2020 INSC 0574
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3735 OF 2020
(Arising out of Special Leave Petition (Civil) No.5452 OF 2020)
M/S KALEDONIA JUTE AND 
FIBRES PVT. LTD.                                              …   APPELLANT(S)
VERSUS
M/S AXIS NIRMAN AND 
INDUSTRIES LTD. & ORS.                                 … RESPONDENT(S)
J U D G M E N T
V. Ramasubramanian, J.
1. Leave granted.
2. Aggrieved   by   an   order   passed   by   the   Company   Court   (High
Court   of   Allahabad),   refusing   to   transfer   the   winding   up   petition
pending   therein,   to   the   National   Company   Law   Tribunal   (NCLT   for
short), a financial creditor has come up with this appeal.
3. Heard   Mr.   Huzefa   Ahmadi,   learned   senior   counsel   appearing
for   the   appellant,   Mr.   A.N.S.   Nadkarni,   learned   senior   counsel
appearing   for   the   1 st
  respondent­corporate   debtor   and   Gp.   Capt.

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Karan   Singh   Bhati,   learned   counsel   appearing   for   the   official
liquidator.
Background Facts
4. One M/s Girdhar Trading Co., the 2 nd
 respondent herein, filed
a petition in Company Petition No.24 of 2015 before the High Court
of Allahabad under Section 433 of the Companies Act, 1956, for the
winding up of the first respondent company, on the ground that the
Company was unable to pay its debts. The Company Court ordered
notice to the 1 st
  respondent herein, but the 1 st
  respondent failed to
appear before the Company Court.
5. Therefore,   by   an   order   dated   08.01.2016   the   Company   Court
ordered   the   admission   of   the   Company   Petition   and   also   directed
publication of the advertisement of the  petition in  accordance with
Rule 24 of the Companies (Court) Rules, 1959. Pursuant to the said
order,   the   2 nd
  respondent   herein   (petitioning   creditor)   effected   a
publication of the advertisement in the Official Gazette in Form No.
48   on   30.01.2016.   Newspaper   publications   were   also   made,
indicating   the   date   of   hearing   of   the   Company   Petition   as
29.02.2016.

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6. Thereafter,   the   Company   Court   passed   an   order   dated
10.03.2016 directing the winding up of the 1 st
 respondent Company
on the ground that the Company has been unable to pay its debts
and   that   it   was   just   and   equitable   to   wind   up   the   1 st
  respondent
Company.
7. By the aforesaid order dated 10.03.2016, the Company  Court
appointed   the   official   liquidator   attached   to   the   High   Court   of
Allahabad   as   the   Liquidator   and   directed   him   to   take   over   the
assets and books of accounts of the Company. The order of winding
up   was   also   directed   to   be   advertised   in   Form   53   in   two
newspapers, as required under Rule 113 of the Companies (Courts)
Rules 1959.
8. Thereafter, the 1 st
  respondent filed an application for recalling
the   order   of   winding   up   dated   10.03.2016.   The   1 st
  respondent,   in
order   to   prove   their   bonafides   paid   the   entire   amount   due   to   the
petitioning creditor (the second respondent herein) along with costs.
Therefore,   the   petitioning   creditor   had   no   objection   to   the   recall   of
the order of winding up.

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9. But the official liquidator opposed the application for recall on
the ground that the 1 st
 respondent­Company owed money to various
creditors   to   the   tune   of   Rs.27   Crores   and   that   unless   the   said
amount   is   paid,   the   order   of   winding   up   cannot   be   recalled.     The
Official   Liquidator   also   submitted   that   he   had   already   taken   over
charge of the assets of the Company.
10. In   the   light   of   the   rival   contentions,   the   Company   Court
passed an order on 22.08.2016 keeping the winding up order dated
10.03.2016 in abeyance. However, the Company Court directed the
Official Liquidator to continue to be in custody of the assets of the
Company.
11. While things stood thus, the appellant herein, claiming to be a
creditor of the first respondent herein, moved an application before
the   NCLT,   Allahabad   under   Section   7   of   the   Insolvency   and
Bankruptcy Code, 2016 (for short the ‘IBC, 2016’).  The claim of the
appellant   herein   before   the   NCLT   was   that   the   1 st
  respondent   was
due   and   liable   to   pay   a   sum   of   Rs.32   lakhs   and   that   despite
repeated demands, the 1 st
 respondent failed to pay the said amount.

