TaxTMI 
TaxTMI 
2021 (8) TMI 1413
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....terim Application Lodg No.13530 of 2021 is filed by the Applicant - Company (Original Respondent in the Company Petition) to transfer the above Company Petition pending before this Court to the National Company Law Tribunal, Mumbai (for short the "NCLT"). This relief is sought on the basis of the 5th proviso to Section 434 (1) (c) of the Companies Act, 2013. 2. The above Company Petition (Company Petition No. 708 of 2016) was filed by the Petitioner against the Applicant - Company under Section 433 read with Section 434 of the Companies Act, 1956. It was presented on 7th September, 2016 and was filed on the basis that the Applicant - Company had not paid the dues of the Petitioner in respect of a work order dated 15th January, 2014 and therefore ought to be wound up. 3. This Company Petition was admitted by this Court vide its order dated 18th September, 2018. It was admitted on the basis of an acknowledgment of debt. A cheque was also issued towards a down payment of Rs. 1 Crore which was dishonoured due to insufficiency of funds. Thereafter, by an order dated 7th August, 2019 the Applicant - Company was finally wound up and the Official Liquidator was appointed in respect of th....
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....d that the primary focus of the IBC is to ensure the revival and continuation of the Corporate Debtor by protecting it from its own management as well as from a corporate death through the process of liquidation. He submitted that the IBC is thus a beneficial legislation as its primary endeavour is to put the Corporate Debtor back on its feet, as it is not merely a recovery legislation for its creditors. The interests of the Corporate Debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in the management of the Company in default. He submitted that even the resolution process under the IBC, is a process to examine whether the Corporate Debtor can be revived in a non adversarial fashion in order to protect its interests. He submitted that one must not lose sight of the primary objective of the IBC which is to try and endeavour the revival of the Corporate Debtor rather than its death. It is keeping all this in mind that discretion ought to be exercised by this Court under the 5th proviso to Section 434 (1) (c) of the Companies Act, 2013, was the submission of Mr. Shroff. 6. Mr. Shroff submitted that insofar as the transfer of winding up pro....
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....e to resuscitate the Corporate Debtor keeping in mind the larger public interest, which includes not only the workmen of the Corporate Debtor, but also its creditors and the goods it produces to enhance the economy of the country. 8. Mr. Shroff submitted that in the facts of the present case, there are no circumstances which can be termed as irreversible for this Court not to exercise its jurisdiction and discretion to transfer the above Petition to the NCLT. Adverting to the facts of the present case, he submitted that the above Company Petition was presented before this Court on 7th September, 2016. Thereafter, the Company Petition was admitted on 18th September, 2018 and it was finally wound up by an order dated 7th August, 2019. Being aggrieved by the winding up order, the Applicant - Company preferred an Appeal before the Division Bench. The Division Bench, on 7th May, 2021, directed the ex-director of the Applicant - Company to deposit a sum of Rs. 2.50 Crores in this Court as a condition precedent for setting aside the order of winding up. The deposit of Rs.2.50 Crores was duly made before the Prothonotary and Senior Master, and hence the order of winding up stood set aside....
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....e Petitioner as a creditor of the Applicant - Company for a sum of Rs. 13.09 Crores. The balance-sheets of the Applicant - Company as on 31st March 2016, 2017 and 2018 disclosed the Petitioner as a creditor of the Applicant - Company for the sum of Rs. 10.64 Crores. Mr. Tamboly submitted that despite these admissions, the Applicant - Company (Original Respondent - Company) did not pay the Petitioner's legitimate outstandings. It is in these circumstances that the above Company Petition came to be filed. 12. Mr. Tamboly submitted that during the course of hearing of the admission of the above Petition, the Directors of the Applicant - Company negotiated a settlement with the Petitioner which culminated in an in-principle settlement by which the parties agreed that the Applicant - Company would pay a sum of Rs. 9.6 Crores to the Petitioner towards a full and final settlement of the Petitioner's claim. In fact, this was reported to this Court by the counsels for both parties and time was granted to file the terms of the settlement. However, on the next occasion, the Director of the Applicant - Company did not turn up to sign the engrossed consent terms before this Court. This Cou....
