2019 (3) TMI 886 - HC - Companies Law

Court Rules High Court's Jurisdiction in Company Matters Ousted by Implication Post-Amendment: Implications for Pending Cases

NEW CENTRAL JUTE MILLS SHRAMIK SANGH AND ANR. Versus SHALIMAR INDUSTRIES LTD. & ORS.

The court ruled that the High Court's jurisdiction in company matters can be ousted by implication post-amendment, transferring all pending proceedings to ... Transfer of the winding-up proceedings to any Tribunal - Transfer of pending proceedings of Winding up on the ground of inability to pay debts - Company gone into liquidation pursuant to an order passed by the company Court on a creditor’s winding-up petition - HELD THAT:- On a reading of Section 434(1)(c) of the Act of 2013 with clause 5(1) of the Notification of December 7, 2016 that it is only where a petition for winding-up instituted under Section 433 (e) of the Act of 1956 has not been served on the company, will such winding-up petition stand transferred to the relevant Bench of the Tribunal. In the present case, the creditor’s winding-up petition resulted in an order of winding-up being passed on June 14, 2016. Thus, as at December 7, 2016, there was no question of transfer of the winding-up proceedings to any Tribunal. The appeal that has been carried from an order passed in the winding-up proceedings is not contemplated under the Act of 2013 or any notification issued thereunder to stand transferred to any tribunal. In any event, it can scarcely be expected that an order passed by a High Court would be carried by way of an appeal to any tribunal. In this context, it may be apposite to record qua the judgment in India Steam Laundry [2018 (9) TMI 337 - CALCUTTA HIGH COURT] that the ratio decidendi in a judgment is exactly what the judgment decides in the context of the issues before it and not what the judgment may imply to say. Without going into the legality of the answers rendered in India Steam Laundry the decision and the dictum therefore, be confined to a case of oppression and mismanagement instituted in this Court prior to the 1988 Amendment coming into effect in 1991. The dictum has no bearing on other company proceedings, far less any impact on proceedings that have been saved and are required to be continued in the High Courts pursuant to the first proviso to Section 434(1)(c) of the Act and as prescribed by the Central Government by the notification of December 7, 2016. The only alteration to such position now is that any party to the pending proceedings in this Court has a right to apply for the transfer of the proceedings to the relevant tribunal. The objection taken by IIBI Limited and IFCI Limited as to the maintainability of the present appeal is, thus, overruled. These matters pertaining to New Central Jute Mills Company Limited (in liquidation) will now appear one week after the puja vacation. Issues Involved:1. Jurisdiction of the High Court in company matters post-amendment.2. Transfer of proceedings to the National Company Law Tribunal (NCLT).3. Interpretation of terms 'all' and 'including' in Section 434(1)(c) of the Companies Act, 2013.4. Applicability of Section 68 of the Amendment Act, 1988.Detailed Analysis:1. Jurisdiction of the High Court in Company Matters Post-Amendment:The primary issue was whether the High Court retains jurisdiction over company matters following legislative amendments. The judgment referenced a prior decision in the case of India Steam Laundry (P) Limited, which addressed whether the jurisdiction of the High Court could be ousted by implication. The court concluded that the jurisdiction of the High Court in company matters could be ousted by implication, as the special jurisdiction conferred by the Companies Act, 1956, can be repealed by the amendment of the enactment that conferred such jurisdiction.2. Transfer of Proceedings to the National Company Law Tribunal (NCLT):The court examined whether ongoing proceedings should be transferred to the NCLT following amendments to Section 434 of the Companies Act, 2013. The judgment clarified that the transfer of proceedings is not at the discretion of the parties but is mandated by legislative changes. Specifically, the term 'all' in Section 434(1)(c) was interpreted expansively to include all matters pending before the District Courts and High Courts, which must be transferred to the NCLT.3. Interpretation of Terms 'All' and 'Including' in Section 434(1)(c) of the Companies Act, 2013:The court addressed the interpretation of the terms 'all' and 'including' in Section 434(1)(c). It was determined that these terms are extensive and expansive, meaning that all proceedings under the Companies Act, 1956, including those pending before the District Courts and High Courts, must be transferred to the NCLT. This interpretation was crucial in determining the scope of matters to be transferred.4. Applicability of Section 68 of the Amendment Act, 1988:The judgment also touched upon whether Section 68 of the Amendment Act, 1988, continues to subsist following the enactment of Section 434(1)(c) of the Companies Act, 2013. The court held that the transitional provision in Section 68 of the Amendment Act, 1988, is inconsistent with the new provision and is therefore impliedly repealed.Impact on Current Proceedings:The court noted that the winding-up order for New Central Jute Mills Company Limited was passed on June 14, 2016, before the relevant amendments and notifications. Consequently, there was no requirement for the winding-up proceedings to be transferred to the NCLT. The appeal from the winding-up order does not fall under the purview of matters to be transferred to the NCLT, as per the Companies Act, 2013, or any related notifications.Conclusion:The objection raised by the secured creditors, IIBI Limited and IFCI Limited, regarding the maintainability of the appeal was overruled. The court emphasized that the decision in India Steam Laundry (P) Limited is confined to cases of oppression and mismanagement and does not impact other company proceedings. The matters concerning New Central Jute Mills Company Limited (in liquidation) were scheduled to appear one week after the puja vacation.