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12. Thereafter,   the   appellant   moved   an   application   in   Civil
Miscellaneous   Application   No.   23   of   2020   before   the   Company
Court   (High   court)  seeking   a   transfer   of   the   winding  up   petition   to
the NCLT, Allahabad. This application was rejected by the Company
Court by a cryptic order dated 24.02.2020, on the sole ground that
the   requirement   of   Rule   24   had   already   been   complied   with   and
that a winding up order had already been passed. It is against this
order   of   the   High   court,   refusing   to   transfer   the   winding   up
proceedings from the Company Court to the NCLT that the financial
creditor has come up with this civil appeal.
Issues for Consideration
13. The main issues that arise for consideration in this appeal are:
(i)   what   are   the   circumstances   under   which   a   winding   up
proceeding pending on the file of a High court could be transferred
to the NCLT and 
(ii) at whose instance, such transfer could be ordered. 
Discussion
14. Though the Companies Act, 2013 (Act 18 of 2013) received the
assent  of  the President on  29.08.2013 and it was published in the

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Gazette of India dated 30.08.2013 and corrected through corrigenda
published   on   01.01.2014,   various   provisions   of   the   Act   came   into
force on various dates. While some of the provisions came into force
w.e.f.   12.09.2013,   some   other   provisions   came   into   force   w.e.f.
01.04.2014.
15. Clauses (a) and (b) of Sub­section (1) of Section 434 as well as
Sub­section   (2)   of   Section   434   came   into   force   w.e.f.   01.06.2016
vide  S.O.1934 (E) dated 01.06.2016. Clause (c) of Sub­section (1) of
Section 434 came into force on 15.12.2016  vide  S.O. 3677(E) dated
01.12.2016.
16. It   may   be   noted   here   that   Section   434   as   it   originally   stood
when   the   Companies   Act,   2013   was   enacted,   was   different   from
what it is today. Section 434 as it was incorporated originally in the
Companies   Act,   2013,   was   actually   substituted   by   the   Insolvency
and Bankruptcy Code, 2016 (Act 31 of 2016), which came into force
on 15.11.2016. 
17. Section 434 as it stood originally in the Companies Act, 2013
(Act 18 of 2013) and Section 434 as substituted by IBC, 2016 (Act

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31   of   2016)   together   with   subsequent   amendments   thereto,   are
presented in a tabular column for easy appreciation.
Sec. 434 as it was originally
drafted in Act 18 of 2013 Sec. 434 as it was substituted
under IBC, Act 31 of 2016
“ 434.   Transfer   of   certain
pending   proceedings. ­(1)   On
such date as may be notified
by   the   Central   Government
in this behalf,­
(a) all   matters,
proceedings or cases pending
before the Board of Company
Law Administration (herein in
this section referred to as the
Company   Law   Board)
constituted   under   sub­
section   (1)   of   section   10E   of
the   Companies   Act,   1956   (1
of   1956),   immediately   before
such   date   shall   stand
transferred   to   the   Tribunal
and   the   Tribunal   shall
dispose   of   such   matters,
proceedings   or   cases   in
accordance   with   the
provisions of this Act;
(b) any   person   aggrieved
by   any   decision   or   order   of
the   Company   Law   Board
made   before   such   date   may
file   an   appeal   to   the   High
Court   within   sixty   days   from
the date of communication of
the   decision   or   order   of   the
Company   Law   Board   to   him
on   any   question   of   law
arising out of such order;
                 Provided that the High
Court   may   if   it   is   satisfied
that   the   appellant   was [434.   Transfer   of   certain
pending   proceedings.­ (1)   On
such   date   as   may   be   notified
by   the   Central   Government   in
this behalf,­
(a)   all matters, proceedings or
cases   pending   before   the
Board   of   Company   Law
Administration   (herein   in   this
section   referred   to   as   the
Company   Law   Board)
constituted   under   sub­section
(1)   of   section   10E   of   the
Companies   Act,   1956   (1   of
1956)  immediately  before such
date   shall   stand   transferred   to
the   Tribunal   and   the   Tribunal
shall   dispose   of   such   matters,
proceedings   or   cases   in
accordance with the provisions
of this Act;
(b)       any   person   aggrieved   by
any   decision   or   order   of   the
Company   Law   Board   made
before   such   date   may   file   an
appeal   to   the   High   Court
within sixty days from the date
of   communication   of   the
decision   or   order   of   the
Company Law Board to him on
any question of law arising out
of such order:
                Provided   that   the   High
Court may if it is satisfied that
the appellant was prevented by
sufficient   cause   from   filing   an

