Maheshwary Ispat Ltd vs Alaknanda Sponge Private Limited
2022 Latest Caselaw 1606 Cal/2

                          IN THE HIGH COURT AT CALCUTTA
                               ORIGINAL JURISDICTION
                                   ORIGINAL SIDE



BEFORE:
The Hon'ble Mr. Justice Ravi Krishan Kapur


                                CA/ 15/2021
                                CP/560/2011


                IN THE MATTER OF: MAHESHWARY ISPAT LTD.
                                  AND
                   ALAKNANDA SPONGE PRIVATE LIMITED
                                  -vs-

              OFFICIAL LIQUIDATOR, HIGH COURT, CALCUTTA


For the petitioner              : Mr. Debdut Mukherjee, Adv
                                  Mr. Avirup Chatterjee, Adv
                                  Mr. Mr. Soumo Roy, Adv
For Official Liquidator         : Mr. Subhadip Biswas, Adv

For the Indian Bank             : Mr. Rajat Kanti Jha, Adv

Heard on                        : 14.01.2022, 11.02.2022, 25.03.2022,
                                  07.04.2022
Judgment on                     : 17.05.2022


Ravi Krishan Kapur, J.:
  1.

This is an application seeking directions on the Official Liquidator to

publish a sale notice in respect of the assets of Maheswary Ispat Limited

[the company (in liquidation)].

2. The admitted facts of this case are that, by an order dated 21st June, 2016

read with the order dated 28th November, 2016, Maheshwary Ispat Limited

was directed to be wound up. Pursuant to the aforesaid, the Official

Liquidator had taken possession of the assets of the company (in

liquidation) as far back as in 2017 and 2018. Admittedly, none of the

assets of the company (in liquidation) have been sold till date.

3. In view of the aforesaid, a point of jurisdiction has arisen as to whether

this Court has the power to exercise jurisdiction in view of the 5th proviso

of Section 434(1(c) of the Companies Act, 2013 ('the Act'). By an

amendment dated 7 August, 2018, the 5th proviso to Section 434(1(c) was

added which provides as follows:-

"434. Transfer of certain pending proceedings. - (1) On such date as may be notified by the Central Government in this behalf -

(a)-(b) * * *

(c) all proceedings under the Companies Act, 1956 (1 of 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 further that 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 and the Court may by order transfer such proceedings to the Tribunal and the proceedings so transferred shall be dealt with by the Tribunal as on application

for initiation of corporate insolvency resolution process under the Insolvency and bankruptcy Code, 2016 (31 of 2016) "

4. In Action Ispat & Power (P) Ltd. vs. Shyam Metalics & Energy Ltd. (2021) 2

SCC 641, the Hon'ble Supreme Court held as follows:-

25. Given the aforesaid scheme of winding up under Chapter XX of the Companies Act, 2013, it is clear that several stages are contemplated, with the Tribunal retaining the power to control the proceedings in a winding-up petition even after it is admitted. Thus, in a winding-up proceeding where the petition has not been served in terms of Rule 26 of the Companies (Court) Rules, 1959 at a pre- admission stage, given the beneficial result of the application of the Code, such winding-up proceeding is compulsorily transferable to NCLT to be resolved under the Code. Even post issue of notice and pre-admission, the same result would ensue. However, post admission of a winding-up petition and after the assets of the company sought to be wound up become in custodia legis and are taken over by the Company Liquidator, Section 290 of the Companies Act, 2013 would indicate that the Company Liquidator may carry on the business of the company, so far as may be necessary, for the beneficial winding up of the company, and may even sell the company as a going concern. So long as no actual sale of the immovable or movable properties have taken place, nothing irreversible is done 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. (emphasis supplied).

Significantly, in the facts of the aforesaid decision, the concurrent

finding of the Company Judge and the Division Bench was that despite

the fact that in the liquidation proceedings, the Official Liquidator had

taken possession and control of the registered office and the factory

premises, records and books no irreversible steps towards winding upon

of the company had otherwise taken place. The ratio in Action Ispat &

Power (P) Ltd. (supra) has subsequently been followed in A. Navinchandra

Steels (P) Ltd. vs. SREI Equipment Finance Ltd. (2021) 4 SCC 435.

5. Ordinarily, there is a strong presumption that Civil Courts have jurisdiction

to decide all questions of civil nature. The exclusion of jurisdiction of

Civil Courts must either be explicitly expressed or clearly implied. In my view,

the section does not contemplate proceedings being automatically

transferred to the Tribunal. There is an element of discretion which the

Company Court retains in respect of pending proceedings whether to

exercise the power to transfer or not depending on the facts and

circumstances of each case. The only test as laid down by the Supreme

Court is whether any irreversible situation has arisen warranting the Court

to stay its hands and not transfer the proceeding to the NCLT. However, the

clear legislative intent is to oust the jurisdiction of the Court and transfer all

proceedings to the Tribunal (except in limited cases) with the ultimate object

to resuscitate the corporate debtors who are in the red and in some cases

to prevent parallel proceedings.

6. I find that, despite the pendency of the winding up proceedings for more

than six years, there is nothing to demonstrate that an irreversible

situation has arisen which justifies this Court in retaining this proceeding.

None of the assets of the company (in liquidation) have been sold. There is

nothing in the Status Report filed by the Official Liquidator to demonstrate

that the Official Liquidator has taken any steps whatsoever to make it

impossible to set the clock back warranting this Court to proceed with the

winding up notwithstanding the embargo now created under the aforesaid

section. There are no facts which have been brought to the attention of this

Court either by the Official Liquidator or any of the parties which permits

this Court in retaining jurisdiction.

7. I also do not find any substance in the argument that it is only upon filing

of a formal application, that a proceeding can be transferred to the

National Company Law Tribunal under the aforesaid section. What is of

essence is that the Court must examine the facts of each case to ascertain

whether an irreversible situation has arisen or not or and the stage of the

liquidation proceedings. The making of an application is a mere formality

and is not imperative in nature. In fact, to continue with the winding up

proceedings simply because no application for transfer has been filed

would tantamount to committing a manifest jurisdictional error. In my

view, in a given case, after examination of the relevant facts if the Court

suo moto finds that the conditions for transfer are satisfied, it should

transfer a proceeding to the Tribunal even in the absence of a formal

application. Hence, such contention is rejected.

8. In view of the aforesaid, CP/560/2011 alongwith CA 15/2021 and any

pending application in this petition stands transferred to the National

Company Law Tribunal, Kolkata. Liberty is granted to the applicant to

raise its grievances in CA 15/2021 before the Tribunal in accordance with

law.

9. The Department will treat CP/560/2011 as disposed of insofar as the

records of this Court are concerned.

(Ravi Krishan Kapur, J.)