2019 (2) TMI 1049 - HC - Companies Law

Transfer Petition to NCLT: High Court Rules No Notice, Directs Registry to Comply

The High Court concluded that since no notice under Rule 26 was served, the petition must be transferred to the National Company Law Tribunal (NCLT) as ... NCLT territorial jurisdiction over the Winding up petition - No formal notice issued on the respondent that petition has to be transferred to NCLT - HELD THAT:- As per the orders of this court no formal notice was issued on the respondent to show cause as the respondent entered appearance on the first date itself and submitted that it was ready and willing to abide by all the terms of the agreement. In fact, on the first date when the matter was taken up for hearing, namely, 15.07.2015 this court after noting the contentions of the petitioner and the respondent noted as follows:- “It is made clear that in view of the peculiar circumstances of this case, no notice to show cause as to why the respondent-company be not wound up is issued to the respondent at this stage.” None of the subsequent orders have issued notice to the respondent. The respondent has also not been asked to file counter affidavit to the main petition to oppose its admission. Hence, no notice under Rule 26 of the Companies(Court) Rules, 1959 was served on the respondent. The Supreme Court in Forech India Ltd. vs. Edelweiss Assets Reconstruction Co.Ltd. (2019 (1) TMI 1442 - SUPREME COURT) has held that where no notice under Rule 26 of the Companies (Court) Rules is issued the petition has to be transferred to NCLT. This court would have no jurisdiction to retain the present matter in view section 434 read with Rule 5 of the Companies(Transfer of Pending Proceedings) Rules, 2016. It is directed accordingly. The Registry may transfer the present petition to NCLT. Issues Involved:1. Jurisdiction of the High Court to adjudicate the petition.2. Interpretation of Rule 26 of the Companies (Court) Rules, 1959.3. Transfer of pending winding-up petitions to NCLT as per Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016.4. Analysis of judgments from Bombay High Court, Madras High Court, and the Supreme Court regarding Rule 26 and Rule 27.Detailed Analysis:1. Jurisdiction of the High Court to Adjudicate the Petition:The primary issue addressed was whether the High Court had jurisdiction to adjudicate the petition given that no formal notice had been issued. The respondent argued that the court lacked jurisdiction and that the matter should be transferred to the National Company Law Tribunal (NCLT) based on a notification from the Ministry of Corporate Affairs dated 7.12.2016.2. Interpretation of Rule 26 of the Companies (Court) Rules, 1959:The petitioner’s counsel relied on the Bombay High Court judgment in West Hills Realty Private Ltd. vs. Neelkamal Realtors Tower Ltd., arguing that service of the petition on the respondent as per Rule 26 was sufficient for the High Court to retain jurisdiction. Rule 26 mandates the service of the petition on the respondent and other necessary parties. Rule 27 deals with the notice of the petition, which must be served not less than 14 days before the hearing.The Bombay High Court clarified that Rule 26 pertains to the service of the petition itself, independent of its admission, while Rule 27 pertains to the notice of hearing post-admission. This interpretation was contrasted with the Madras High Court’s view in Mr. Sanjay Goel vs. EL Forge Ltd., which held that Rule 26 pertains only to post-admission notices.3. Transfer of Pending Winding-Up Petitions to NCLT:The court examined Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016, which states that all winding-up petitions on the ground of inability to pay debts, pending before a High Court and where the petition has not been served on the respondent under Rule 26, shall be transferred to the NCLT.The Supreme Court in Forech India Ltd. v. Edelweiss Assets Reconstruction Co.Ltd. clarified that Rules 26 and 27 refer to a pre-admission scenario, and if no notice under Rule 26 was served, the petition must be transferred to the NCLT.4. Analysis of Judgments:The High Court noted the conflicting interpretations of Rule 26 by the Bombay and Madras High Courts. The Bombay High Court’s interpretation was deemed correct, emphasizing that Rule 26 requires service of the petition irrespective of its admission status. The Supreme Court in Forech India Ltd. supported this view, stating that the expression 'was admitted' in Form No. 6 means that notice has been issued for hearing before the Company Judge.In the present case, the respondent appeared voluntarily on the first date of hearing (15.07.2015), and no formal notice under Rule 26 was issued. The court had noted the respondent’s willingness to comply with the terms of the agreement, and no subsequent orders issued notice to the respondent.Conclusion:The High Court concluded that since no notice under Rule 26 was served, the petition must be transferred to the NCLT as per the Supreme Court’s directive in Forech India Ltd. The Registry was directed to transfer the present petition to the NCLT.