTHER(S) [LAWS(GJH)-2021-2-414] [REFERRED TO]
LALITABEN GOVINDBHAI PATEL VS. GUJARAT STATE FINANCIAL CORPORATION [LAWS(GJH)-2021-7-151] [REFERRED TO]
SHYAM B. GHIA VS. FUTURA POLYESTERS LTD. [LAWS(BOM)-2022-9-47] [REFERRED TO]


JUDGEMENT

R.F.NARIMAN, J. - (1.)Leave granted.
(2.)These appeals arise out of a judgment of the Division Bench of the Delhi High Court dated 10.10.2019 by which a Single Judge's order dated 14.01.2019 transferring a winding up proceeding pending before the High Court to the National Company Law Tribunal ["NCLT"] was upheld. The brief facts necessary to appreciate the controversy involved in these appeals are as follows:2.1. A winding up petition under sections 433(e) and (f), 434 and 439 of the Companies Act, 1956, being Co. Pet. No.731 of 2016 was filed by one Shyam Metalics and Energy Limited (Respondent No.1 herein), seeking winding up of the appellant company inasmuch as for goods supplied to the appellant company, a sum of Rs.4.55 crore was still due. The learned Company Judge in the Delhi High Court passed the 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 439 of the Company Act, 1956 (hereinafter referred to as 'the Act') seeking winding up of the respondent company.

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

3. No reply has been filed by the respondent. On the last date of hearing, the learned counsel for the respondent had taken time to settle the matter with the petitioner.

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

5. In these circumstances, the petition is admitted and the Official Liquidator attached to this Court is appointed as the Liquidator. He is directed to take over all the assets, books of accounts and records of the respondent-company forthwith. The citations be published in the Delhi editions 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 of hearing. The cost of publication is to be borne by the petitioner who shall deposit a sum Rs.75,000/- with the Official Liquidator within 2 weeks, subject to any further amounts that may be called for by the liquidator for this purpose, if required. The Official Liquidator shall also endeavour to prepare a complete inventory of all the assets of the respondent-company when the same are taken over; and the premises in which they are kept shall be sealed by him. At the same time, he may also seek the assistance of a valuer to value all assets to facilitate the process of winding up. It will also be open to the Official Liquidator to seek police help in the discharge of his duties, if he considers it appropriate to do so. The Official Liquidator to take all further steps that may be necessary in this 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 the court master."

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

"ORDER

14.01.2019

CA No.1240/2018

1. This application is filed seeking transfer of the present petition being Co.Pet. No.731/2016 to NCLT. This application has been filed by State Bank of India stating that an application under section 7 of the IBC is pending before NCLT. It has been pleaded that the respondent company had failed to pay outstanding dues of about Rs.722 crores to the applicant bank and hence this proceeding have been initiated before NCLT. The applicant bank is also a lead bank of the consortium of banks which have outstanding dues of about Rs.1100 crores.

2. This court had admitted the present winding up petition on 27.08.2018 and appointed the OL as the provisional liquidator of the respondent company.

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

4. The Ex. Management however objects to transfer of this petition. They have submitted that they have had no opportunity to defend the proceedings before NCLT.

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

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

"[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 any party or parties to any proceedings relating to the winding up of companies pending before any Court immediately before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018, may file an application for transfer of such proceedings and the Court may by order transfer such proceedings to the Tribunal and the proceedings so transferred shall be dealt with by the Tribunal as an application for initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016."

7. This court has already in CP 152/2016 vide decision dated 27.9.2018 in Rajni Anand vs. Cosmic Structures Limited held that the power under section 434(1)(c) of the Companies Act, 2013 for transfer of a petition to NCLT is discretionary and has to be exercised in the facts and circumstances of the case so as to expeditiously deal with the proceedings/winding up. 8. In my opinion, it would be in the interest of justice and in the interest of the respondent company and the creditors that the matter be transferred to NCLT in exercise of the discretionary powers of the court under section 434 of the Companies Act, 1956. The order appointing the OL is a recent order and not much time has elapsed since then. The OL has only taken steps to seize the office of the respondent company and the factory premises and further exercise is yet to be carried out. The application is allowed as above. The present petition is transferred to NCLT.

CO. PET. 731/2016

9. In view of the above order, the present petition is transferred to NCLT. All pending applications, if any, stand disposed of. The order admitting the petition and appointing the OL as the provisional 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 consortium of banks. The OL will hand over the possession of the assets as 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 to the Division Bench has been dismissed by the impugned order in which the learned Division Bench held as follows:

"41. The process under IBC is meant to find the best possible solution in a given case, which is beneficial to the company concerned as well as its creditors and other stakeholders. Therefore, in the interest of equity and justice, and keeping in mind the special nature of the IBC, if the Learned Company Judge has found it fit to transfer the winding up petition to NCLT on the application of respondent No. SBI- who is a secured creditor, this Court would not ordinarily interfere with the judgment of the Learned Company Judge, and that too, on the asking of the erstwhile management. The Learned Company Judge rightly recalled the order of appointment of Official Liquidator and admission of petition, since the liquidation was at its initial stage and the learned Company Judge was fully competent to do so. After the passing of the winding up order, the OL had not proceeded to take any effective or irreversible steps towards liquidation of the assets of the appellant company. All that he appears to have done is to take possession and control of the registered office of the appellant company and its factory premises and its records and books.

42. Pertinently, the respondent No. 2 has already initiated proceedings before the NCLT in respect of the appellant company which, in any event, would continue. The continuation of the liquidation proceedings at the hands of the OL in terms of the order passed by this Court would be incongruous with the proceedings that the NCLT has undertaken and would undertake under the IBC. Continuation of two parallel proceedings - one before the Company Court for liquidation, and the other before the IBC for resolution/ revival, would serve no useful purpose. The statutory scheme found in Section 434(1)(c) clearly is that the proceedings for winding up pending before the Company Court could be transferred to the NCLT and there is no provision for transfer 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 and dismiss the appeal."

(3.)Shri Sidharth Luthra, learned Senior Advocate appearing on behalf of the appellant company, referred to three judgments of this Court, namely, Jaipur Metals and Electricals Employees Organization v. Jaipur Metals and Electricals Ltd., (2019) 4 SCC 227 ["Jaipur Metals"], Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd., 2019 SCCOnLine SC 87 ["Forech"], and M/s Kaledonia Jute and Fibres Pvt. Ltd. v. M/s Axis Nirman and Industries Ltd. and Ors., 2020 SCCOnLine SC 943 ["Kaledonia"]. According to him, none of the judgments apply to the facts of the present case inasmuch as, on the facts in the present case, once a winding up order has been passed by the Company Judge, winding up proceedings alone must continue before the High Court and parallel proceedings under the Code cannot continue. He argued that Jaipur Metals (supra) makes it clear that even independent proceedings under the Code can only continue when the stage is before a winding up order is passed, which was the case on the facts before the Court. Likewise, in Forech (supra) also, the stage of the winding up proceeding was post service of notice of the winding up petition and before a winding up order was passed, as a result of which the 5th proviso to section 434(1)(c) of the Companies Act, 2013 was applied. Likewise, in Kaledonia (supra), though a winding up order had been passed on the facts of that case, the aforesaid order had been kept in abeyance. On facts therefore, these three cases are entirely distinguishable and would have no application to a scenario in which a winding up order has been passed and the Official Liquidator has in fact seized the assets of the company in order to begin the process of distribution to creditors and others which would ultimately result in dissolution of the company.
;


Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.