The Supreme Court has held that transfer of winding up proceedings from High Court to NCLT on application of financial creditor not party to proceedings before Court is permissible.
Observing that the proceedings for winding up of a company are actually proceedings in rem to which the entire body of creditors is a party, the Court held that the words ‘party or parties’ appearing in 5th proviso to Section 434(1)(c) of the Companies Act, 2013 would take within its fold any creditor of the company in liquidation.
The contention that the word ‘party’ would mean only the single petitioning creditor or the company of the official liquidator, was thus rejected. The 5th proviso provides for filing of application in the Court for transfer of proceedings relating to winding up of companies, from the Court to the NCLT.
The Apex Court in the case Kaledonia Jute and Fibres Pvt. Ltd. v. Axis Nirman and Industries Ltd. [Judgement dated 19 November 2020] also observed that the restriction under Rules 5 and 6 of the Companies (Transfer of Pending Proceedings) Rules, 2016 relating to stage at which a transfer could be ordered, is not applicable to the case of transfer covered under the said 5th proviso.
Earlier, the Allahabad High Court had rejected the petition filed by a financial creditor who was not part of the winding up proceedings before the Court, for transfer of proceedings to NCLT.