M/S Kaledonia Jute And Fibres Pvt. Ltd. vs M/S Axis Nirman And Industries Ltd.

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3735 OF 2020 (Arising out of Special Leave Petition (Civil) No.5452 OF 2020)

M/S KALEDONIA JUTE AND FIBRES PVT. LTD. … APPELLANT(S)

VERSUS

M/S AXIS NIRMAN AND INDUSTRIES LTD. & ORS. … RESPONDENT(S)

JUDGMENT

V. Ramasubramanian, J.

1. Leave granted.

2. Aggrieved by an order passed by the Company Court (High

Court of Allahabad), refusing to transfer the winding up petition

pending therein, to the National Company Law Tribunal (NCLT for

short), a financial creditor has come up with this appeal.

3. Heard Mr. Huzefa Ahmadi, learned senior counsel appearing

for the appellant, Mr. A.N.S. Nadkarni, learned senior counsel Signature Not Verified Digitally signed by Madhu Bala Date: 2020.11.19 14:44:56 IST

appearing for the 1st respondent­corporate debtor and Gp. Capt. Reason:

2

Karan Singh Bhati, learned counsel appearing for the official

liquidator.

Background Facts

4. One M/s Girdhar Trading Co., the 2 nd respondent herein, filed

a petition in Company Petition No.24 of 2015 before the High Court

of Allahabad under Section 433 of the Companies Act, 1956, for the

winding up of the first respondent company, on the ground that the

Company was unable to pay its debts. The Company Court ordered

notice to the 1st respondent herein, but the 1st respondent failed to

appear before the Company Court.

5. Therefore, by an order dated 08.01.2016 the Company Court

ordered the admission of the Company Petition and also directed

publication of the advertisement of the petition in accordance with

Rule 24 of the Companies (Court) Rules, 1959. Pursuant to the said

order, the 2nd respondent herein (petitioning creditor) effected a

publication of the advertisement in the Official Gazette in Form No.

48 on 30.01.2016. Newspaper publications were also made,

indicating the date of hearing of the Company Petition as

29.02.2016.

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6. Thereafter, the Company Court passed an order dated

10.03.2016 directing the winding up of the 1 st respondent Company

on the ground that the Company has been unable to pay its debts

and that it was just and equitable to wind up the 1st respondent

Company.

7. By the aforesaid order dated 10.03.2016, the Company Court

appointed the official liquidator attached to the High Court of

Allahabad as the Liquidator and directed him to take over the

assets and books of accounts of the Company. The order of winding

up was also directed to be advertised in Form 53 in two

newspapers, as required under Rule 113 of the Companies (Courts)

Rules 1959.

8. Thereafter, the 1st respondent filed an application for recalling

the order of winding up dated 10.03.2016. The 1 st respondent, in

order to prove their bonafides paid the entire amount due to the

petitioning creditor (the second respondent herein) along with costs.

Therefore, the petitioning creditor had no objection to the recall of

the order of winding up.

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9. But the official liquidator opposed the application for recall on

the ground that the 1st respondent­Company owed money to various

creditors to the tune of Rs.27 Crores and that unless the said

amount is paid, the order of winding up cannot be recalled. The

Official Liquidator also submitted that he had already taken over

charge of the assets of the Company.

10. In the light of the rival contentions, the Company Court

passed an order on 22.08.2016 keeping the winding up order dated

10.03.2016 in abeyance. However, the Company Court directed the

Official Liquidator to continue to be in custody of the assets of the

Company.

11. While things stood thus, the appellant herein, claiming to be a

creditor of the first respondent herein, moved an application before

the NCLT, Allahabad under Section 7 of the Insolvency and

Bankruptcy Code, 2016 (for short the ‘IBC, 2016’). The claim of the

appellant herein before the NCLT was that the 1st respondent was

due and liable to pay a sum of Rs.32 lakhs and that despite

repeated demands, the 1st respondent failed to pay the said amount. 5

12. Thereafter, the appellant moved an application in Civil

Miscellaneous Application No. 23 of 2020 before the Company

Court (High court) seeking a transfer of the winding up petition to

the NCLT, Allahabad. This application was rejected by the Company

Court by a cryptic order dated 24.02.2020, on the sole ground that

the requirement of Rule 24 had already been complied with and

that a winding up order had already been passed. It is against this

order of the High court, refusing to transfer the winding up

proceedings from the Company Court to the NCLT that the financial

creditor has come up with this civil appeal.

