FORECH INDIA LTD. versus EDELWEISS ASSETS RECONSTRUCTION CO. LTD.

FORECH INDIA LTD. versus EDELWEISS ASSETS RECONSTRUCTION CO. LTD.

Proceedings under Sections 7 and 9 of the Insolvency & Bankruptcy Code, 2016 are independent of any winding up process pending before the High Court. Even when a winding up petition notice (Rule 26, Companies (Court) Rules, 1959) was served before the Code commenced, NCLT proceedings under IBC may proceed. However, in view of amended Section 434 of the Companies Act, 2013 (2018), parties may apply to transfer pending winding up petitions to NCLT to be treated as IBC proceedings. The NCLAT's ultimate order was affirmed on this basis, but its reasoning regarding Section 11 was found to be erroneous.

Parties
Appellant: Forech India Ltd.; Respondent No.1: Edelweiss Assets Reconstruction Co. Ltd.; Respondent No.2: [Respondent no.2 Company, not named]
Jurisdiction
India
Judgment Date
22 January 2019
Procedural Posture
Civil Appeal / Appeal Against Order of the National Company Law Appellate Tribunal
Outcome
Appeal disposed of; not interfering with Appellate Tribunal order dismissing the appeal; liberty granted to appellant to apply for transfer of winding up petition to NCLT.
Legal Topics
Winding Up Proceedings, Insolvency Proceedings Under IBC, Transfer of Winding Up Petitions, Section 434 Companies Act, Section 7 and 9 IBC, Companies (court) Rules, 1959
Insolvency and Bankruptcy Company Law Winding Up Proceedings Insolvency Proceedings Under IBC Transfer of Winding Up Petitions Section 434 Companies Act Section 7 and 9 IBC Companies (court) Rules, 1959

Case Brief

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Parties

Forech India Ltd.

Appellant

Edelweiss Assets Reconstruction Co. Ltd.

Respondent No.1

[Respondent no.2 Company, not named]

Respondent No.2

Procedural Posture

Civil Appeal / Appeal Against Order of the National Company Law Appellate Tribunal

Legal Issues

  1. 1 Whether insolvency proceedings under Sections 7 and 9 of Insolvency & Bankruptcy Code, 2016 are independent of winding up process pending in High Court.
  2. 2 Whether winding up petitions where notice under Rule 26 of Companies (Court) Rules, 1959 was served prior to commencement of the Code should be allowed to continue in High Court or can be transferred to NCLT under the Code.

Ratio Decidendi

Proceedings under Sections 7 and 9 of the Insolvency & Bankruptcy Code, 2016 are independent of any winding up process pending before the High Court. Even when a winding up petition notice (Rule 26, Companies (Court) Rules, 1959) was served before the Code commenced, NCLT proceedings under IBC may proceed. However, in view of amended Section 434 of the Companies Act, 2013 (2018), parties may apply to transfer pending winding up petitions to NCLT to be treated as IBC proceedings. The NCLAT's ultimate order was affirmed on this basis, but its reasoning regarding Section 11 was found to be erroneous.

Court Disposition

Appeal disposed of; not interfering with Appellate Tribunal order dismissing the appeal; liberty granted to appellant to apply for transfer of winding up petition to NCLT.

Orders

  • Ultimate order of Appellate Tribunal not interfered with.
  • Liberty granted to appellant to apply under the proviso to Section 434 of the Companies Act (2018) to transfer the winding up proceeding to NCLT to be treated as IBC proceeding.