The discretion to transfer winding up proceedings to NCLT under Section 434(1)(c) of the Companies Act must prioritize potential corporate revival, and no irreversible actions should have occurred.

JUDGMENT :

Tarlok Singh Chauhan, J.

Aggrieved by the order dated 02.08.2024 passed by the learned Company Judge, whereby the company petition has been ordered to be transferred to the National Company Law Tribunal (for short ‘NCLT’), the appellant has filed the instant appeal.

2. The appellant filed the petition for winding up of the respondent-company on the ground that the respondent- company has failed and neglected to make the payment of the outstanding amount of Rs. 3,25,78,000/- (Rs.1,41,78,000/- towards supply of gear box materials i.e. H.G. Wind Gear Box and Rs. 1,84,00,000/- towards Refundable Security Deposit), which is due and payable by the respondent-Company to the petitioner-Company. It was averred that the respondent- company has lost its substratum and has become commercially insolvent and is unable to make payment of the amount due to the petitioner-company and it is just and equitable that the respondent-company is ordered to be wound-up under the provisions of the Companies Act.

3. During the pendency of the company-petition, the respondent moved an application under Section 434(1)(c) of the Companies Act (for short ‘Act’) for transferring the case to the NCLT at Chandigarh, which as observed above, came to be allowed by the learned Company Judge.

4. It is vehemently argued by Shri V. D. Khidtta, learned Advocate duly assisted by Shri Nishant Khidtta, Advocate, that the findings recorded by the learned Company Judge, is not only wrong and contrary to law but the same are perverse inasmuch as much reliance has been placed on the judgment passed by three-Judge Bench of the Hon’ble Supreme Court in Action Ispat and Power Pvt. Ltd. vs. Shyam Metalics and Energy Limited 2021 (2) SCC 641 , which judgment in fact though forms the basis of the decision of the case but was not at all applicable. He has also placed strong reliance on the judgment of the Karnataka High Court in Company Application No. 31 of 2024 in Company petition No. 42 of 2016, titled as M/s Magnifico Minerals Pvt. Ltd. vs. M/s Saravana Alloys Steels Pvt. Ltd. to contend that the discretion to transfer the case had to be exercised judiciously and not mechanically.

5. On the other hand, Shri Sunil Mohan Goel, learned Senior Advocate duly assisted by Shri Vipul Sharda, Advocate, would vehemently contend that the findings recorded by the learned Company Judge having rendered strictly in accordance with law, warrants no interference.

6. We have heard the learned counsel for the parties and have gone through the material placed on record.

7. It would be noticed that Section 434 (c) of the Act has been amended more than one time and before substitution made in the year, 2013, Section 434(c) reads as follow:

“(c) all proceedings under the Companies Act, 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.”

8. In the year 2016 by Act 31 of 2016, Section 434(c) was substituted w.e.f. 15.11.2016 and then reads as follows:-

“(c) all proceedings under the Companies Act, 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.”

9. After the amendments on 29.06.2017 and 17.08.2018, the entire Section 434 including sub section (1)(c), reads as under:-

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

(a) all matters, proceedings or cases pending before the Board of Company Law Administration (herein in this section referred to as the Company L