2017 (5) TMI 315 - HC - Insolvency and Bankruptcy

Transfer of Company Act proceedings to NCLT: Court directs prompt transmission to NCLT Mumbai

The court concluded that the proceedings under Sections 559 and 560 of the Companies Act, 1956, were transferred to the National Company Law Tribunal ... Proceedings transferred to the NCLT, Mumbai - whether in the present proceedings the conditions for not transferring set out in the proviso to Rule 3 of the said Company (Transfer of Pending proceedings) Rule, 2016 are satisfied and thus are not required to be transferred to NCLT? - Held that:- The legislature, accordingly, inserted proviso (ii) under Section 434(1)(c) of the Companies Act, 2013. Insofar as the proceedings other than the winding up are concerned, it is clear beyond reasonable doubt that where hearings have been completed and only pronouncement of order is pending or reserved with a view to avoid any delay and prejudice to the rights of the parties to the proceedings who are likely to be affected by such transfer at such stage, the legislation has provided such safeguard not to transfer such proceedings at such stage to the NCLT. Admittedly in this case the hearing of this petition was not concluded and thus in view of Section 434 (1)(c) read with proviso thereto, read with the Companies (Removal of Difficulties) Fourth Order, 2016, read with the Companies (Transfer of Pending Proceedings) Rules, 2016, these proceedings stood transferred to the NCLT with effect from 15th December, 2016. In my view the interpretation of the proviso to Rule 3 as sought to be canvased by the learned Senior Counsel for the petitioner thus being contrary to aforesaid provisions can not be accepted. Insofar as the winding up proceedings are concerned, the pending proceedings as on 15 December, 2016 in High Court shall stand transferred to the NCLT or not depend upon the effect of service under Rule 26 of the Companies (Court) Rules, 1959 or not whereas the criteria for transfer of all other proceedings including proceedings under Section 560 of the Companies Act, 1956 is different and transfer thereof is based on and is depending upon the condition whether hearing in such matters is concluded and the proceedings are reserved for orders for allowing or not. In my view, there is no discretion left in the hands of the Court to not to transfer such proceedings to the NCLT on the ground that it would be more convenient or that in the interest of justice the proceedings shall be heard by this Court, though the hearing is not concluded and proceedings are not reserved for order for allowing or not. Thus the present proceedings stand transferred to the NCLT, Mumbai. The Tribunal shall proceed with the matter from the stage before its transfer. Since the argument were not concluded before this Court, the parties may advance their argument before the NCLT. Issues Involved:1. Validity of striking off MoTech Software Pvt. Ltd. from the Register of Companies.2. Whether the proceedings under Sections 559 and 560 of the Companies Act, 1956 should be transferred to the National Company Law Tribunal (NCLT) as per Rule 3 of the Companies (Transfer of Pending Proceedings) Rules, 2016.Issue-wise Detailed Analysis:1. Validity of Striking off MoTech Software Pvt. Ltd. from the Register of Companies:The petitioner, Commissioner of Income Tax-8, Mumbai, sought a declaration that the striking off of MoTech Software Pvt. Ltd. from the Register of Companies by the Registrar of Companies (ROC) under Section 560(5) of the Companies Act, 1956, was null and void ab initio and of no legal effect. The petitioner also sought restoration of the company's name to the Register of Companies and the quashing of notices dated 20th April 2012, 20th May 2012, and notification dated 30th March 2013.2. Transfer of Proceedings to NCLT:During the argument, the issue arose whether the proceedings under Sections 559 and 560 of the Companies Act, 1956, should be transferred to the NCLT in view of Rule 3 of the Companies (Transfer of Pending Proceedings) Rules, 2016. Rule 3 mandates that all proceedings under the Act, except those reserved for orders, should be transferred to the NCLT. The petitioner argued that since the matter was substantially heard by the High Court, it should not be transferred to the NCLT to prevent further delay and injustice.Arguments Presented:- The petitioner contended that the amendments to the petition were necessary to clarify and correct inadvertent mistakes. The amendments were allowed by the court on 21st April 2016, subject to costs, and the respondents were permitted to file further affidavits.- The petitioner argued that the expression 'or otherwise' in Rule 3 should be interpreted to allow the High Court to retain jurisdiction over matters that were substantially heard, even if not reserved for orders.- The respondents countered that the proceedings were not reserved for orders, and no arguments were advanced post-amendment. Therefore, the proceedings should be transferred to the NCLT as per Section 434(1)(c) of the Companies Act, 2013.Court's Analysis:- The court noted that the Companies Act, 1956, was repealed by the Companies Act, 2013, and various provisions, including those related to the striking off of companies, were brought into force through notifications.- Section 252 of the Companies Act, 2013, provides for an appeal to the NCLT against the order of the Registrar notifying the company as dissolved.- The court examined Rule 3 of the Companies (Transfer of Pending Proceedings) Rules, 2016, which mandates the transfer of all proceedings, except those reserved for orders, to the NCLT.- The court found that the proceedings were not reserved for orders, and no arguments were concluded post-amendment. Therefore, the conditions for not transferring the proceedings to the NCLT were not satisfied.Conclusion:The court concluded that the proceedings under Sections 559 and 560 of the Companies Act, 1956, stood transferred to the NCLT as per Rule 3 of the Companies (Transfer of Pending Proceedings) Rules, 2016. The NCLT would proceed with the matter from the stage before its transfer. The court directed the office to transmit the papers and proceedings to the NCLT, Mumbai, expeditiously.