The Himachal Pradesh High Court upheld the transfer of a winding-up petition to the NCLT, noting that while courts have the discretion to transfer such cases, the key factor is whether the company's corporate death is unavoidable.
The High Court dismissed an appeal challenging the transfer of a winding-up petition to the NCLT. The appellant had sought winding-up of the respondent company for failing to pay ₹3.25 crore, alleging commercial insolvency. During the proceedings, the respondent applied under Section 434(1)(c) of the Companies Act to transfer the case to NCLT, which was allowed.
The Division Bench of Justice Tarlok Singh Chauhan and Justice Sushil Kukreja observed, “No doubt, the Court has the discretion to transfer proceedings depending upon the stage of the proceedings. Obviously, the main consideration that would weigh before the Court as to whether the corporate death of the company is inevitable, then it would exercise its jurisdiction not to transfer such proceedings and where nothing can said to have become irretrievable in the sense as mentioned in para 25 of the Action Ispat and Power Pvt. Ltd. (supra), then the Court would normally transfer such proceedings.”
The Court referred to the fifth proviso of Section 434(1)(c), introduced to address conflicts arising from the implementation of the IBC. The Court noted that the IBC takes precedence over the Companies Act in case of conflict, as its primary aim is to revive financially distressed companies. It emphasized that transferring winding-up cases to the NCLT may be necessary to avoid parallel proceedings and ensure effective resolution under the IBC framework.
The Bench observed that in the present case, no irreversible actions—such as the sale of the company's assets—had taken place, referencing the Action Ispat judgment. It emphasized that unless the winding-up process has reached a point where reversal is impossible, the Company Court can consider transferring the case to the NCLT. Only when the proceedings are at an irreversible stage should the Court continue with the winding-up rather than allowing transfer under the IBC framework.
The Court dismissed Elecon Engineering’s appeal and upheld the transfer of the winding-up petition to the NCLT.
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