Issues for Consideration

13. The main issues that arise for consideration in this appeal are:

(i) what are the circumstances under which a winding up

proceeding pending on the file of a High court could be transferred

to the NCLT and

(ii) at whose instance, such transfer could be ordered.

Discussion

14. Though the Companies Act, 2013 (Act 18 of 2013) received the

assent of the President on 29.08.2013 and it was published in the 6

Gazette of India dated 30.08.2013 and corrected through corrigenda

published on 01.01.2014, various provisions of the Act came into

force on various dates. While some of the provisions came into force

w.e.f. 12.09.2013, some other provisions came into force w.e.f.

01.04.2014.

15. Clauses (a) and (b) of Sub­section (1) of Section 434 as well as

Sub­section (2) of Section 434 came into force w.e.f. 01.06.2016

vide S.O.1934 (E) dated 01.06.2016. Clause (c) of Sub­section (1) of

Section 434 came into force on 15.12.2016 vide S.O. 3677(E) dated

01.12.2016.

16. It may be noted here that Section 434 as it originally stood

when the Companies Act, 2013 was enacted, was different from

what it is today. Section 434 as it was incorporated originally in the

Companies Act, 2013, was actually substituted by the Insolvency

and Bankruptcy Code, 2016 (Act 31 of 2016), which came into force

on 15.11.2016.

17. Section 434 as it stood originally in the Companies Act, 2013

(Act 18 of 2013) and Section 434 as substituted by IBC, 2016 (Act 7

31 of 2016) together with subsequent amendments thereto, are

presented in a tabular column for easy appreciation.

Sec. 434 as it was originally Sec. 434 as it was substituted drafted in Act 18 of 2013 under IBC, Act 31 of 2016 “434. Transfer of certain [434. Transfer of certain pending proceedings.­(1) On pending proceedings.­(1) On such date as may be notified such date as may be notified by the Central Government by the Central Government in in this behalf,­ this behalf,­

(a) all matters, (a) all matters, proceedings or proceedings or cases pending cases pending before the before the Board of Company Board of Company Law Law Administration (herein in Administration (herein in this this section referred to as the section referred to as the Company Law Board) Company Law Board) constituted under sub­ constituted under sub­section section (1) of section 10E of (1) of section 10E of the the Companies Act, 1956 (1 Companies Act, 1956 (1 of of 1956), immediately before 1956) immediately before such such date shall stand date shall stand transferred to transferred to the Tribunal the Tribunal and the Tribunal and the Tribunal shall shall dispose of such matters, dispose of such matters, proceedings or cases in proceedings or cases in accordance with the provisions accordance with the of this Act;

provisions of this Act;

(b) any person aggrieved by (b) any person aggrieved any decision or order of the by any decision or order of Company Law Board made the Company Law Board before such date may file an made before such date may appeal to the High Court file an appeal to the High within sixty days from the date Court within sixty days from of communication of the the date of communication of decision or order of the the decision or order of the Company Law Board to him on Company Law Board to him any question of law arising out on any question of law of such order: arising out of such order; Provided that the High Provided that the High Court may if it is satisfied that Court may if it is satisfied the appellant was prevented by that the appellant was sufficient cause from filing an 8

prevented by sufficient cause appeal within the said period, from filing an appeal within allow it to be filed within a the said period, allow it to be further period not exceeding filed within a further period sixty days; and not exceeding sixty days; (c) all proceedings under the (c) all proceedings under Companies Act, 1956 (1 of the Companies Act, 1956 (1 1956), including proceedings of 1956), including relating to arbitration, proceedings relating to compromise, arrangements arbitration, compromise, and reconstruction and arrangements and winding up of companies, reconstruction and winding pending immediately before up of companies, pending such date before any District immediately before such date Court or High Court, shall before any District Court or stand transferred to the High Court, shall stand Tribunal and the Tribunal may transferred to the Tribunal proceed to deal with such and the Tribunal may proceedings from the stage proceed to deal with such before their transfer: proceedings from the stage Provided that only such before their transfer; proceedings relating to the winding up of companies shall (d) any appeal preferred to be transferred to the Tribunal the Appellate Authority for that are at a stage as may be Industrial and Financial prescribed by the Central Reconstruction or any Government: reference made or inquiry [Provided further that only such pending to or before the proceedings relating to cases Board of Industrial and other than winding­up, for Financial Reconstruction or which orders for allowing or any proceeding of whatever otherwise of the proceedings nature pending before the are not reserved by the High Appellate Authority for Court shall be transferred to Industrial and Financial the Tribunal: Reconstruction or the Board [Provided also that­] for Industrial and Financial (i) all proceedings under Reconstruction under the the Companies Act, sick Industrial Companies 1956 other than the (Special Provisions) Act, 1985 cases relating to (1 of 1986) immediately winding­up of before the commencement of companies that are this Act shall stand abated: reserved for orders Provided that a company for allowing or 9

