Company winding-up proceedings cannot be transferred to NCLT when assets sold and proceedings irreversibly advanced

The Delhi HC dismissed an application seeking transfer of winding-up proceedings to NCLT. The Court distinguished the case from Action Ispat, noting that unlike that case where no effective steps had been taken, here the winding-up had progressed to an irreversible stage. The company's assets had been sold, plant and machinery were with the creditor, and land was acquired by Haryana Government. With no assets available to satisfy creditor dues and proceedings at an advanced stage, the Court found no good reason for transfer to NCLT.

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Issues:
Transfer of winding-up proceedings to NCLT under the Companies Act, 2013.

Analysis:
The judgment addressed an application for the transfer of winding-up proceedings to the National Company Law Tribunal (NCLT) under the Companies Act, 2013. The applicant, an ex-Director and shareholder of the company, relied on the Supreme Court's decision in Action Ispat and Power Pvt. Ltd. v. Shyam Metalics and Energy Ltd. to support the transfer. The applicant argued that transferring the proceedings to NCLT would initiate the corporate insolvency process, aiming to revive the company under the Insolvency and Bankruptcy Code, 2016 (IBC). The applicant emphasized that the IBC serves as a beneficial legislation for corporate debtors' revival and is not merely a recovery tool for creditors.

The creditor, Pegasus Assets Reconstruction Pvt. Ltd., opposed the application, questioning the applicant's locus standi and contending that the application was not maintainable. The creditor argued that the applicant, as a shareholder/ex-Director, was not entitled to file such an application for transfer. Additionally, the creditor highlighted that the proceedings had reached an advanced stage, making it inappropriate to transfer them to NCLT at that point.

The court considered the arguments presented by both parties and reviewed the preceding proceedings of the case. It noted the history of the company's winding-up proceedings, including the declaration of the company as a 'sick company' by the Board for Industrial and Financial Reconstruction (BIFR) and subsequent orders for winding up and appointment of the Official Liquidator. The court also highlighted the challenges faced during the auction process and the subsequent possession issues related to the company's assets.

Referring to the Supreme Court's observations in Action Ispat, the court emphasized that the transfer of proceedings to NCLT should occur before irreversible steps in the winding-up process. The court noted that in the present case, significant progress had been made in the liquidation proceedings, including the possession of assets by the creditor and the acquisition of the company's land. Considering the irreversible stage reached in the winding-up proceedings and the lack of available assets to satisfy the creditor's dues, the court concluded that transferring the proceedings to NCLT would not be beneficial. The court dismissed the application for transfer based on the advanced stage of the winding-up process and the lack of grounds to warrant a transfer to NCLT.

In conclusion, the court dismissed the application for transfer of winding-up proceedings to NCLT, citing the irreversible stage of the liquidation proceedings and the lack of assets available to satisfy the creditor's dues. The court's decision was based on the specific circumstances of the case, emphasizing the advanced state of the winding-up process and the absence of compelling reasons to warrant a transfer to NCLT.

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