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prevented   by   sufficient   cause
from   filing   an   appeal   within
the said period, allow it to be
filed   within   a   further   period
not exceeding sixty days;
(c) all   proceedings   under
the   Companies   Act,   1956   (1
of   1956),   including
proceedings   relating   to
arbitration,   compromise,
arrangements   and
reconstruction   and   winding
up   of   companies,   pending
immediately  before such date
before   any   District   Court   or
High   Court,   shall   stand
transferred   to   the   Tribunal
and   the   Tribunal   may
proceed   to   deal   with   such
proceedings   from   the   stage
before their transfer;
(d) any  appeal  preferred  to
the   Appellate   Authority   for
Industrial   and   Financial
Reconstruction   or   any
reference   made   or   inquiry
pending   to   or   before   the
Board   of   Industrial   and
Financial   Reconstruction   or
any   proceeding   of   whatever
nature   pending   before   the
Appellate   Authority   for
Industrial   and   Financial
Reconstruction   or   the   Board
for   Industrial   and   Financial
Reconstruction   under   the
sick   Industrial   Companies
(Special Provisions) Act, 1985
(1   of   1986)   immediately
before   the   commencement   of
this Act shall stand abated:
           Provided that a company appeal   within   the   said   period,
allow   it   to   be   filed   within   a
further   period   not   exceeding
sixty days; and 
(c)   all   proceedings   under   the
Companies   Act,   1956   (1   of
1956),   including   proceedings
relating   to   arbitration,
compromise,   arrangements
and   reconstruction   and
winding   up   of   companies,
pending   immediately   before
such   date   before   any   District
Court   or   High   Court,   shall
stand   transferred   to   the
Tribunal and the Tribunal may
proceed   to   deal   with   such
proceedings   from   the   stage
before their transfer:
Provided   that   only   such
proceedings   relating   to   the
winding   up   of   companies   shall
be   transferred   to   the   Tribunal
that   are   at   a   stage   as   may   be
prescribed   by   the   Central
Government:
[Provided further that only such
proceedings   relating   to   cases
other   than   winding­up,   for
which   orders   for   allowing   or
otherwise   of   the   proceedings
are   not   reserved   by   the   High
Court   shall   be   transferred   to
the Tribunal:
[Provided also that­]
(i) all proceedings under
the   Companies   Act,
1956   other   than   the
cases   relating   to
winding­up   of
companies   that   are
reserved   for   orders
for   allowing   or

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in   respect   of   which   such
appeal or reference or inquiry
stands   abated   under   this
clause   may   make   a   reference
to the Tribunal under this Act
within   one   hundred   and
eighty   days   from   the
commencement   of   this   Act   in
accordance   with   the
provisions of this Act:
            Provided   further   that   no
fees   shall   be   payable   for
making   such   reference   under
this  Act   by   a  company   whose
appeal or reference or inquiry
stands   abated   under   this
clause.
(2)   The   Central   Government
may   make   rules   consistent
with the provisions of this Act
to   ensure   timely   transfer   of
all   matters,   proceedings   or
cases   pending   before   the
Company   Law   Board   or   the
court,   to   the   Tribunal   under
this section.” otherwise   such
proceedings; or
(ii) the   proceedings
relating   to   winding­
up   of   companies
which   have   not   been
transferred   from   the
High Courts;
shall   be   dealt   with   in
accordance   with   provisions   of
the   Companies   Act,   1956   and
the   Companies   (Court)   Rules,
1959:]
[Provided   also   that   proceedings
relating   to   cases   of   voluntary
winding up of a company where
notice   of   the   resolution   by
advertisement   has   been   given
under sub­section (1) of section
485   of   the   Companies   Act,
1956   but   the   company   has   not
been   dissolved   before   the   1 st
April, 2017 shall continue to be
dealt   with   in   accordance   with
provisions   of   the   Companies
Act,   1956   and   the   Companies
(Court) Rules, 1959.]
[Provided further that any party
or   parties   to   any   proceedings
relating   to   the   winding   up   of
companies   pending   before   the
any   Court   immediately   before
the   commencement   of   the
Insolvency   and   Bankruptcy
Code   (Amendment)   Ordinance,
2018,   may   file   an   application
for transfer of such proceedings
and   the   Court   may   by   order
transfer   such   proceedings   to
the   Tribunal   and   the
proceedings so transferred shall
be dealt with by the Tribunal as
an   application   for   initiation   of
corporate   insolvency   resolution