in respect of which such otherwise such appeal or reference or inquiry proceedings; or stands abated under this (ii) the proceedings clause may make a reference relating to winding­ to the Tribunal under this Act up of companies within one hundred and which have not been eighty days from the transferred from the commencement of this Act in High Courts; accordance with the shall be dealt with in provisions of this Act: accordance with provisions of Provided further that no the Companies Act, 1956 and fees shall be payable for the Companies (Court) Rules, making such reference under 1959:] this Act by a company whose [Provided also that proceedings appeal or reference or inquiry relating to cases of voluntary stands abated under this winding up of a company where clause. notice of the resolution by advertisement has been given (2) The Central Government under sub­section (1) of section may make rules consistent 485 of the Companies Act, with the provisions of this Act 1956 but the company has not to ensure timely transfer of been dissolved before the 1st all matters, proceedings or April, 2017 shall continue to be cases pending before the dealt with in accordance with Company Law Board or the provisions of the Companies court, to the Tribunal under Act, 1956 and the Companies this section.” (Court) Rules, 1959.] [Provided further that any party or parties to any proceedings relating to the winding up of companies pending before the 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 an application for initiation of corporate insolvency resolution 10

process under the Insolvency and Bankruptcy Code, 2016 (31 of 2016).]

(2) The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this section.]

18. It is important to note that what is extracted in the right hand

side column of the above Table includes, apart from what was

substituted by Act 31 of 2016, a couple of amendments made to

Section 434. Those amendments were made under:­

(i) The Companies (Removal of Difficulties) Fourth Order, 2016 published on 07.12.2016, which came into effect on 15.12.2016;

(ii) The Companies (Removal of Difficulties) Order, 2017 published on 29.06.2017 which came into effect on the same date; and

(iii) The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 namely 26 of 2018, which came into force w.e.f. 06.06.2018.

19. A careful look at Section 434 as it stands today would show

that Clause (b) of Sub­section(1) of Section 434 has nothing to do

with what Section 434 in entirety purports to deal with. Section 434 11

in entirety purports to deal with the transfer of proceedings pending

either before the Board of Company Law Administration or before

the Company Court (the High Court or the District Court). Clause

(b) of Sub­section (1) deals with the right of appeal to the High

Court against any decision of the Company Law Board and hence

Clause (b) is actually a misfit in the scheme of Section 434.

20. Be that as it may, clause (c) of Sub­section (1) is the provision

that actually provides for the transfer of all the proceedings under

the Companies Act, 1956 pending before any District Court or High

Court, to the Tribunal. Broadly Clause (c) makes a mention about

proceedings relating to arbitration, compromise, arrangements and

reconstruction and winding up. But Clause (c) is not limited in its

application to proceedings relating to arbitration, compromise,

arrangements and reconstruction and winding up. This is due to

the usage of the words “All proceedings......including” in Clause (c).

21. However, the first proviso to Clause (c) which was not there in

the original Section 434, but which was inserted only under IBC Act

of 2016 when Section 434 was substituted, circumscribes what is

contained in the main part of Clause (c). The first proviso to Clause 12

(c) restricts the transferability of proceedings for winding up from

the High Court to the tribunal, by stipulating that only such

proceedings for winding up which are at a stage as may be

prescribed by the Central Government, be transferred to the

Tribunal.

22. Sub­section (2) of Section 434 empowers the Central

Government to make Rules consistent with the provisions of the

Act, to ensure timely transfer of all matters pending before the

Company Law Board or the Courts, to the Tribunal. Therefore, in

exercise of the power conferred by Sub­section (2) of Section 434 of

the Companies Act, 2013 read with Sub­section (1) of Section 239

of the IBC, 2016, the Central Government issued a set of Rules

known as ‘The Companies (Transfer of Pending Proceedings) Rules,

2016.

