Axis Bank Limited vs M/s. Hi-Tech Abrasives Ltd

Sanjay K. Agrawal, J

This is a company petition filed by petitioner Axis Bank Limited under Section 433 of the Companies Act, 1956 in which notice was issued to the

respondent borrower on 12-9-2014 at pre-admission stage, thereafter, reply affidavit has been filed, but the matter has not been proceeded further.

Now, an application under Section 434 of the Companies Act, 2013 as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance,

2018 for transfer of winding-up proceedings has been filed before this Court in which reply has been filed opposing the said application.

I have heard learned counsel for the parties on the said application.

By the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, Comp.Pet.No.9/2014 following provision has been inserted in sub-

section (1) of Section 434 of the Companies Act, 2013, in clause (c), after the proviso: -

Provided further that any party or parties to any proceedings relating to the winding up of companies pending before 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 process under the Insolvency and Bankruptcy Code, 2016.

A careful reading of the aforesaid provision would show that the newly inserted proviso to Section 434 of the Companies Act, 2013 gives an option

to either party to file an application for transfer of proceedings before the National Company Law Tribunal treating it to be an application for initiation

of corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016. The language employed by the proviso makes it amply

clear that firstly, an application is to be filed by either party for transfer of proceeding and secondly, the Court may by an order transfer such

proceeding to the Tribunal and the proceeding so transferred shall be dealt with by the Tribunal as an application under the Insolvency and Bankruptcy

Code, 2016.

The argument of Mr. Harsh Wardhan, learned counsel for the respondent borrower, is that the petitioner Bank has not specified any ground or

reason as to why this Court should exercise its discretion and order for transfer of proceedings to the National Company Law Tribunal. The newly

inserted proviso firstly uses the word 'may' which is directory in nature. Secondly, the very fact that the proviso has made an arrangement of filing an

application before the Court makes it clear that proper consideration and exercise of discretion is imperative.

Whereas, reply by Mr. Shishir Dixit, learned counsel for the petitioner Comp.Pet.No.9/2014 Bank, is that the power is discretionary and since the

proceeding is only at pre-admission stage and as the winding-up petition has not been admitted and the proceeding is pending since 2014, it would be

apt to transfer those proceedings.

It is well settled that when a discretion is conferred on the Court to allow any relief claimed by a party to a legal proceeding, the Court must

judicially exercise such discretion. In the instant case, undoubtedly, present petition for winding-up proceeding is at initiation stage, only pre- admission

notice has been issued on 12-9-2014 and thereafter, nothing has substantially progressed and the petition has not yet been admitted for winding up of

the company and no Official Liquidator has been appointed.

In this view of the matter, I am of the considered opinion that it is a fit case where I deem it appropriate to exercise the power conferred under the

proviso to Section 434 of the Companies Act, 2013 as amended with effect from 6th day of June, 2018 and direct transfer of the present company

petition to the National Company Law Tribunal. It is ordered accordingly.

Registry is directed to take steps for transfer of the matter to the National Company Law Tribunal, Mumbai for further needful action and this

company petition is deemed to have been disposed of from the file of this Court. No order as to cost(s).