In Action Ispat and Power Limited v. Shyam Metalics and Energy Limited, a case decided by the Delhi High Court on October 10, 2019, it was determined that an application to transfer cases from the Delhi High Court to the National Company Law Tribunal operating under the Insolvency and Bankruptcy Code, 2016 ("IBC") is maintainable. On August 27, 2018, Shyam Metalics and Energy Limited (Respondent 1) filed a winding-up petition against Action Ispat and Power Limited (Appellant) under Section 433 of the Companies Act, 1956. The petition was admitted, and an Official Liquidator (OL) was appointed with the mandate to take control of all of the Appellant's assets, books of accounts, and records. State Bank of India ("Respondent 2") filed a petition under Section 7 of the IBC and an application to the Company Judge during the pendency of the proceedings, but before the passing of the winding up order on August 27, 2018, requesting a transfer of the pending winding proceedings to the National Company Law Tribunal ("NCLT").
In an order dated January 14, 2019, the Company Judge approved this transfer and stated that the decision to refer a case to the NCLT is a discretionary one that should be made with consideration for the unique facts and circumstances of each case in order to handle the matter quickly. Since the OL's appointment resulted in the sealing of the Appellant's office and industrial premises but no further action had been taken, it was noted that liquidation was still in its early stages. According to the opinion, the transfer was in the best interests of justice, the appellant, and the implicated creditors. As a result, an appeal was filed before a Division Bench of the Delhi High Court.
In the instant case titled Action Ispat and Power Limited v. Shyam Metalics and Energy Limited the issue raised for clarification before the High Court was:
Is it possible to sustain the plea to transfer the Delhi High Court's case to the NCLT working under the IBC?
With regard to this issue, The Court noted that while the OL's mandate is to liquidate the company's assets in order to satisfy the claims of the secured and other creditors, the scope of the proceedings before the Company Court following the admission of the winding-up petition is unidirectional. On the other hand, the NCLT is a specialist body that attempts to revive the company, if possible, and only moves forward with steps to wind it up if the rebirth of the company is not possible. The Delhi High Court also cited its decision in Rajni Anand v. Cosmic Structures Limited, which was rendered on September 27, 2018, in which it was determined that the court's ability to order the transfer of the winding-up proceedings to the NCLT is discretionary in nature and that the best interests of all the creditors must be taken into account when making that decision. Additionally, Section 238 of the IBC was mentioned, which declares that the IBC's provisions have precedence over other laws. Furthermore, it was determined that the Company Court's decision to order a company's winding up was not final and that the procedure involved in doing so involved several stages and wasn't completed by simply issuing an order. The case of Sudarshan Chits v. Sukumaran Pillai [AIR 1984 SC 1579] was cited.
The court ruled that just because the appellant's winding up was ordered, it did not follow that the appellant should be forcibly wound up and dissolved. Further, unless irrevocable steps toward liquidation have already been taken, other options accessible, namely to resolve/ resuscitate the company, can and should always be investigated for which purpose the NCLT is invested with the jurisdiction. As a result, the NCLT should take over the proceedings.
The Court categorically stated that,
“In the facts of the present case, the concurrent finding of the Company Judge and the Division Bench is that despite the fact that the liquidator has taken possession and control of the registered office of the appellant company and its factory premises, records and books, no irreversible steps towards winding up of the appellant company have otherwise taken place. This being so, the Company Court has correctly exercised the discretion vested in it by the proviso to section 434(1)(c). Resultantly, the civil appeal arising out of SLP (Civil) No.26415 of 2019 stands dismissed.”