Winding-Up Proceedings Not Irreversible Must Be Transferred to NCLT under IBC, Rules Delhi High Court
- REEDLAW
- 39 minutes ago
- 4 min read
REEDLAW Legal News Network reports: In a significant pronouncement, the Delhi High Court ruled that pending winding-up proceedings which have not attained an irreversible stage must be transferred to the National Company Law Tribunal (NCLT) for adjudication under the Insolvency and Bankruptcy Code, 2016. The Court reaffirmed that such a transfer ensures effective resolution, value maximisation, and uniformity in insolvency proceedings under the IBC framework.
The Delhi High Court Single-Judge Bench of Justice Ms. Tara Vitasta Ganju, while adjudicating an application seeking the transfer of pending winding-up proceedings against the corporate debtor to the National Company Law Tribunal, held that matters which have not reached an irreversible stage must be shifted to the NCLT for adjudication under the Insolvency and Bankruptcy Code, 2016. The Bench emphasised that the legislative intent behind the IBC is to consolidate and expedite insolvency proceedings through a unified forum, thereby ensuring the most efficient realisation of value for stakeholders.
The petitioner, an allottee of a commercial unit in a real estate project developed by the Corporate Debtor, had sought transfer of the pending winding-up proceedings against the Corporate Debtor to the National Company Law Tribunal (NCLT) under Section 434(1)(c) of the Companies Act, 2013. It was contended that no irreversible steps had been taken in the winding-up process, and therefore, the matter could be more effectively adjudicated under the Insolvency and Bankruptcy Code, 2016 (IBC). The Official Liquidator and associations representing the allottees supported the transfer, relying on the Supreme Court’s rulings in Action Ispat and Power Private Limited v. Shyam Metalics and Energy Limited, REEDLAW 2020 SC 12531 and A. Navinchandra Steels Private Limited v. SREI Equipment Finance Limited and Others, REEDLAW 2021 SC 03531, which held that pending winding-up proceedings may be transferred to the NCLT even after admission, provided no irreversible steps have been undertaken.
The Official Liquidator confirmed possession of certain assets of the Corporate Debtor and stated that although a liquidation order had been passed, no sale of assets or distribution of funds had yet taken place. It was noted that approximately 1,250 claims had been lodged, and the Serious Fraud Investigation Office (SFIO) was conducting an investigation. The Ex-Directors did not oppose the transfer, as similar proceedings involving a group company had already been transferred to the NCLT. Investor and allottee representatives submitted that such a transfer would facilitate an effective resolution process under the IBC, preserving the possibility of revival of the Corporate Debtor as a going concern for the benefit of more than 1,700 small investors.
The Court observed that the winding-up petition had been admitted in 2016, and though a revival scheme was approved in 2020, it was later set aside in 2023 due to non-implementation and mounting statutory liabilities. Despite the appointment of a liquidator, no assets had been sold, and no irreversible steps had been taken. Referring to Action Ispat and Power Private Limited v. Shyam Metalics and Energy Limited, REEDLAW 2020 SC 12531, Kaledonia Jute and Fibres Private Limited v. Axis Nirman and Industries Limited and Others, REEDLAW 2020 SC 11533, and Forech India Limited v. Edelweiss Assets Reconstruction Company Limited, REEDLAW 2019 SC 01501, the Court held that where winding-up proceedings have not attained an irreversible stage, they should be transferred to the NCLT for adjudication under the IBC framework.
Accordingly, the High Court directed that the winding-up proceedings be transferred to the NCLT, Delhi Bench, for further action under the Insolvency and Bankruptcy Code, 2016, observing that such transfer would ensure a specialised, time-bound resolution mechanism and protect the interests of all stakeholders.
Ms. Purti Gupta, Ms. Henna George, Ms. Sunidhi Sah, Ms. Pooja Aggarwal, and Ms. Khushi Sharma, Advocates, represented the Applicant in CA.608/25.
Mr. Bharat Gupta, Mr. Varun Tyagi, Mr. Vishesh Chauhan, Ms. Akshita Harjai, Mr. Ishan Srivastava, Ms. Shagun Gupta, Ms. Snigdha S. Jena, Advocates, appeared for Allottees – Investors Sanghars Samiti and Vigneshwara Victims Welfare Association.
Mr. Dhruv Wadhwa, Advocate for Applicant, appeared in CA. 948/24 and 239/25.
Mr. Sumit K. Batra, SC, appeared for the OL.
Mr. Jeevesh Nagrath, Sr. Advocate, with Ms. Kashish Chhabra, Ms. Nitya Maheshwari, Ms. Sabeeh Akhtar and Ms. Mrinalini, Advocates, appeared for the Respondent No. 2.
Mr. Sunil Dahiya appeared with Respondent No. 2 in person
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