The Court emphasizes the test of irreversibility in transferring winding-up cases to the NCLT, dismissing appeals by Shiva Shakti Security Services.
In a significant decision, the Calcutta High Court, comprising Justices Debangsu Basak and Md. Shabbar Rashidi, dismissed the appeals filed by Shiva Shakti Security Services against the transfer of winding-up petitions to the National Company Law Tribunal (NCLT). The case, which involves the liquidation of Martina Boi Genics Pvt. Ltd., highlighted the judicial discretion involved in transferring such petitions under Section 434 of the Companies Act, 2013.
The appellant, Shiva Shakti Security Services, was engaged by the Official Liquidator to safeguard the assets of the company in liquidation. They contended that the unpaid bills for their services should be settled before transferring the case to the NCLT, arguing that such expenses should be considered under the Corporate Insolvency and Restructuring Process.
The court, however, cited Supreme Court precedents in Action Ispat and Power Private Limited v. Shyam Metalics and Energy Limited and A. Navinchandra Steels Private Limited v. SREI Equipment Finance Limited, which established that the transfer of winding-up petitions to the NCLT should occur unless an irreversible or irretrievable stage has been reached in the proceedings. The mere pendency of claims or non-payment of bills does not qualify as an irreversible stage, the court noted.
Justice Basak, delivering the judgment, stated that the principles of custodia legis necessitate that no party should suffer prejudice due to actions sanctioned by the court. The judgment underscored that claims like those of the appellant could be asserted before the NCLT post-transfer.
The court found no error in the Company Court's decision to transfer the cases, dismissing the appeals filed by Shiva Shakti Security Services. The decision reaffirms the discretion of Company Courts to transfer cases to the NCLT unless specific irreversible conditions are met.
Bottom line:-
Transfer of winding-up petitions to NCLT under section 434 of the Companies Act, 2013 is subject to the test of irreversible/irretrievable act(s)/stage. The discretion to transfer remains with the Company Court until an irreversible stage is reached.
Statutory provision(s): Companies Act, 2013 Section 434, Companies Act, 1956 Section 529, Insolvency and Bankruptcy Code, 2016.
Shiva Shakti Security Services v. Official Liquidator, (Calcutta)(DB) : Law Finder Doc id # 2896823