23. Before we have a look at the Rules it is necessary to note that

for the purpose of transfer, winding up proceedings pending before

the High Courts, are classified by Section 434 into two categories

namely:­ 13

(a) Proceedings for voluntary winding up where notice of resolution by advertisement has been given under Section 485(1) of the Companies Act, 1956, but the company has not been dissolved before 01.04.2017; and

(b) Other types of winding up proceedings.

24. The first of the above 2 categories of cases are covered by the

fourth proviso under Clause (c) of Sub­section (1) of Section 434,

which states:

“Provided also that proceedings relating to cases of voluntary winding up of a company where notice of the resolution by advertisement has been given under sub­ section (1) of section 485 of the Companies Act, 1956 but the company has not been dissolved before the 1 st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959”.

Such cases of voluntary winding up covered by the above proviso

shall continue to be dealt with by the High court. It is only (i) cases

of voluntary winding up falling outside the scope of the 4 th Proviso

and (ii) other types of winding up proceedings, that can be

transferred by the High Courts to the Tribunal, subject however to

the Rules made by the Central Government under Section 434 (2). 14

25. The transferability, by operation of law, of winding up

proceedings, other than those covered by the 4 th Proviso, depends

upon the stage at which they are pending before the Company

Court. But this is left by the law makers to be determined through

subordinate legislation, in the form of Rules.

26. Apart from providing for the transfer of certain types of

winding up proceedings by operation of law, Section 434 (1)(c) also

gives a choice to the parties to those proceedings to seek a transfer

of such proceedings to the NCLT. This is under the fifth proviso to

Clause (c).

27. Keeping in mind the above scheme of Section 434, let us now

turn to the Rules. As stated earlier, The Companies (Transfer of

Pending Proceedings) Rule, 2016 were issued in exercise of the

powers conferred by Section 434 (2) read with Section 239(1) of IBC,

2016.

28. The aforesaid Rules categorise the pending proceedings for

winding up into three types namely (i) proceedings for voluntary

winding up covered by the fourth proviso to Clause (c) of Sub­

section (1) of Section 434, which shall continue to be dealt with in 15

accordance with the provisions of the 1956 Act; (ii) proceedings for

winding up on the ground of inability to pay debts; and (iii)

proceedings for winding up on grounds other than inability to pay

debts.

29. Rule 4 of the aforesaid Rules deals with cases of voluntary

winding up covered by the fourth proviso to Section 434(1)(c). We

are not concerned in this case with such types of cases.

30. Rule 5 of the aforesaid Rules provides for transfer of

proceedings for winding up on the ground of inability to pay debts.

It reads as follows:

“5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.—(1) All petitions relating to winding up of a company under clause (c) 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 under Rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub­section (4) of section 419 of the Companies Act, 2013 exercising territorial jurisdiction to be dealt with in accordance with Part II of the Code:

Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with Rule 7, required for admission of the petition under sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal upto 15th day of July, 2017, failing which the petition shall stand abated.

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Provided further that any party or parties to the petitions shall, after the 1st day of July, 2017, be eligible to file fresh applications under Sections 7 or 8 or 9 of the Code, as the case may be in accordance with the provisions of the Code:

Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under this Rule and remains in the High Court and where there is another petition under Clause (e) of Section 433 of the Act for winding up against the same company pending as on 15th December, 2016, such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent.”

31. Rule 6 of the aforesaid Rules deals with transfer of

proceedings for winding up, on grounds other than inability to pay

debts. It reads as follows:­

“6. Transfer of pending proceedings of Winding up matters on the grounds other than inability to pay debts.—All petitions filed under clauses (a) and (f) of section 433 of the Companies Act, 1956 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 exercising territorial jurisdiction and such petitions shall be treated as petitions under the provisions of the Companies Act, 2013 (18 of 2013).”

32. The transferability of a winding up proceeding, both under

Rule 5 as well as under Rule 6, is directly linked to the service of

the winding up petition on the respondent under Rule 26 of the

Companies (Court) Rules, 1959. If the winding up petition has 17

already been served on the respondent in terms of Rule 26 of the

1959 Rules, the proceedings are not liable to be transferred. But if

service of the winding up petition on the respondent in terms of

Rule 26 had not been completed, such winding up proceedings,

whether they are under Clause (c) of Section 433 or under Clauses

(a) and (f) of Section 433, shall peremptorily be transferred to the

NCLT.

