TaxTMI 
TaxTMI 
2022 (3) TMI 333
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....of compromise between M/s.Viswapriya (India) Limited (Viswapriya or the Company) and its creditors. In Comp. A. No.413 of 2019, Analog seeks the transfer of Comp.A.No.367 of 2019, which was filed to recall the order sanctioning the scheme of compromise and to consequently wind-up the sponsor, Analog. In Comp. A. No.414 of 2019, Analog seeks the transfer of Comp.A.No.366 of 2019, which was also filed to recall the order sanctioning the scheme of compromise and to consequently wind-up Vishwapriya. In Comp.A.No.313 of 2021, Viswapriya seeks the dismissal of Comp.A.No.56 of 2021, which was filed to direct sale of specific assets of Vishwapriya. 2. By order dated 30.04.2014, this Court sanctioned the scheme of compromise (the Scheme) proposed by Analog. In terms thereof, the secured debenture holders were directed to be paid their dues within the time limits specified in the Scheme in alteration of the original terms of repayment under the relevant debenture. The admitted position is that the Scheme was not adhered to either by the proponent of the scheme, Analog, or the Company, Viswapriya. Therefore, by subsequent proceedings under Section 392 of CA 1956, this Court appointed Mr.P.....
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....(the NCLT) in view of the recent amendments to the Companies Act, 2013 (CA 2013). The said three applications are considered and disposed of by this order. 4. Mr.Prakash Goklaney, learned counsel for Analog, submitted that this Court is required to transfer the applications to the NCLT upon request by any person who is a party to the proceedings. According to him, once it is concluded that the Scheme could not be implemented, the most drastic consequence would be to order the winding-up of the Company. In such circumstances, upon request by a party thereto, in terms of the second proviso to Section 434(1)(c) of CA 2013, the applications of which transfer is requested must be transferred to the NCLT. In support of this contention, Mr.Prakash Goklaney referred to and relied upon the following judgments: (i) Jaipur Metals and Electricals Employees Organisation v. Jaipur Metals and Electricals Ltd (2019) 4 SCC 227 (Jaipur Metals), whereby the Hon'ble Supreme Court held that all proceedings under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985, which are pending before High Courts, must be transferred to the NCLT if a party files an application....
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....nsider matters relating to the implementation of a scheme of arrangement which was sanctioned by any high court, including this Court. Thus, if Section 231(3) of CA 2013 is applied to the facts of this case, he contended that the NCLT has the authority to consider any application with regard to the implementation of the Scheme, which was sanctioned by this Court on 30.04.2014. Since the NCLT has the jurisdiction to consider applications relating to the implementation of the Scheme, he contended that this Court does not have the authority or jurisdiction to consider such applications in view of the Companies(Transfer of Pending Proceedings) Rules, 2016(the Transfer Rules). By referring to Rule 3 of the Transfer Rules, he contended that the said Rule applies to all proceedings other than proceedings for winding up. Consequently, Rule 3 applies to proceedings for sanction of a scheme of compromise. He contended that the petition under Section 391 of CA 1956 was disposed of by sanctioning the Scheme. Under Rule 3, he contended that the only exception to transfer is with regard to proceedings which are reserved for orders, either to be allowed or otherwise. None of the applications whic....
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....eedings should be retained by this Court. Besides, he contended that this Court should take charge of the assets and affairs and initiate liquidation of Viswapriya and Analog. 8. The rival contentions raise several questions. Although the contention that CA 1956, including Section 391 thereof, was repealed was the last contention, this issue should be dealt with first for the following reason: if accepted, this Court cannot exercise authority to consider and decide these applications irrespective of the answer to the other queries. For such purpose, Section 434(1)(c) and the relevant provisos thereto are set out below: "S.434. Transfer of certain pending proceedings. (1)On such date as may be notified by the Central Government in this behalf,- (c)all proceedings under the Companies Act, 1956, including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding-up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer: Provided that only suc....
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....at CA 1956 and the Companies (Court) Rules, 1959 continue to apply to matters retained by the High Court. In effect, if validly retained, Section 465 of CA 2013 has no effect on the continued application of CA 1956 or the rules framed thereunder. 10. The question whether these proceedings are required to be transferred is, however, a distinct matter. Since this issue was considered previously, it warrants scrutiny whether the earlier order of this Court constitutes a bar to the present request for transfer. By order dated 05.01.2017 in CA No.1175 of 2016 and C.A.Nos.609 to 614 of 2016, this Court concluded that the proceedings are not liable to be transferred to the jurisdictional NCLT. In paragraph 12 of the said order, this Court held, in relevant part, as under: ''12....All these factors would clearly establish that the Scheme having been approved, and this court having appointed an Administrator, by order, dated 22.08.2016, it is for this Court to monitor as to whether the Scheme has been implemented or not, and what is the intent and purport for giving up the scheme and whether there were any hidden agenda for giving up the Scheme with an intention to stall....
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....llectively, including proceedings for winding up or schemes of arrangement. To put it differently, only the provisos deal separately with winding up proceedings and other proceedings, and not the principal clause. Secondly, it should be noticed that the above provision deals with proceedings and not applications or even petitions. While enumerating proceedings illustratively, the language used is "including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies... shall stand transferred...." The expression "proceedings" is not defined either in CA 1956 or CA 2013. The expression "relating to" is also undefined but certainly widens the scope of the expression "proceedings". In effect, Section 434 of CA 2013 deals with transfer of proceedings, including proceedings relating to a scheme of arrangement, and not transfer of individual applications or petitions relating thereto. As regards proceedings relating to schemes of arrangement, the second proviso to Section 434(1)(c) provides for transfer thereof if orders were not reserved. Rule 3 of the Transfer Rules also deals with the transfer of pending proceedings other than winding u....
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....y the Central Government, and Rule 5 prescribes that the criterion or cut-off factor is whether the petition was served on the respondent under Rule 26 of the Companies (Court) Rules 1959. If served, the proceedings before the jurisdictional high court shall not stand transferred unless a request is made by a party thereto in terms of the amended last proviso to Section 434(1) of CA 2013. If the expression "proceedings" is construed as each individual application relating to a winding up petition, given the cut-off criterion, if the petition for winding up had crossed the Rule 26 stage, such petition would be retained by the relevant high court, whereas individual applications in the winding up petition would stand transferred. Clearly, this would result in ludicrous consequences. Even in the context of a scheme of arrangement, it could lead to a situation wherein the petition in which the scheme is sanctioned and individual applications in which orders are reserved would be retained by the high court concerned, whereas other applications relating to the same scheme of arrangement would stand transferred to the NCLT. In such event, the appeals arising out of the retained petition a....
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...., AFSPL today seeks to do; given what was portrayed to this Court, when the scheme was sanctioned in the first instance.'' After recording the above finding, the Court appointed Mr.P.H.Arvindh Pandian, Senior Advocate, as the Administrator. The said Administrator has also filed about five reports before this Court. Criminal proceedings are also pending before the TNPID Court and the learned Public Prosecutor has filed a status report dated 26.10.2021 in such regard. In addition, a contempt petition is pending before this Court. 16. While Mr.Goklaney and Mr.Subramanian referred to and relied upon several orders of the Hon'ble Supreme Court relating to Section 434 of CA 2013, the said orders pertain to winding up proceedings, which were retained by the High Court because such proceedings had crossed the stage of issuance of notice as per Rule 26 of the Companies (Court) Rules 1959. Pursuant to the amendment to Section 434 by the introduction of the last proviso thereto, a party to the proceedings is entitled to file an application for transfer in retained matters. Applications for transfer were filed in those cases by resorting to such proviso. In contrast, in the p....