Court Affirms Possibility of Revival Under IBC, Dismisses Appeal Against Transfer
In a significant judgment, the Bombay High Court dismissed an appeal by Omkara Assets Reconstruction Pvt Ltd against the transfer of winding-up proceedings concerning Sahjun Impex Trading Pvt Ltd to the National Company Law Tribunal (NCLT). The division bench, comprising Justices A.S. Gadkari and Kamal Khata, upheld the decision of a Single Judge, asserting that the transfer was permissible given the potential for company revival under the Insolvency and Bankruptcy Code (IBC) framework.
The court emphasized that the transfer of proceedings under Section 434(1)(c) of the Companies Act, 2013, is valid if there is a possibility of company revival. The judgment underscored that the sale of assets by secured creditors outside winding-up proceedings does not constitute an irreversible step that would prevent such a transfer. The decision aligns with the Supreme Court's rulings in the cases of "Action Ispat and Power Pvt Ltd vs. Shyam Metalics and Energy Limited" and "A. Navinchandra Steels Pvt Ltd," which were applied in this context.
Omkara Assets Reconstruction Pvt Ltd, represented by counsel Mr. Prakash Shinde, argued that irreversible steps had been taken in the liquidation process, including the sale of core assets in Aurangabad and Pune, making revival impossible. However, the court found these arguments unpersuasive, noting that the assets were not completely extinguished and that the investors would determine the feasibility of revival.
On the other hand, the respondent, Sahjun Impex Trading Pvt Ltd, represented by senior counsel Mr. Zubin Behramkamdin, highlighted that they hold more than 50% of the financial debt, entitling them to seek the transfer under the IBC framework. The court agreed with this position, finding no justifiable reason to reject the application for transfer.
The judgment clarified that the existence of assets at various locations, including Thane, Bangalore, and Pune, indicated potential for revival. The court noted that the official liquidator had taken only limited steps, which did not reach an irreversible stage or amount to corporate death.
In conclusion, the court found the impugned order to be well-reasoned, having considered all material facts and applicable laws, leading to the dismissal of the appeal. The court's decision reinforces the rehabilitative purpose of the IBC, prioritizing the possibility of revival over irreversible characterization of winding-up proceedings.
Bottom Line :
Transfer of winding-up proceedings to NCLT under Section 434(1)(c) of the Companies Act, 2013 must consider whether winding-up has reached an irreversible stage. Sale of assets outside winding-up proceedings does not by itself constitute an irreversible step to refuse transfer.
Statutory provision(s):
Companies Act, 2013 Section 434(1)(c), Insolvency and Bankruptcy Code, 2016
