M/s Nav Finances Ltd v. M/s Yogi Pharmacy Ltd. and others

Mr. Anil Kumar Joshi, learned counsel for the Official Liquidator has drawn attention of this Court to the report submitted by Official Liquidator on 18.06.2009 (page no. 255 of the paper book). In para no. 3 of the said report, it is stated that the property of M/s Yogi Pharmacy Ltd. situate at 2A/1-5, Village Devpura, Pargana Jwalapur, Tehsil Roorkee, District Haridwar was sold by the Directors of the Company some 10-12 years ago and the said property stands mutated in the name of other persons. In para no. 4 of the report, it is mentioned that the property of M/s Yogi Pharmacy Ltd. situate at Shivdaspur, Haridwar was sold in a public auction held on

19.08.2004 by Debts Recovery Tribunal, Jhandewalan, Delhi vide order dated 02.06.2004 and the sale of the property was confirmed on 23.09.2004. In para no. 5 of the report, it is stated that the property situated at E-300, Greater Kailash-II, New Delhi was also sold by Debts Recovery Tribunal, Jhandewalan, New Delhi. In para 6, it is stated that Ex-Directors of the Company have not yet filed statements of affairs, as required under Section 454 of the Companies Act, 1956. It is further stated that a notice under Rule 130 of the Companies (Court) Rules, 1959 was issued to the Directors asking them to appear before the Official Liquidator for personal interview, but, 2 none of the Directors complied with the notice.

5. Mr. Anil Kumar Joshi, learned counsel appearing for the Official Liquidator submits that a complaint has been filed by him under Section 454 (5) of the Companies Act, 1956 against Ex-Directors of M/s Yogi Pharmacy Ltd. for not filing statement of affairs within prescribed time; however, no order has been passed on the said application till date. Thus, he submits that necessary order be passed on the said complaint.

6. Dr. Kartikey Hari Gupta, learned counsel appearing for the Ex-Directors submits that objections have been filed by all the Ex-Directors of M/s Yogi Pharmacy Ltd.; at present, only two of the five Ex- Directors are alive and others have passed away during pendency of the Company Petition.

7. Section 434 of the Companies Act, 2013 provides for transfer of certain pending proceedings from High Court to National Company Law Tribunal. Section 434 of the Companies Act, 2013 is extracted below:- “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 Law Board) constituted under sub-section (1) of section 10E of the Companies Act, 1956 (1 of 1956), immediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act; (b) any person aggrieved by any decision or order of the Company Law Board made before such date may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may if it is satisfied that the appellant was prevented by sufficient cause from filing an appeal within the said period, allow it to be 3 filed within a further period not exceeding sixty days; (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, the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer: transferred Provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government. [Provided further that only such proceedings relating to cases other than winding-up, for which orders for allowing or otherwise of the proceedings are not reserved by the High Courts shall be transferred to the Tribunal: [Provided further that –] (i) all proceedings under the Companies Act, 1956 other than the cases relating to winding up of companies that are reserved for orders for allowing or otherwise such proceedings; or (ii) the proceedings relating to winding up of companies which have not been transferred from the High Courts; shall be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959:] [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 1st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act. 1956 and the Companies (Court) Rules, 1959:] [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 an application for initiation of corporate insolvency resolution 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.]” 4

8. A plain reading of fifth proviso to Section 434 (1) (c) reveals that any party to a proceeding relating to winding up of a company pending before any Court immediately before 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 process under Insolvency and Bankruptcy Code, 2016.

9. Hon’ble Supreme Court in the case of M/s Kaledonia Jute and Fibres Pvt. Ltd. Vs. M/s Axis Nirman and Industries Ltd. & others, reported in (2020) SCC Online SC 943, has held as under: “47. 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 Sub-section (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 5th proviso to clause (c) of sub-section (1) of Section 434. Therefore, the 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.”

10. In the case of Action Ispat & Power (P) Ltd. v. Shyam Metalics & Energy Ltd., reported in (2021) 2 SCC 641, Hon’ble Supreme Court after considering the 5 provision contained in Section 433 of the Companies Act has held as under:- “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 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 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 sales of the immovable or movable taken place, nothing properties have 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 provisions of the Code. Whether this stage is reached would depend upon the facts and circumstances of each case. in accordance with

26. In the facts of the present case, the concurrent finding of the Company Judge and the Division Bench [Action Ispat & Power (P) Ltd. v. Shyam Metalics & Energy Ltd., 2019 SCC OnLine Del 10424] is that despite the fact that the liquidator has taken possession and control of registered office of the appellant Company factory premises, records and 6 irreversible steps towards books, no 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 5th proviso to Section 434(1)(c). Resultantly, the civil appeal arising out of SLP (Civil) No. 26415 of 2019 stands dismissed..”

11. In the present case, after appointing Official Liquidator, no further progress has been made and possession of assets of the company under liquidation also could not be taken by the Official Liquidator. Thus, the winding up proceeding has not reached a stage where it can be said to be irreversible or making it impossible to set the clock back.

11. In view of the legal position as discussed above, this case is liable to be transferred to National Company Law Tribunal, Allahabad Bench.

12. Accordingly, the Company Petition No. 8 of 1998 is disposed of by transferring it to National Company Law Tribunal, Allahabad Bench, for determination, in accordance with law.

13. Registry is directed to send the entire records to National Company Law Tribunal, Allahabad Bench, within a week. Parties shall appear before learned Tribunal on

26.03.2025, without any further notice.

14. In view of the long pendency of the Company Petition, learned Tribunal is requested to dispose of the matter as expeditiously as possible.

15. All pending applications stand disposed of accordingly. Navin (Manoj Kumar Tiwari, J)

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