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process   under   the   Insolvency
and Bankruptcy Code, 2016 (31
of 2016).]
(2)   The   Central   Government
may make rules consistent with
the   provisions   of   this   Act   to
ensure   timely   transfer   of   all
matters,   proceedings   or   cases
pending   before   the   Company
Law Board or the courts, to the
Tribunal under this section.]
18. It is important to note that what is extracted in the right hand
side   column   of   the   above   Table   includes,   apart   from   what   was
substituted   by   Act   31   of   2016,   a   couple   of   amendments   made   to
Section 434. Those amendments were made under:­
(i) The   Companies   (Removal   of   Difficulties)   Fourth
Order,   2016   published   on   07.12.2016,   which   came
into effect on 15.12.2016;
(ii) The Companies (Removal of Difficulties) Order, 2017
published on 29.06.2017 which came into effect on
the same date; and
(iii) The   Insolvency   and   Bankruptcy   Code   (Second
Amendment)   Act,   2018   namely   26   of   2018,   which
came into force w.e.f. 06.06.2018.
19. A   careful   look   at   Section   434   as   it   stands   today   would   show
that   Clause   (b)   of   Sub­section(1)   of   Section   434   has   nothing   to   do
with what Section 434 in entirety purports to deal with. Section 434

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in entirety purports to deal with the transfer of proceedings pending
either   before   the   Board   of   Company   Law   Administration   or   before
the Company Court (the High Court or the District Court).   Clause
(b)   of   Sub­section   (1)   deals   with   the   right   of   appeal   to   the   High
Court   against   any   decision   of   the   Company   Law   Board   and   hence
Clause (b) is actually a misfit in the scheme of Section 434.
20. Be that as it may, clause (c) of Sub­section (1) is the provision
that   actually   provides   for   the   transfer   of   all   the  proceedings   under
the Companies Act, 1956 pending before any District Court or High
Court,   to   the   Tribunal.   Broadly   Clause   (c)   makes   a   mention   about
proceedings relating  to arbitration, compromise, arrangements and
reconstruction   and   winding   up.  But  Clause  (c)  is  not   limited   in  its
application   to   proceedings   relating   to   arbitration,   compromise,
arrangements   and   reconstruction   and   winding   up.   This   is   due   to
the usage of the words “All proceedings......including” in Clause (c).
21. However, the first proviso to Clause (c) which was not there in
the original Section 434, but which was inserted only under IBC Act
of   2016   when   Section   434   was   substituted,   circumscribes   what   is
contained in the main part of Clause (c). The first proviso to Clause

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(c)   restricts   the   transferability   of   proceedings   for   winding   up   from
the   High   Court   to   the   tribunal,   by   stipulating   that   only   such
proceedings   for   winding   up   which   are   at   a   stage   as   may   be
prescribed   by   the   Central   Government,   be   transferred   to   the
Tribunal.
22. Sub­section   (2)   of   Section   434   empowers   the   Central
Government   to   make   Rules   consistent   with   the   provisions   of   the
Act,   to   ensure   timely   transfer   of   all   matters   pending   before   the
Company   Law   Board   or   the   Courts,   to   the   Tribunal.   Therefore,   in
exercise of the power conferred by Sub­section (2) of Section 434 of
the   Companies   Act,   2013   read   with   Sub­section   (1)   of   Section   239
of   the   IBC,   2016,   the   Central   Government   issued   a   set   of   Rules
known as ‘The Companies (Transfer of Pending Proceedings) Rules,
2016.
23. Before we have a look at the Rules it is necessary to note that
for the purpose of transfer, winding up proceedings pending before
the   High   Courts,   are   classified   by   Section   434   into   two   categories
namely:­

