1997 (3) TMI 471 - HC - Companies Law

Supreme Court clarifies transfer of suits to company court under Companies Act, emphasizes court's discretion

The Supreme Court addressed the transfer of suits from the Bombay High Court to the company court under section 446 of the Companies Act, emphasizing the ... Winding up – Suits stayed on winding-up order Issues:The judgment involves issues related to the transfer of suits pending before the Bombay High Court to the company court, granting leave to continue suits outside winding up proceedings, and the jurisdiction of the company court under section 446 of the Companies Act, 1956.Transfer of Suits:The judgment addressed multiple applications, including M.C.A. No. 12 of 1991, seeking to transfer suits pending before the Bombay High Court to the company court under section 446 of the Companies Act, 1956. The Supreme Court emphasized the discretion of the company court in such matters, considering the rationale behind the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.Jurisdiction under Section 446:Section 446 of the Companies Act grants special powers to the company court regarding suits pending during winding up. The court has the authority to withdraw suits and try them, as highlighted in the Supreme Court's decision in Industrial Credit and Investment Corporation of India Ltd. v. Srinivas Agencies [1996] 86 Comp Cas 255. The judgment emphasized the need for reasonableness in imposing terms and considering the dues of workmen alongside secured creditors.Impact of the Recovery of Debts Act:The judgment analyzed the implications of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 on the jurisdiction of the company court. Section 31 of the 1993 Act mandates the transfer of cases to the designated Tribunal, overriding the provisions of the Companies Act, 1956. Consequently, suits filed by financial institutions under the 1993 Act must be tried before the specialized machinery established by that Act.Enforcement and Winding Up Process:Regarding enforcement and winding up proceedings, the judgment clarified that no leave is required to continue suits falling under the 1993 Act, and the company court lacks jurisdiction over such matters post the Act's 'appointed day.' The official liquidator was directed to take necessary steps to represent the company in relevant suits and to ensure compliance with orders for the winding up process.Compliance and Financial Obligations:The judgment emphasized the obligation of secured creditors to contribute towards the winding up expenses, as directed by previous court orders. The I.C.I.C.I. and the I.D.B.I. were instructed to make payments to the official liquidator within a specified timeframe to facilitate the winding up proceedings effectively.This summary provides a detailed overview of the judgment's analysis and decisions concerning the transfer of suits, jurisdiction under section 446, the impact of the Recovery of Debts Act, enforcement procedures, and financial obligations of secured creditors in the winding up process.