33. In other words, Rules 5 and 6 of the Companies (Transfer of

Pending Proceedings) Rules 2016, fix the stage of service of notice

under Rule 26 of the Companies (Court) Rules, 1959, as the stage

at which a winding up proceeding can be transferred. This is

because the first proviso under Clause (c) of Sub­section (1) of

Section 434 enables the Central Government to prescribe the stage

at which proceedings for winding up can be transferred and sub­

section (2) of section 434 confers rule making power on the Central

Government.

34. Rule 26 of the Companies (Court) Rules, 1959 reads as

follows:

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“Service of petition­ Every petition shall be served on the respondent, if any, named in the petition and on such other persons as the Act or these rules may require or as the Judge or the Registrar may direct. Unless otherwise ordered, a copy of the petition shall be served along with the notice of the petition.”

35. The normal requirement of Rule 26, as seen from its last limb

is that the copy of the petition under the Act shall be served on the

respondent along with the notice of the petition, unless otherwise

ordered. The notice of the petition, required under Rule 26 to be

served along with the copy of the petition, should be in Form No.6,

due to the mandate of Rule 27.

36. Due to the usage of the words “was admitted” in Form No.6,

there was a confusion as to whether the service referred to in Rule

26, is of a pre­admission notice or post­admission notice, in a

winding up proceeding. Different High Courts took different views.

Eventually, this Court settled the position in Forech India Ltd. vs.

Edelweiss Assets Reconstruction Co. Ltd.1 by holding “that Rules

26 and 27 clearly refer to a pre­admission scenario.”

37. After so interpreting Rules 26 and 27 of the Companies (Court)

Rules, 1959, this Court pointed out in Forech India Ltd. (supra)

1 2019 (2) SCR 477 19

that “when the Code was enacted, only winding up petitions where

no notice under Rule 26 was served, were to be transferred to NCLT

and treated as petitions under the Code”. However, after Section 434

was substituted by a new provision under Act 31 of 2016 and the

5th proviso was inserted by Act 26 of 2018, the transfer of the

winding up proceedings, even at the instance of the party or parties

to the proceedings became permissible. This change of position was

also noted by this Court in Forech India Limited(supra).

38. But while noting the change of position after the insertion of

the 5th proviso through Act 26 of 2018, this Court indicated in para

17 of the Judgment as though “any person could apply for transfer

of such petitions to the NCLT under the Code”. Taking advantage of

this, it is contended by the learned senior counsel for the petitioner

that “any person” (and not necessarily a party to the proceeding)

could apply for transfer.

39. But we do not think that the decision in Forech India

Limited (supra) is an authority for the proposition that the 5 th

proviso to Clause (c) of Sub­section (1) of Section 434 could be

invoked by any person who is not a party to the proceeding for 20

winding up. The 5th proviso which we have already extracted uses

the words “any party or parties to any proceedings relating to

the winding up of companies pending before any Court.”

40. In other words, the right to invoke the 5th proviso is

specifically conferred only upon the parties to the

proceedings. Therefore, on a literal interpretation, such a right

should be held to be confined only to“the parties to the

proceedings.”

41. That takes us to the next question as to who are “the parties

to” the winding up proceedings. The Companies Act, 1956 does not

define the expression “party”. The Companies (Court) Rules, 1959

also does not define the expression “party”. The Companies Act

2013 does not define the expression “party”. The Companies

(Transfer of pending proceedings) Rules, 2016 also does not define

the expression “party”. Even the IBC, 2016 does not define the

expression “party”.

42. But there are certain clues inherently available in the

Companies Act, 1956, to indicate the persons who may come within 21

the meaning of the expression “party to the proceedings”. The

provisions which contain such clues are as follows:

(i) Section 447 of the Companies Act, 1956, which is

equivalent to Section 278 of the Companies Act, 2013 states

that an order for winding up shall operate in favour of all

the creditors and of all the contributories of the company

as if it has been made on the joint petition of a creditor

and of a contributory. There is a small change between the

wording of Section 278 of the 2013 Act and the wording of

Section 447 of the 1956 Act. This change may be appreciated,

if both these provisions are presented simultaneously in a

tabular column:

Section 447 of 1956 Act Section 278 of 2013 Act

Effect of winding up order.­ Effect of winding up order. ­ An order for winding up a The order for the winding up of company shall operate in favour a company shall operate in of all the creditors and of all the favour of all the creditors and contributories of the company all contributories of the as if it has been made on the company as if it had been made joint petition of a creditor out on the joint petition of and of a contributory. creditors and contributories. 22 Section 278 of the 2013 Act shows that any petition by a

single creditor or contributory is actually treated as a

joint petition of creditors and contributories, so that the

order of winding up operates in favour of all the

creditors and all the contributories.