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(a) Proceedings   for   voluntary   winding   up   where   notice   of
resolution   by   advertisement   has   been   given   under
Section   485(1)   of   the   Companies   Act,   1956,   but   the
company   has   not   been   dissolved   before   01.04.2017;
and
(b)  Other types of winding up proceedings.
24. The first of the above 2 categories of cases are covered by the
fourth   proviso   under   Clause   (c)   of   Sub­section   (1)   of   Section   434,
which states:
“Provided   also   that   proceedings   relating   to   cases   of
voluntary   winding   up   of   a   company   where   notice   of   the
resolution   by   advertisement   has   been   given   under   sub­
section (1) of section 485 of the Companies Act, 1956 but the
company   has   not   been   dissolved   before   the   1 st
  April,   2017
shall continue to be dealt with in accordance with provisions
of   the   Companies   Act,   1956   and   the   Companies   (Court)
Rules, 1959” .
Such   cases   of   voluntary   winding   up   covered   by   the   above   proviso
shall continue to be dealt with by the High court. It is only (i) cases
of  voluntary   winding  up  falling  outside  the scope of  the  4 th
  Proviso
and   (ii)   other   types   of   winding   up   proceedings,   that   can   be
transferred by  the High Courts to the Tribunal, subject however to
the Rules made by the Central Government under Section 434 (2).

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25. The   transferability,   by   operation   of   law,   of   winding   up
proceedings,   other   than   those   covered   by   the   4 th
  Proviso,   depends
upon   the   stage   at   which   they   are   pending   before   the   Company
Court. But this is left by the law makers to be determined through
subordinate legislation, in the form of Rules.
26. Apart   from   providing   for   the   transfer   of   certain   types   of
winding up proceedings by operation of law, Section 434 (1)(c) also
gives a choice to the parties to those proceedings to seek a transfer
of such proceedings to the NCLT. This is under  the fifth proviso to
Clause (c).  
27. Keeping in mind the above scheme of Section 434, let us now
turn   to   the   Rules.   As   stated   earlier,   The   Companies   (Transfer   of
Pending   Proceedings)   Rule,   2016   were   issued   in   exercise   of   the
powers conferred by Section 434 (2) read with Section 239(1) of IBC,
2016.
28. The   aforesaid   Rules   categorise   the   pending   proceedings   for
winding   up   into   three   types   namely   (i)   proceedings   for   voluntary
winding   up   covered   by   the   fourth   proviso   to   Clause   (c)   of   Sub­
section (1) of Section 434, which shall continue to be dealt with in

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accordance with the provisions of the 1956 Act;   (ii)   proceedings for
winding   up   on   the   ground   of   inability   to   pay   debts;   and   (iii)
proceedings   for   winding   up   on   grounds   other   than   inability   to   pay
debts.
29. Rule   4   of   the   aforesaid   Rules   deals   with   cases   of   voluntary
winding   up   covered   by   the   fourth   proviso   to   Section   434(1)(c).   We
are not concerned in this case with such types of cases.
30. Rule   5   of   the   aforesaid   Rules   provides   for   transfer   of
proceedings for winding up on the ground of inability to pay debts.
It reads as follows:
“5.   Transfer   of   pending   proceedings   of   Winding   up   on
the   ground   of   inability   to   pay   debts. —(1)   All   petitions
relating   to   winding   up   of   a   company   under   clause   (c)   of
section   433   of   the   Act   on   the   ground   of   inability   to   pay   its
debts   pending   before   a   High   Court,   and,   where   the   petition
has   not  been  served  on   the   respondent  under  Rule   26   of  the
Companies   (Court)   Rules,   1959   shall   be   transferred   to   the
Bench   of   the   Tribunal   established   under   sub­section   (4)   of
section   419   of   the   Companies   Act,   2013   exercising   territorial
jurisdiction   to   be   dealt   with   in   accordance   with   Part   II   of   the
Code:  
Provided that the petitioner shall submit all information, other
than   information   forming   part   of   the   records   transferred   in
accordance with Rule 7, required for admission of the petition
under   sections   7,   8   or   9   of   the   Code,   as   the   case   may   be,
including   details   of   the   proposed   insolvency   professional   to
the   Tribunal   upto   15 th
  day   of   July,   2017,   failing   which   the
petition shall stand abated. 