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.... to the Appeal Court, it called upon the Applicant - Company (the Appellant) to produce the original Demand Draft in Court. Faced with this situation, the Applicant - Company (the Appellant) sought to contend that the same was with their accountant in Jalgaon and that they were unable to produce it as he was hospitalized. The Appeal Court, realizing that the story of the Applicant - Company was extremely fishy, asked the Applicant - Company (the Appellant) to disclose the details of the hospitalization. Further, considering that Applicant - Company (the Appellant) was taking undue advantage of the matter being heard virtually under the then prevailing SOP, the Appeal Court directed the matter to be taken up physically and the Applicant - Company (the Appellant) was directed to remain present in Court. The Ex-Director of the Applicant - Company (the Appellant) who was physically present in Court with his son, admitted that the Demand Draft which he claimed was with his accountant, was actually no longer in force. Be that as it may, on 7th May, 2021, the Appeal was disposed of by consent wherein the Applicant - Company was inter alia directed to deposit a sum of Rs. 2.50 Crores and u....
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....Applicant - Company as irreversible events have occurred as contemplated in the judgment of the Supreme Court in the case of Action Ispat and Power Pvt. Ltd. (supra). The irreversible events, according to Mr. Tamboly, are as follows: - (a) The first irreversible event is the alleged transfer of shares in the joint venture in the name of one Mr. Chandrakant Sonawane without the leave of this Court and/or the Official Liquidator. He submitted that this transfer was done after the presentation of the winding up Petition. He submitted that in fact the Official Liquidator has filed an Official Liquidator's Report No. 90 of 2020 dated 15th October, 2020 demonstrating the illegal and collusive nature of these alleged transactions. (b) The next irreversible event was the sale of a Duplex Apartment No. A 502, on the 5th and 6th Floor in "OPUS Building", in Survey No.454 PMC Gultekdi Salisbuag, Park near Poonawala Garden, Pune ("the said flat"). Mr. Tamboly submitted that one Mr. Prince R. Shah, claims to be the owner of the said flat, and has furnished copies of the agreement for sale dated 30th August, 2017 and a Deed of Assignment dated 12th October, 2018. Mr. Tamboly submitted that t....
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....y be, can make an application to avoid such a transaction/s. He submitted that in the facts of the present case, if the matter is transferred, then the transactions referred to above would not be eligible for avoidance under Section 43 as they would be beyond the period of two years and one year respectively as set out therein. He made similar submissions with reference to Section 45 which deals with avoidance of undervalued transactions. He submitted that undervalued transactions can be avoided if they are made with a person who is a related party within the period of two years preceding the insolvency commencement date and with any other person within a period of one year preceding the insolvency commencement date. Mr. Tamboly submitted that by allowing the above transfer application, the Petitioner and/or the Liquidator and/or the resolution professional would not be able to assail the said under-valued transfer as they would not fall within the stipulated time as contemplated under Sections 45 and 46 of the IBC. 20. The last argument canvassed by Mr. Tamboly was that an irreversible stage has been reached also because under Section 536(2) of the Companies Act, 1956, it is for ....
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....22. As can be seen from the aforesaid proviso, any party or parties to any proceedings relating to the winding up of companies pending before any Court immediately before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018, may file an application for transfer of such proceedings. The Court may by an order, transfer such proceedings to the Tribunal and the proceedings so transferred shall be dealt with by the Tribunal as an application for initiation of the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016. The aforesaid proviso basically stipulates that the Court may exercise its discretionary powers to transfer any winding up proceedings to the NCLT. 23. The reason for inserting the aforesaid proviso (the 5th proviso) appears to be quite clear. Initially, so far as the transfer of winding up proceedings were concerned, the Code began tentatively by leaving proceedings relating to winding up of companies to be transferred to the NCLT at a stage as may be prescribed by the Central Government. This was stipulated by the Transfer Rules, 2016 which came into force w. e. f. 15th December, 2016. Rules 5 and 6 referred ....
