M/S KALEDONIA JUTE AND FIBRES PVT. LTD. versus M/S AXIS NIRMAN AND INDUSTRIES LTD. & ORS.

M/S KALEDONIA JUTE AND FIBRES PVT. LTD. versus M/S AXIS NIRMAN AND INDUSTRIES LTD. & ORS.

A creditor of a company in liquidation qualifies as a 'party' under the fifth proviso to s.434(1)(c) of the Companies Act, 2013 and may seek transfer of pending winding up proceedings to the NCLT; Rules 5 and 6 prescribe that proceedings are transferable by operation of law only when the winding up petition has not been served under r.26, but that restriction does not apply to transfers sought under the fifth proviso by a party; accordingly the High Court's refusal based solely on Rule 26 was flawed and the winding up proceedings were ordered transferred to the NCLT to be taken up with the appellant's s.7 IBC application.

Parties
Appellant/financial Creditor: M/S KALEDONIA JUTE AND FIBRES PVT. LTD.; First Respondent/corporate Debtor: M/S AXIS NIRMAN AND INDUSTRIES LTD.; Second Respondent/petitioning Creditor: M/s Girdhar Trading Co.; Official Liquidator: Official Liquidator, High Court of Allahabad
Jurisdiction
India
Judgment Date
19 November 2020
Procedural Posture
Civil Appeal / Appeal From High Court Order Refusing Transfer of Winding Up Petition to NCLT
Outcome
Appeal allowed
Legal Topics
Transfer of Pending Proceedings, Winding Up, Jurisdiction, Service of Petition Under Companies (court) Rules, 1959 R.26, Role of Official Liquidator
Companies Act Insolvency and Bankruptcy Transfer of Pending Proceedings Winding Up Jurisdiction Service of Petition Under Companies (court) Rules, 1959 R.26 Role of Official Liquidator

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Parties

M/S KALEDONIA JUTE AND FIBRES PVT. LTD.

Appellant/financial Creditor

M/S AXIS NIRMAN AND INDUSTRIES LTD.

First Respondent/corporate Debtor

M/s Girdhar Trading Co.

Second Respondent/petitioning Creditor

Official Liquidator, High Court of Allahabad

Official Liquidator

Procedural Posture

Civil Appeal / Appeal From High Court Order Refusing Transfer of Winding Up Petition to NCLT

Legal Issues

  1. 1 Under what circumstances can a winding up proceeding pending before a High Court be transferred to the NCLT?
  2. 2 At whose instance can such a transfer be ordered (who qualifies as a 'party' to seek transfer under the fifth proviso to s.434(1)(c))?

Ratio Decidendi

A creditor of a company in liquidation qualifies as a 'party' under the fifth proviso to s.434(1)(c) of the Companies Act, 2013 and may seek transfer of pending winding up proceedings to the NCLT; Rules 5 and 6 prescribe that proceedings are transferable by operation of law only when the winding up petition has not been served under r.26, but that restriction does not apply to transfers sought under the fifth proviso by a party; accordingly the High Court's refusal based solely on Rule 26 was flawed and the winding up proceedings were ordered transferred to the NCLT to be taken up with the appellant's s.7 IBC application.

Court Disposition

Appeal allowed

Orders

  • Impugned order of the High Court dated 24.02.2020 set aside
  • Winding up proceedings pending before the Company Court (Allahabad High Court) against the first respondent ordered to be transferred to the NCLT and taken up along with the appellant's application under s.7 of the IBC