16
Provided   further   that   any   party   or   parties   to   the   petitions
shall,   after   the   1 st
  day   of   July,   2017,   be   eligible   to   file   fresh
applications   under   Sections   7   or   8   or   9   of   the   Code,   as   the
case may be in accordance with the provisions of the Code:
Provided also that where a petition relating to winding up of a
company   is   not   transferred   to   the   Tribunal   under   this   Rule
and   remains   in   the   High   Court   and   where   there   is   another
petition under Clause (e) of Section 433 of the Act for winding
up   against  the  same  company   pending  as  on   15 th
  December,
2016,   such   other   petition   shall   not   be   transferred   to   the
Tribunal,   even   if   the   petition   has   not   been   served   on   the
respondent.”
31. Rule   6   of   the   aforesaid   Rules   deals   with   transfer   of
proceedings for winding up, on grounds other than inability to pay
debts. It reads as follows:­
“6.   Transfer   of   pending   proceedings   of   Winding   up
matters   on   the   grounds   other   than   inability   to   pay
debts.— All   petitions   filed  under  clauses  (a)   and   (f)   of  section
433 of the Companies Act, 1956 pending before a High Court
and where the petition has not been served on the respondent
as   required   under   rule   26   of   the   Companies   (Court)   Rules,
1959   shall   be   transferred   to   the   Bench   of   the   Tribunal
exercising   territorial   jurisdiction   and   such   petitions   shall   be
treated   as   petitions   under   the   provisions   of   the   Companies
Act, 2013 (18 of 2013).”
32. The   transferability   of   a   winding   up   proceeding,   both   under
Rule   5   as   well   as   under   Rule   6,   is   directly   linked   to   the   service   of
the   winding   up   petition   on   the   respondent   under   Rule   26   of   the
Companies   (Court)   Rules,   1959.   If   the   winding   up   petition   has

17
already   been   served   on   the   respondent   in   terms   of   Rule   26   of   the
1959 Rules, the proceedings are not liable to be transferred. But if
service   of   the   winding   up   petition   on   the   respondent   in   terms   of
Rule   26   had   not   been   completed,   such   winding   up   proceedings,
whether they are under Clause (c) of Section 433 or under Clauses
(a)   and   (f)   of   Section   433,   shall   peremptorily   be   transferred   to   the
NCLT.
33. In   other   words,   Rules   5   and   6   of   the   Companies   (Transfer   of
Pending   Proceedings)   Rules   2016,   fix   the   stage   of   service   of   notice
under  Rule  26  of  the  Companies  (Court)  Rules,  1959,  as  the  stage
at   which   a   winding   up   proceeding   can   be   transferred.   This   is
because   the   first   proviso   under   Clause   (c)   of   Sub­section   (1)   of
Section 434 enables the Central Government to prescribe the stage
at   which   proceedings   for   winding   up   can   be   transferred   and   sub­
section (2) of section 434 confers rule making power on the Central
Government.
34. Rule   26   of   the   Companies   (Court)   Rules,   1959   reads   as
follows:

18
“Service   of   petition­   Every   petition   shall   be   served   on   the
respondent,   if   any,   named   in   the   petition   and   on   such   other
persons as the Act or these rules may require or as the Judge
or the Registrar may direct. Unless otherwise ordered, a copy
of   the   petition   shall   be   served   along   with   the   notice   of   the
petition.”
35. The normal requirement of Rule 26, as seen from its last limb
is that the copy of the petition under the Act shall be served on the
respondent   along   with   the   notice   of   the   petition,   unless   otherwise
ordered.   The   notice   of   the   petition,   required   under   Rule   26   to   be
served along with the copy of the petition, should be in Form No.6,
due to the mandate of Rule 27.
36. Due   to   the   usage   of   the   words   “was   admitted ”   in   Form   No.6,
there was a confusion as to whether the service referred to in Rule
26,   is   of   a   pre­admission   notice   or   post­admission   notice,   in   a
winding   up   proceeding.   Different   High   Courts   took   different   views.
Eventually, this Court settled the position in  Forech India Ltd .  vs.
Edelweiss Assets Reconstruction Co. Ltd . 1
  by holding  “that Rules
26 and 27 clearly refer to a pre­admission scenario.”
37. After so interpreting Rules 26 and 27 of the Companies (Court)
Rules,   1959,   this   Court   pointed   out   in   Forech   India   Ltd.   (supra)
1   2019 (2) SCR 477

