Transfer of Winding-Up Proceedings to NCLT Permissible Until Irreversible Steps Are Taken: Delhi High Court Reaffirms Primacy of IBC Framework
- REEDLAW
- Nov 2
- 5 min read
REEDLAW Legal News Network reports: In a significant ruling, the Delhi High Court reaffirmed that pending winding-up proceedings before the High Court may be transferred to the National Company Law Tribunal (NCLT) under Section 434(1)(c) of the Companies Act, 2013, provided no irreversible steps such as the sale of assets have been undertaken in liquidation. The Court clarified that such a transfer ensures the effective application of the Insolvency and Bankruptcy Code, 2016 (IBC), promoting a consolidated and time-bound resolution mechanism and upholding the IBC’s overriding effect in matters of corporate insolvency.
The Delhi High Court Single-Judge Bench of Justice Ms. Tara Vitasta Ganju, while adjudicating a batch of applications seeking transfer of pending winding-up proceedings to the NCLT, held that winding-up proceedings pending before the High Court can be transferred to the NCLT under Section 434(1)(c) of the Companies Act, 2013, as long as no irreversible steps such as asset sale have been taken. The Court relied upon the precedents laid down in Action Ispat and Power (P) Ltd. v. Shyam Metalics and Energy Ltd. and Kaledonia Jute and Fibres (P) Ltd. v. Axis Nirman and Industries Ltd., reiterating that the IBC framework prevails to enable effective insolvency resolution and corporate revival. The Court further observed that such a transfer facilitates a unified approach under the IBC, ensuring that creditors’ claims are adjudicated comprehensively and efficiently within the statutory scheme of insolvency law.
The Petitioner had filed a winding-up petition under Sections 433(e), 434 and 439 of the Companies Act, 1956, seeking dissolution of the Respondent Company on account of its failure to discharge admitted debts. The Applicants, who were among the allottees in a commercial project developed by the Respondent, later sought transfer of the pending winding-up proceedings to the National Company Law Tribunal (NCLT), Delhi Bench, under Section 434(1)(c) of the Companies Act, 2013, asserting that no irreversible steps had yet been taken in the liquidation process and that transfer would facilitate resolution under the Insolvency and Bankruptcy Code, 2016 (IBC). The Applicants contended that, though the Official Liquidator was appointed and had taken possession of certain assets, no sale or distribution had occurred, keeping the matter open for revival through the Corporate Insolvency Resolution Process (CIRP).
It was noted that the winding-up petition had been admitted in 2016, and while a revival scheme was approved by the Court in 2020, it was later declared unworkable and set aside in January 2023 due to failure of the promoters to infuse funds and settle statutory dues. The Official Liquidator confirmed that certain assets of the company were under his custody, but no irreversible step, such as a sale, had been undertaken. The Official Liquidator supported the transfer, observing that nearly 1,250 investors had filed claims, and the IBC framework offered a broader mechanism for dealing with fraudulent and undervalued transactions while keeping open the possibility of corporate revival. The Ex-Directors, however, opposed the application, contending that the liquidation had reached an advanced stage and relied on a coordinate bench decision to argue that transfer would be inappropriate once the Official Liquidator had taken possession of assets.
The Court considered the submissions and examined the applicability of the proviso to Section 434(1)(c) of the Companies Act, 2013. Referring to the Supreme Court’s decisions in Action Ispat and Power Private Limited v. Shyam Metalics and Energy Limited, REEDLAW 2020 SC 12531 and Kaledonia Jute and Fibres Private Limited v. Axis Nirman and Industries Limited and Others, REEDLAW 2020 SC 11533, it was reiterated that winding-up proceedings pending before the High Court may be transferred to the NCLT at any stage unless irreversible steps, such as the sale of company assets, have occurred. The Court observed that in the present matter, the assets of the company remained unsold and continued to be under the custody of the Official Liquidator, indicating that the proceedings had not reached an irreversible stage.
Applying the settled legal position, the Court held that since no irreversible action had taken place in the liquidation process and as transfer to NCLT would allow for a comprehensive resolution of claims under the IBC, the application deserved to be allowed. Consequently, the winding-up proceedings were ordered to be transferred to the NCLT, Delhi Bench, to be dealt with as a Corporate Insolvency Resolution Process in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016.
Ms. Pruti Gupta, Ms. Henna George and Ms. Sunidhi San, Advocates, appeared for the Applicant in CA. 428/2025.
Mr. Prabhakar Mehra, Advocate, appeared for the Applicant in CA. 168/2022.
Mr. Sandeep Choudhary, Ms. Yati Dahiya and Mr. Garnav Kumar, Advocates, appeared for the Applicant in CA. 339/2024.
Mr. Puneet Dadecch, Advocate, appeared for the Applicant in CA. 41/2019 and 509/2018.
Mr. Jaideep Singh Sandhu, Ms. Meera Kaur and Mr. Dilmol Singh Sandhu, Advocates, appeared for the Applicant in CA. 382/24, 439/24, 921/24, 922/24, 110/25 and 498/25.
Mr. Bharat Gupta, Mr. Vishesh Chauhan, Mr. Ishan Srivastava, and Ms. Shagun Gupta, Advocate, appeared for Applicants/ISS and VVWA in CA. 548/22, 743/24, 744/24, 1060/24 and 1067/2024.
Mr. Arjun Nanda, Advocate for Applicant.
Ms. Anannya Ghosh, Ms. Mrinalini Mishra and Ms. Kashish Chhabra, Advocates, appeared for the R-2/Mr. Sunil Dahiya.
Mr. Shashank Bajpai, CGSC and Mr. Shriram Tiwary, Government Pleader for the R/SFIO/Union of India Mr. Sumit K. Batra, SC, appeared for the OL.
Mr. Robin Ratnakar Davis and Ms. Neiting Khongsai, Advocates, appeared for the Ex Director Sanjay Kumar.
Mr. Bharat Gupta, Advocate, represented the ISS and VVWA.
Mr. R. Ramachandran, SSC with Mr. Prateek Dhir, Advocate, appeared for the CGST.
Ms. Aditi Mohan, Mr. Divya Gyan and Ms. Palak Bhargava, Advocate, appeared for the R-4 in CA. 1067/2024.
Ms. Bhabna Das and Mr. Arpit Kumar Mishra, Advocates, appeared for the R/Objectors in CA. 347/2023.
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