(ii) Under Section 454 (6) of the 1956 Act, any person

stating himself in writing to be a creditor shall be entitled

to inspect the statement of affairs submitted to the official

liquidator. If the claim of such a person to be a creditor turns

out to be untrue, such a person is liable to be punished under

Section 454(7) of the 1956 Act.

(iii) The powers of the liquidator are enumerated in Section

457 of the 1956 Act. Section 457 actually divides the powers

of a liquidator into two categories namely (i) those available

with the sanction of the Tribunal and (ii) those generally

available to the liquidator. But Section 290 of the 2013 Act

has done away with such a distinction. However, the 1956

Act, as well as 2013 Act make the exercise of the powers by

the liquidator, subject to the overall control of the Tribunal. 23

This is made clear by Section 457(3) of the 1956 Act and

Section 290(2) of the 2013 Act. Additionally, Section 457(3) of

the 1956 Act enables any creditor or contributory to apply to

the Court with respect to the exercise by the Liquidator, of

any of the powers conferred by Section 457.

(iv) Section 460 of the 1956 Act and Section 292 of the 2013

Act make it clear that in the administration of the assets of

the Company and the distribution thereof among its

creditors, the liquidator should have regard to any directions

given by resolution of creditors at any general meeting. If the

liquidator does something, in exercise of his powers, any

person aggrieved by such Act or decision of the liquidator, is

entitled to apply to the Company Court, under Section

460(6) of the 1956 Act and Section 292(4) of the 2013 Act.

(v) Section 466(1) of the 1956 Act enables any creditor to

apply for stay of all proceedings in relation to the winding

up. This right can be exercised by any creditor at any time

after the making of a winding up order.

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43. Thus, the proceedings for winding up of a company are

actually proceedings in rem to which the entire body of creditors is

a party. The proceeding might have been initiated by one or more

creditors, but by a deeming fiction the petition is treated as a joint

petition. The official liquidator acts for and on behalf of the entire

body of creditors. Therefore, the word “party” appearing in the 5th

proviso to Clause (c) of Sub­section (1) of section 434 cannot be

construed to mean only the single petitioning creditor or the

company or the official liquidator. The words “party or parties”

appearing in the 5th proviso to Clause (c) of Sub­section (1) of

Section 434 would take within its fold any creditor of the company

in liquidation.

44. The above conclusion can be reached through another method

of deductive logic also. If any creditor is aggrieved by any decision of

the official liquidator, he is entitled under the 1956 Act to challenge

the same before the Company Court. Once he does that, he

becomes a party to the proceeding, even by the plain language of

the section. Instead of asking a party to adopt such a circuitous

route and then take recourse to the 5 th proviso to section 434(1)(c), 25

it would be better to recognise the right of such a party to seek

transfer directly.

45. As observed by this Court in Forech India Limited (supra),

the object of IBC will be stultified if parallel proceedings are allowed

to go on in different fora. If the Allahabad High Court is allowed to

proceed with the winding up and NCLT is allowed to proceed with

an enquiry into the application under Section 7 IBC, the entire

object of IBC will be thrown to the winds.

46. Therefore, we are of the considered view that the petitioner­

herein will come within the definition of the expression “party”

appearing in the 5th proviso to Clause (c) of Sub­section (1) of

Section 434 of the Companies Act, 2013 and that the petitioner is

entitled to seek a transfer of the pending winding up proceedings

against the first respondent, to the NCLT. It is important to note

that the restriction under Rules 5 and 6 of the Companies

(Transfer of Pending Proceedings) Rules, 2016 relating to the

stage at which a transfer could be ordered, has no

application to the case of a transfer covered by the 5 th proviso

to clause (c) of sub­section (1) of Section 434. Therefore, the 26

impugned order of the High court rejecting the petition for transfer

on the basis of Rule 26 of the Companies (Court) Rules, 1959 is

flawed.

47. Therefore, the appeal is allowed, the impugned order is set

aside and the proceedings for winding up pending before the

Company Court (Allahabad High Court) against the first respondent

herein, is ordered to be transferred to the NCLT, to be taken up

along with the application of the appellant­herein under Section 7 of

the IBC. There will be no order as to costs.

……………………………..CJI (S.A. BOBDE)

……………………………….J. (A.S. BOPANNA)

………………………………..J. (V. RAMASUBRAMANIAN)

New Delhi November 19, 2020