19
that   “when the  Code was  enacted, only winding up petitions  where
no notice under Rule 26 was served, were to be transferred to NCLT
and treated as petitions under the Code”.  However, after Section 434
was   substituted   by  a  new   provision   under  Act  31   of   2016   and  the
5 th
  proviso   was   inserted   by   Act   26   of   2018,   the   transfer   of   the
winding up proceedings, even at the instance of the party or parties
to the proceedings became permissible.  This change of position was
also noted by this Court in  Forech India Limited (supra).
38. But   while   noting   the   change   of   position   after   the   insertion   of
the 5 th
 proviso through Act 26 of 2018, this Court indicated in para
17 of the Judgment as though  “ any person  could apply for transfer
of  such  petitions   to  the  NCLT  under  the   Code”.   Taking  advantage  of
this, it is contended by the learned senior counsel for the petitioner
that   “any   person”   (and   not   necessarily   a   party   to   the   proceeding)
could apply for transfer.
39. But   we   do   not   think   that   the   decision   in   Forech   India
Limited   (supra)   is   an   authority   for   the   proposition   that   the   5 th
proviso   to   Clause   (c)   of   Sub­section   (1)   of   Section   434   could   be
invoked   by   any   person   who   is   not   a   party   to   the   proceeding   for

20
winding   up.   The   5 th
  proviso   which   we   have   already   extracted   uses
the words   “ any party or parties to any proceedings relating to
the winding up of companies pending before any Court .”
40. In   other   words,   the   right   to   invoke   the   5 th
  proviso   is
specifically   conferred   only   upon   the   parties   to   the
proceedings .   Therefore,   on   a   literal   interpretation,   such   a   right
should   be   held   to   be   confined   only   to “the   parties   to   the
proceedings.”
41. That  takes us to  the next  question  as to  who  are   “the  parties
to”   the winding up proceedings. The Companies Act, 1956 does not
define   the   expression   “party”.   The   Companies   (Court)   Rules,   1959
also   does   not   define   the   expression   “party”.   The   Companies   Act
2013   does   not   define   the   expression   “party”.   The   Companies
(Transfer  of  pending  proceedings)  Rules,  2016 also   does not  define
the   expression   “party”.   Even   the   IBC,   2016   does   not   define   the
expression  “party”.
42. But   there   are   certain   clues   inherently   available   in   the
Companies Act, 1956, to indicate the persons who may come within

21
the   meaning   of   the   expression   “party   to   the   proceedings”.   The
provisions which contain such clues are as follows:
(i) Section   447   of   the   Companies   Act,   1956,   which   is
equivalent   to   Section   278   of   the   Companies   Act,   2013   states
that  an order for winding up shall operate in favour of all
the creditors and of all the contributories of the company
as  if it  has  been  made on the  joint  petition  of  a creditor
and   of  a  contributory .  There  is  a   small   change  between   the
wording   of   Section   278   of   the   2013   Act   and   the   wording   of
Section 447 of the 1956 Act. This change may be appreciated,
if   both   these   provisions   are   presented   simultaneously   in   a
tabular column:
Section 447 of 1956 Act Section 278 of 2013 Act
Effect   of   winding   up   order .­
An   order   for   winding   up   a
company shall operate in favour
of all the creditors and of all the
contributories   of   the   company
as   if   it   has   been   made   on   the
joint   petition   of   a   creditor
and of a contributory .  Effect   of   winding   up   order .   ­
The   order   for   the   winding   up   of
a   company   shall   operate   in
favour   of   all   the   creditors   and
all   contributories   of   the
company as if it had been made
out   on   the   joint   petition   of
creditors and contributories .

22
Section   278   of   the   2013   Act   shows   that   any   petition   by   a
single   creditor   or   contributory   is   actually   treated   as   a
joint petition of creditors and contributories, so that the
order   of   winding   up   operates   in   favour   of   all   the
creditors and all the contributories .
(ii) Under   Section   454   (6)   of   the   1956   Act,   any   person
stating himself in writing to be a creditor  shall be entitled
to   inspect   the   statement   of   affairs   submitted   to   the   official
liquidator. If the claim of such a person to be a creditor turns
out to be untrue, such a person is liable to be punished under
Section 454(7) of the 1956 Act.
(iii) The   powers   of   the   liquidator   are   enumerated   in   Section
457 of the 1956 Act. Section 457 actually divides the powers
of   a   liquidator   into   two   categories   namely   (i)   those   available
with   the   sanction   of   the   Tribunal   and   (ii)   those   generally
available   to   the   liquidator.   But   Section   290   of   the   2013   Act
has   done   away   with   such   a   distinction.   However,   the   1956
Act, as well as 2013 Act make the exercise of the powers by
the   liquidator,   subject   to   the   overall   control   of   the   Tribunal.

