Transfer winding-up to NCLT unless 'corporate death' inevitable; sales by secured creditors outside proceedings or limited liquidator steps (asset possession, claims verification) do not bar transfer for IBC revival.

JUDGMENT :

ARIF S. DOCTOR, J

1.The Applicant has, by way of the present Company Application, sought the transfer of the captioned Company Petition to the National Company Law Tribunal (“NCLT”) Mumbai under the provisions of Section 434(1)(c) of the Companies Act, 2013 (“the Companies Act”).

Submissions on behalf of the Applicant:

2. Mr. Behramkamdin, Learned Senior Counsel appearing on behalf of the Applicant, at the outset submitted that the Applicant had acquired various debts of the Company in liquidation from the erstwhile financial creditors and now represented more than 50% of the total financial debt owed by the Company in liquidation. He thus submitted that the Applicant had the requisite locus to file the present Application, for transfer of the proceedings to the NCLT u/s. 434(1)(c) of the Companies Act.

3. Mr. Behramkamdin then submitted that the object underlying the proposed transfer was to facilitate the resolution and revival of the Company in liquidation under the provisions of the Insolvency and Bankruptcy Code of 2016 (“IBC”), in a time-bound manner within the rehabilitative framework for resolution provided for under the IBC. He submitted that the IBC, being a later and special enactment, consolidates and amends the law relating to corporate insolvency resolution with the object of maximising value, ensuring equitable treatment of stakeholders, and preserving employment.

4. Mr. Behramkamdin placed reliance upon the decision of the Hon’ble Supreme Court in the case of Action Ispat and Power Private Limited v. Shyam Metalics and Energy Limited , (2021) 2 SCC 641 to point out that the Hon’ble SupremeCourt had held that the power of the Company Court to transfer winding- up proceedings to the NCLT under Section 434(1)(c) of the Companies Act must be exercised by examining whether the winding-up has reached an irreversible stage. He pointed out from the said decision that the mere admission of a winding-up petition, appointment of a provisional liquidator, or even the liquidator taking possession of assets does not, by itself, amount to an irreversible position. He emphasised that a transfer ought to be refused only where such substantive and final steps had been taken such that it is no longer possible to “set the clock back”, making continuation under the Companies Act inevitable.

5. He then placed reliance upon the decision of the Hon’ble Supreme Court in A. Navinchandra Steels Private Limited v. SREI Equipment Finance Limited and Others , (2021) 4 SCC 435 to point out that the decisive test for refusing a transfer was only when the Court reaches the irresistible conclusion that the company had reached the stage of “corporate death”, rendering revival impossible. He thus submitted that, short of the Court reaching the irresistible conclusion that the revival of the Company in question was no longer feasible, the Court must lean in favour of transfer to the NCLT so that an attempt to revive the corporate debtor can be made under the framework of the IBC. He also pointed out that the Court, in the aforesaid decision, had further clarified that the sale of assets by se