Ashok Commercial Enterprises vs. Parekh Aluminex Ltd.

Citation: Company Petition (CP) No. 136 of 2014

Decided on: April 11, 2017

Court: Bombay High Court

Coram: R. D. Dhanuka, J.

Facts

Ashok Commercial Enterprises (“Petitioner”) sought winding up of the Parekh Aluminex Ltd. (“Respondent”) on the ground that the Respondent was unable to pay its debts. This petition was placed on board for admission from time to time in last more than two years along with several other petitions for similar reliefs against the Respondent. Records of the Respondent company indicated that the secured creditors had declared the account of Respondent as fraudulent and most of the lenders had already exited and filed the recovery proceedings against the Respondent. Moreover, most of the secured creditors had already filed the proceedings against the Respondent for winding up. Thus, several petitions were pending against the Respondent.

Respondent requested the present petition to be transferred to National Company Law Tribunal (“NCLT”) in view of the amendment to the provisions of Insolvency and Bankruptcy Code, 2016 (“Bankruptcy Code”) and the notification dated 7th December, 2016, issued by the Central Govt. for transferring various proceedings pending before the High Court to NCLT.

Issue

Whether High Court has jurisdiction to hear proceedings for winding up petition after the enactment of Bankruptcy Code or the jurisdiction lies only with NCLT.

Held

The Court observed that Central Govt. on 7th December, 2016, by exercising powers conferred on it under Section 434(1) and (2) of the Companies Act, 2013, issued a Notification notifying “Companies (Transfer of Pending Proceedings) Rules, 2016” (“Transfer Rules”) and stating that various proceedings pending before the High Courts would be transferred to NCLT. Further, Rule 5 of the Transfer Rules provided that:

“All petitions relating to winding up under clause (e) of Section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not been served on the respondent as required under Rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub-section (4) of Section 419 of the Act, exercising territorial jurisdiction and such petitions shall be treated as applications under Sections 7, 8 or 9 of the Code, as the case may be, and dealt with in accordance with Part II of the Code…”

The Court further noted that Schedule XI to the Bankruptcy Code provides for amendments to various provisions of the Companies Act, 2013 (“2013 Act”) and also Companies Act, 1956 (“1956 Act”). Section 434(c) of 2013 Act provides that all proceedings under the 1956 Act, including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending before any District Court or High Court, will stand transferred to NCLT and NCLT may proceed to deal with such proceedings from the stage before their transfer. The above provision also came with a proviso that only those winding up proceedings should be transferred to NCLT that are at a stage as may be prescribed by the Central Government.

The Court clarified that not all winding up proceedings should be transferred to NCLT. In cases where the service of notice of the company petition under Rule 26 of the Companies (Court) Rules, 1959 is not complied with before 15th December, 2016, such Petitions will stand transferred to NCLT. On the other hand, all other Company Petitions would continue to be heard and adjudicated upon only by the High Court. The Legislative intent is thus clear that two sets of winding up proceedings would be heard by two different forum i.e. one by NCLT and another by the High Court depending upon the date of service of Petition before or after 15th December 2016.

The Court in the present case observed that the pending petition was served by the Petitioner to the Respondent before 15th December, 2016. Therefore, the present petition will continue to be dealt with by the High Court and the applicable provisions for this purpose will be the provisions of 1956 Act.

Conclusion

NCLT has jurisdiction over all winding up proceedings, including, inter alia, winding up on the ground of inability to pay debt, where such petition is served to a respondent after 15th December, 2016. For all other winding up petitions served before 15th December, 2016, High Court will continue to have jurisdiction.

Summary prepared by Team Indian Case Laws

Editor: Vivek Verma

Download full text of the judgment here

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