23
This   is   made   clear   by   Section   457(3)   of   the   1956   Act   and
Section 290(2) of the 2013 Act. Additionally, Section 457(3) of
the 1956 Act enables any creditor or contributory to apply to
the   Court   with   respect   to   the   exercise   by   the   Liquidator,   of
any of the powers conferred by Section 457.  
(iv) Section 460 of the 1956 Act and Section 292 of the 2013
Act make it clear that in the administration of the assets of
the   Company   and   the   distribution   thereof   among   its
creditors, the liquidator should have regard to any directions
given by resolution of creditors at any general meeting. If the
liquidator   does   something,   in   exercise   of   his   powers,   any
person aggrieved by such Act or decision of the liquidator, is
entitled   to   apply   to   the   Company   Court,   under   Section
460(6) of the 1956 Act and Section 292(4) of the 2013 Act.  
(v) Section   466(1)   of   the   1956   Act   enables   any   creditor   to
apply   for   stay   of   all   proceedings   in   relation   to   the   winding
up. This right can be exercised by any creditor  at any time
after the making of a winding up order.

24
43. Thus,   the   proceedings   for   winding   up   of   a   company   are
actually proceedings in rem to which the entire body of creditors is
a   party.   The   proceeding   might   have   been   initiated   by   one   or   more
creditors, but by a deeming fiction the petition is treated as a joint
petition.   The   official   liquidator   acts   for   and   on   behalf   of   the   entire
body   of   creditors.   Therefore,   the   word   “party”   appearing   in   the   5 th
proviso   to   Clause   (c)   of   Sub­section   (1)   of   section   434   cannot   be
construed   to   mean   only   the   single   petitioning   creditor   or   the
company   or   the   official   liquidator.   The   words   “party   or   parties”
appearing   in   the   5 th
  proviso   to   Clause   (c)   of   Sub­section   (1)   of
Section 434 would take within its fold any creditor of the company
in liquidation. 
44. The above conclusion can be reached through another method
of deductive logic also. If any creditor is aggrieved by any decision of
the official liquidator, he is entitled under the 1956 Act to challenge
the   same   before   the   Company   Court.   Once   he   does   that,   he
becomes   a   party   to   the   proceeding,   even   by   the   plain   language   of
the   section.   Instead   of   asking   a   party   to   adopt   such   a   circuitous
route and then take recourse to the 5 th
  proviso to section 434(1)(c),

25
it   would   be   better   to   recognise   the   right   of   such   a   party   to   seek
transfer directly.
45. As   observed   by   this   Court   in   Forech   India   Limited   (supra),
the object of IBC will be stultified if parallel proceedings are allowed
to go on in different fora. If the Allahabad High Court is allowed to
proceed   with   the   winding   up   and   NCLT   is   allowed   to   proceed   with
an   enquiry   into   the   application   under   Section   7   IBC,   the   entire
object of IBC will be thrown to the winds.
46. Therefore,   we   are   of   the   considered   view   that   the   petitioner­
herein   will   come   within   the   definition   of   the   expression   “party”
appearing   in   the   5 th
  proviso   to   Clause   (c)   of   Sub­section   (1)   of
Section   434   of   the   Companies  Act,   2013  and   that  the   petitioner   is
entitled   to   seek   a   transfer   of   the   pending   winding   up   proceedings
against   the   first   respondent,   to   the   NCLT.   It   is   important   to   note
that   the   restriction   under   Rules   5   and   6   of   the   Companies
(Transfer   of   Pending   Proceedings)   Rules,   2016   relating   to   the
stage   at   which   a   transfer   could   be   ordered,   has   no
application to the case of a transfer covered by the 5 th
 proviso
to   clause   (c)   of   sub­section   (1)   of   Section   434 .   Therefore,   the

26
impugned order of the High court rejecting the petition for transfer
on   the   basis   of   Rule   26   of   the   Companies   (Court)   Rules,   1959   is
flawed.
47. Therefore,   the   appeal   is   allowed,   the   impugned   order   is   set
aside   and   the   proceedings   for   winding   up   pending   before   the
Company Court (Allahabad High Court) against the first respondent
herein,   is   ordered   to   be   transferred   to   the   NCLT,   to   be   taken   up
along with the application of the appellant­ herein  under Section 7 of
the IBC.  There will be no order as to costs.
……………………………..CJI
(S.A. BOBDE)
……………………………….J.
(A.S. BOPANNA)
………………………………..J.
(V. RAMASUBRAMANIAN)
New Delhi
November 19, 2020