Transfer of pending winding up proceedings to NCLT becomes mandatory once a post-amendment transfer application is filed.
A winding up proceeding referred by the BIFR and pending before the High Court must be transferred to the National Company Law Tribunal when a transfer application is filed after 17.08.2018. Section 434(1)(c) of the Companies Act, 2013 and Rules 5 and 6 of the Companies (Transfer of Pending Proceedings) Rules, 2016, read with the controlling Supreme Court interpretation, require such pending Section 20 Sick Industrial Companies Act matters to move from the High Court to the NCLT. On transfer, the matter is treated as an application for initiation of the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016.
Issues: Whether a winding up proceeding referred by the Board for Industrial and Financial Reconstruction and pending before the High Court, on an application moved after 17.08.2018, was required to be transferred to the National Company Law Tribunal for initiation of the Corporate Insolvency Resolution Process.
Analysis: The applicable framework comprised Section 434(1)(c) of the Companies Act, 2013 and Rules 5 and 6 of the Companies (Transfer of Pending Proceedings) Rules, 2016, as interpreted in the controlling Supreme Court decision. Proceedings falling under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 and pending before the High Court were to continue before that forum until a party sought transfer after the relevant amendment date. Once such an application was made, the High Court had no discretion to retain the matter and had to transfer it to the National Company Law Tribunal, where it would be dealt with as an application for initiation of the Corporate Insolvency Resolution Process.
Conclusion: The transfer application was maintainable and had to be allowed, and the winding up proceeding was required to be transferred to the National Company Law Tribunal for further action under the Insolvency and Bankruptcy Code, 2016.
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