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....e which would warrant a Company Court staying its hands on a transfer application made to it by a creditor or any party to the proceedings. It is only where the winding-up proceedings have reached a stage where it would be irreversible, making it impossible to set the clock back that the Company Court must proceed with the winding up, instead of transferring the proceedings to NCLT to now be decided in accordance with the provisions of the Code. Whether this stage is reached would depend upon the facts and circumstances of each case. 26. In the facts of the present case, the concurrent finding of the Company Judge and the Division Bench [Action Ispat & Power (P) Ltd. v. Shyam Metalics & Energy Ltd., 2019 SCC OnLine Del 10424] is that despite the fact that the liquidator has taken possession and control of the registered office of the appellant Company and its factory premises, records and books, no irreversible steps towards winding up of the appellant Company have otherwise taken place. This being so, the Company Court has correctly exercised the discretion vested in it by the 5th proviso to Section 434(1)(c). Resultantly, the civil appeal arising out of SLP (Civil) No. 26415 of....
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...., paras 14 and 25) "14. What becomes clear upon a reading of the three judgments of this Court is the following: 14.1. So far as transfer of winding-up proceedings is concerned, the Code began tentatively by leaving proceedings relating to winding up of companies to be transferred to NCLT at a stage as may be prescribed by the Central Government. 14.2. This was done by the Transfer Rules, 2016 [Companies (Transfer of Pending Proceedings) Rules, 2016] which came into force with effect from 15-12- 2016. Rules 5 and 6 referred to three types of proceedings. Only those proceedings which are at the stage of pre-service of notice of the winding-up petition stand compulsorily transferred to NCLT. 14.3. The result therefore was that post notice and pre-admission of winding-up petitions, parallel proceedings would continue under both statutes, leading to a most unsatisfactory state of affairs. This led to the introduction of the 5th proviso to Section 434(1)(c) which, as has been correctly pointed out in Kaledonia [Kaledonia Jute & Fibres (P) Ltd. v. Axis Nirman & Industries Ltd., (2021) 2 SCC 403] , is not restricted to any particular stage of a winding-up proceeding. 14.4. There....
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....here a company in winding up is near corporate death that no transfer of the winding-up proceeding would then take place to NCLT to be tried as a proceeding under the IBC. Short of an irresistible conclusion that corporate death is inevitable, every effort should be made to resuscitate the corporate debtor in the larger public interest, which includes not only the workmen of the corporate debtor, but also its creditors and the goods it produces in the larger interest of the economy of the country. It is, thus, not possible to accede to the argument on behalf of the appellant that given Section 446 of the Companies Act, 1956/Section 279 of the Companies Act, 2013, once a winding-up petition is admitted, the winding-up petition should trump any subsequent attempt at revival of the company through a Section 7 or Section 9 petition filed under the IBC. While it is true that Sections 391 to 393 of the Companies Act, 1956 may, in a given factual circumstance, be availed of to pull the company out of the red, Section 230(1) of the Companies Act, 2013 is instructive and provides as follows: "230. Power to compromise or make arrangements with creditors and members.-(1) Where a compromise ....
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....- Company one last opportunity to be revived. In the facts of the present case, I am unable to agree with Mr. Tamboly that simply because the Applicant - Company entered into certain transactions after the presentation of the winding up petition, the same results in any irreversible event. It is not as if that those transactions cannot be assailed under the provisions of the IBC before the NCLT. In fact, Section 49 of the IBC specifically deals with transactions entered into by the corporate debtor in order to defraud the creditors and inter alia stipulates that where the corporate debtor has entered into an undervalued transaction as referred to in sub-section (2) of Section 45 and the Adjudicating Authority is satisfied that such transaction was deliberately entered into by such corporate debtor, (a) for keeping assets of the corporate debtor beyond the reach of any person who is entitled to make a claim against the corporate debtor; or (b) in order to adversely affect the interests of such a person in relation to the claim; then the Adjudicating Authority may:- (i) pass an order restoring the position as it existed before such a transaction took place as if the transaction had n....