HC Allows Transfer to NCLT Under Section 434

Case Details: Sahjun Impex Trading (P.) Ltd. vs. Patheja Forgings & Auto Parts Manufacturing Ltd. - [2026] 184 taxmann.com 39 (HC-Bombay)

Judiciary and Counsel Details

• Arif S. Doctor, J.
• Zubin Behramkamdin, Sr. Adv., M. Damania, Ms Sakshi Kashyap & Ms Kaizeen Mistry, Advs. for the Applicant.
• Siddharth Samantray, Vinod Kothari, Kshitij Parekh, Manoj Vishwakarma, Ms Vishakha B., Ms Niyati Merchant, Ranjeev Carvalho, Satyajit Roul & Anil Bhagure, Advs. for the Respondent.

Facts of the Case

In the instant case, the company was already under the winding-up when the applicant, an assignee holding more than 50 per cent of the financial debt, sought transfer of proceedings to the National Company Law Tribunal (NCLT) under section 434(1)(c) of the Companies Act, 2013 for initiation of the Corporate Insolvency Resolution Process (CIRP) under Insolvency Bankruptcy Code (IBC), contending that the winding-up had not reached an irreversible stage.

The Official Liquidator disclosed that some assets were with the Debt Recovery Tribunal (DRT) Receiver, some had been sold outside the winding-up, certain assets remained in its possession, one Pune property had been sold under the court order, and claims of about 476 workmen and creditors were under verification.

In the Opposing transfer, the Official Liquidator submitted that irreversible steps had been taken and that workmen would be prejudiced under the IBC, while seeking protection for their pending claims before the NCLT.

The IFCI and the other supporting creditors opposed the transfer, citing the DRT recovery proceedings, the sale of the mortgaged assets, the Board for Industrial and Financial Reconstruction (BIFR) history, the company’s non-viability, and alleged suppression by the applicant.

In rejoinder, the applicant submitted that the secured creditors’ enforcement outside winding-up did not bar the transfer, the Official Liquidator had taken only limited steps, and no irreversible stage had been reached.

It was noted that the IBC is a special enactment intended to provide a comprehensive, uniform and time-bound mechanism for the resolution of corporate insolvency, replacing the earlier regime under the Companies Act.

Further, the legislative intent and scheme of the IBC is to give primacy to resolution over liquidation. The transfer of winding-up proceedings to the NCLT ought to be refused only when the Court reaches an irresistible conclusion that the company has reached the stage of ‘corporate death’, rendering revival impossible.

High Court Held

The High Court observed that the sale of assets by the secured creditors enforcing a security interest while standing outside a winding-up does not, by itself, constitute an irreversible step to bar transfer under section 434(1)(c) of the Companies Act, 2013.

Further, the High Court observed that the fact that revival under the Sick Industrial Companies Act (SICA) did not materialise is not by itself sufficient to assume that revival under the IBC would fail. The objection that transfer to the NCLT would prejudice the workmen could not be accepted as a ground for refusing the transfer.

The High Court held that the transfer of the company petition to the NCLT would not ipso facto invalidate actions taken by the secured creditors or orders passed by the High Court in pending legal proceedings. Thus, the applicant had made out a case for transfer of proceedings to the NCLT under section 434(1)(c) of the Companies Act, 2013.

List of Cases Reviewed

• A. Navinchandra Steels (P.) Ltd. v. SREI Equipment Finance Ltd. [2021] 125 taxmann.com 50 (SC) (para 35) followed

List of Cases Referred to

• Action Ispat & Power (P.) Ltd. v. Shyam Metalics & Energy Ltd. [2020] 122 taxmann.com 147 (SC)/[2021] 164 SCL 375 (SC) (para 4)
• A. Navinchandra Steels (P.) Ltd. v. SREI Equipment Finance Ltd. [2021] 125 taxmann.com 50 (SC) (para 5)
• Moser Baer Karamchari Union v. Union of India [2023] 150 taxmann.com 43 (SC)/[2023] 178 SCL 229 (SC) (para 30)
• Forech India Ltd. v. Edelweiss Assets Reconstruction Company Limited and Anr [2019] 101 taxmann.com 451 (SC)/[2019] 152 SCL 145 (SC) (para 31).