In a significant ruling, the Himachal Pradesh High Court has emphasized that winding-up proceedings under the Companies Act should be transferred to the National Company Law Tribunal (NCLT) if they have not reached an irreversible stage. The division bench comprising Justices Tarlok Singh Chauhan and Sushil Kukreja ruled that revival efforts under the Insolvency and Bankruptcy Code, 2016 (IBC) must be prioritized unless the company’s demise is inevitable.
Case Background
The matter titled Elecon Engineering Company Limited vs. M/s Inox Wind Limited & Anr. (Case No. 2025:HHC:11215) stemmed from a company appeal filed by Elecon Engineering Company Limited. The appeal challenged an order dated 02.08.2024 by the Company Judge, which transferred the winding-up petition to the NCLT, Chandigarh.
Elecon had originally petitioned for the winding-up of Inox Wind Limited, citing non-payment of dues amounting to Rs. 3,25,78,000—comprising Rs. 1,41,78,000 for gearbox materials and Rs. 1,84,00,000 as refundable security deposit. It argued that the respondent was commercially insolvent and unable to discharge its liabilities, justifying winding-up under the Companies Act.
Transfer of Petition to NCLT
During the pendency of the case, Inox Wind moved an application under Section 434(1)(c) of the Companies Act, requesting the transfer of the petition to NCLT for resolution under the IBC. The Company Judge allowed the request, prompting Elecon to file the present appeal.
Legal Submissions
The appellant contended that the Company Judge had wrongly relied on the Supreme Court’s ruling in Action Ispat and Power Pvt. Ltd. vs. Shyam Metalics and Energy Ltd. (2021), which it claimed was inapplicable to the present facts. Conversely, the respondent argued that the order was legally sound and in line with judicial precedents.
High Court Observations
The Himachal Pradesh High Court delved into the amended provisions of Section 434(1)(c) of the Companies Act, which governs the transfer of pending winding-up proceedings to NCLT. The Court highlighted that:
- The Companies (Transfer of Pending Proceedings) Rules, 2016, especially Rule 5, mandates that winding-up cases under Section 433(e) for non-payment of debt—where no notice has been served under Rule 26 of the Companies (Court) Rules, 1959—must be transferred to NCLT.
- The fifth proviso to Section 434(1)(c), introduced in 2018, enables the Court to transfer proceedings even post-admission, provided they haven’t reached an irreversible stage (like asset liquidation).
The Court reiterated the Supreme Court’s stance in Action Ispat and A. Navinchandra Steels Pvt. Ltd. vs. Srei Equipment Finance Ltd. & Ors. (2021). Both rulings underscore that unless a company is beyond revival—such as post-asset sale or nearing liquidation—the case should be transferred to NCLT to explore possibilities of revival under the IBC.
Court’s Conclusion
The High Court held that the discretion to transfer winding-up proceedings depends on the stage of the case. If the proceedings have not reached a point of no return, transferring the case to NCLT aligns with the IBC’s objective of reviving distressed companies. This approach also prevents parallel proceedings and serves the broader public interest, including that of creditors, employees, and the economy at large.
Final Verdict
Finding no merit in the appeal, the Himachal Pradesh High Court dismissed the plea by Elecon Engineering, upholding the transfer of the winding-up petition to the NCLT.
Key Takeaway:
The ruling reaffirms that courts must prioritize revival over liquidation and underscores NCLT’s central role in resolving corporate insolvency under the IBC.