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Winding Up Proceedings Under SICA Are To Continue In HC And Not In NCLT

In JAIPUR METALS & ELECTRICALS EMPLOYEES ORGANIZATION vs JAIPUR METALS & ELECTRICALS LTD., appeal was filed before the Supreme Court against the refusal of the Rajasthan High Court to transfer winding up proceedings pending before it to the National Company Law Tribunal and set aside the NCLT order declaring a moratorium in terms of Section 14 of the Code and appointing an interim resolution professional.

The Supreme Court has held that winding up proceedings under the Sick Industrial Companies (Special Provisions) Act 1985 will continue in the High Court and not the National Company Law Tribunal, until an application for transfer to NCLT is filed by a party under Section 434(1)(c) of the Companies Act 2013. Therefore the Supreme Court decided that the High Court judgment, therefore, though incorrect in applying Rule 6 of the 2016 Transfer Rules, can still be supported on this aspect with a reference to Rule 5(2) of the Companies (Transfer of Pending Proceedings) Rules 2016, read with Section 434 of the Companies Act, 2013, as amended, with effect from 17.08.2018.

Further, the order passed by the NCLT on 13.04.2018 admitting an application under Section 7 of the Insolvency Code is perfectly valid as this  proceeding is an independent proceeding which has nothing to do with the transfer of pending winding up proceedings before the High Court. It is open for a financial creditor at any time before a winding up order is passed to apply under Section 7 of the Code.


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