Court holds transfer under Section 434 of Companies Act, 2013 is discretionary; former director lacks locus, and irreversible steps in liquidation preclude forum shift.
In a significant ruling dated June 23, 2026, the Karnataka High Court, presided over by Justice Suraj Govindaraj, dismissed an application seeking transfer of winding-up proceedings of Broadcast Infratel India from the High Court to the National Company Law Tribunal (NCLT). The petitioner, Mr. Santosh Umakant Jawadar, a former director of the company, moved the court under the fifth proviso to Section 434(1)(c) of the Companies Act, 2013, arguing that no irreversible steps had been taken in the liquidation process and thus the matter should be transferred to the NCLT for adjudication in line with insolvency laws.
The winding-up petition was admitted in 2011, and the final winding-up order was passed on January 9, 2012. Since then, the Official Liquidator has been administering the liquidation, including submission of periodic reports and initiation of consequential proceedings under Sections 454, 468, and 543 of the Companies Act, 1956. Despite the passage of over a decade, the petitioner delayed the transfer application until 2025.
The Court examined relevant Supreme Court precedents, including the landmark decision in Action Ispat and Power Pvt. Ltd. v. Shyam Metalics and Energy Ltd. (2021), which clarified that transfer of winding-up proceedings pending before the High Court to the NCLT is discretionary and permissible only if no irreversible steps, such as sale of assets, have been taken. However, the Court emphasized that delay, bona fides, stage of liquidation, and interests of creditors are critical factors in exercising such discretion.
Rejecting the petitioner's locus standi, the Court observed that once a winding-up order is passed, the powers of the Board of Directors cease, and the Official Liquidator assumes control under court supervision. Therefore, a former director cannot represent the company or maintain proceedings on its behalf post-liquidation. The Court noted that the petitioner failed to demonstrate any authority or bona fide interest sufficient to seek transfer.
Addressing the issue of delay, the Court highlighted the unexplained 13-year gap between the winding-up order and the transfer application, deeming it indicative of tactical motives rather than bona fide intent. Moreover, the winding-up process had progressed substantially, with multiple statutory proceedings ongoing, which the Court found constituted irreversible steps beyond mere asset sales.
The Court underscored that the discretionary power to transfer under Section 434(1)(c) is not automatic. It must be exercised judiciously, weighing the facts and circumstances, and cannot override the interests of creditors or disrupt established liquidation processes.
Accordingly, the Karnataka High Court dismissed the application, directing that the winding-up petition and all consequential proceedings continue before the High Court.
This judgment clarifies the scope and limitations of transferring winding-up proceedings to the NCLT post-liquidation order and reinforces the procedural role of official liquidators and the importance of timely and bona fide applications.
Bottom line:-
Transfer of winding-up proceedings pending before the High Court to the National Company Law Tribunal (NCLT) under Section 434 of the Companies Act, 2013 is discretionary and not automatic; such transfer is permissible only if no irreversible steps have been taken in the liquidation process and the party seeking transfer has locus standi and acts with bona fides without delay.
Statutory provision(s):
Companies Act, 2013 Section 434; Companies (Transfer of Pending Proceedings) Rules, 2016; Companies Act, 1956 Sections 454, 468, 543; Companies (Court) Rules, 1959 Rule 26
