M/S. ABHIJEET PROJECTS LTD v. YOGESH KHANNA, 2023: Calcutta High Court Says Winding up Can’t be Shifted to NCLT Without Trigger

Case Name	M/S. Abhijeet Projects Ltd v. Yogesh Khanna.
Citation	APO/12/2023, IA NO: ACO/1/20232023 SCC OnLine Cal 2357
Court	High Court of Calcutta
Decided On.	17TH August 2023.
Appellants	Abhijeet Projects
Respondents	Yogesh Khanna

INTRODUCTION 

This dispute involved whether the Company court ‘HC’ has the appropriate jurisdiction to Suo moto transfer pending winding up proceedings to the National Company Law Tribunal (NCLT) of if such transfer can only occur upon an application by a party. 

The issue arises under the framework of Section 434(1) (c) of the Companies Act, 2013, as amended and interpreted through relevant Supreme Court decisions and transfer rules, the case further examines the judicial discretion involved in these transfers considering the stage and progress of each winding up case and the input of the Official liquidator and the secured creditors and the broader goal of corporate revival through the IBC code. 

IMPORTANT PROVISIONS 

• Section 434(1) (c) Companies Act, 2013: this provision governs the transfer of pending proceedings from HC to NCLT, specifying circumstances and procedural stages required for such transfer.  
• Section 290 Companies Act 2013: talks about the powers and duties of a company liquidator.
• Section 279 Companies Act 2013: talks about the authorities to contrast the company court control after admission of the suit.  
• Section 9 of IBC, 2016: talks about operational creditors’ application and stresses that proceedings are independent of the Company court. 

BRIEF FACTS – 

The current dispute comes from a series of appeals about the transfer of the company’s winding-up proceedings. These proceedings were initially started in the High Court under the Companies Act, 1956. 

They are now being moved to the National Company Law Tribunal (NCLT) following the introduction of the Companies Act, 2013, and the Insolvency and Bankruptcy Code (IBC), and M/S. Abhijeet Projects Ltd. was ordered to be wound up and put under the supervision of the Official Liquidator, this company became the center of attention when orders were issued to transfer its ongoing winding up petitions from the High Court to the NCLT, like other companies in liquidation and their stakeholders joined the litigation and these stakeholders, including creditors, the Official Liquidator, and secured lenders, filed appeals related to the transfer orders.

The issue started with Section 434(1)(c) of the Companies Act, 2013. This section, along with the Companies (Transfer of Pending Proceedings) Rules, 2016 and later amendments, set up a new system for dealing with old winding-up cases. 

The legal framework, along with recent Supreme Court rulings, raised the question of whether the transfer to NCLT should happen automatically by the High Court or only through a specific application from a party involved in the winding-up proceedings, and in this situation, the Court needed to look at the different stages and progress of each winding-up case. It had to evaluate how transfer would affect the rights of creditors and other stakeholder’s and finally, it had to interpret the main goal of the legislation, which is to support corporate revival instead of dissolution.

The facts show that M/S Abhijeet Projects Ltd. and similar companies received winding up orders well before the IBC came into effect and some cases had reached later stages, including the appointment of Official Liquidators, partial or significant asset realization, issuance of notices to creditors, and distribution of sale proceeds and as a result, the issue of transferring cases to the NCLT was complicated, including some parties wanted a quick transfer to allow for a possible corporate restart under the IBC and others preferred to keep the cases in the High Court to finish liquidation and dissolution without delays or disruptions.

The official liquidator’s and secured creditors’ views became central as did the stage of progress in each individual case, complicating matters further the transfer of proceedings was not always initiated on application by the parties in certain appeals the HC had exercised its powers suo moto, triggering concerns by the parties, and limits of judicial authority and the role of parties in such decisions. 

Opponents of automatic transfer argued that only cases not yet “irreversible” (that is, before final dissolution or asset realization) should be transferred and they believed irreversible cases should stay in the High Court, further supreme Court precedents, notably Action Ispat & Power Pvt. Ltd. v. Shyam Metalics and A. Navinchandra Steels Pvt. Ltd. v. Srei Equipment Finance Ltd., offered guidance on interpretation and they all emphasized the importance of the stage reached and the chances for revival.

In summary, this instance was shaped by this clash between procedural statutory mandates and judicial discretion. The core factual matrix required the Calcutta HC to sift through multiple winding up petitions at different stages, evaluate detailed stakeholder input, and balance competing interests in a rapidly changing regulatory landscape, ultimately determining the correct forum for completion of the liquidation process. 

ISSUES INVOLVED – 

1. Whether the Company Court (High Court) has the jurisdiction to transfer pending winding up proceedings to the National Company Law Tribunal (NCLT) suo motu (on its own) or only upon an application by a party involved in the proceedings? 
2. Whether the discretion to transfer such winding up cases to the NCLT depends on the stage and progress of the proceedings, including considerations of whether irreversible steps towards liquidation or dissolution have already been taken? 
3. What weight should be accorded to the views of the Official Liquidator, secured creditors, and other stakeholders in deciding whether a winding-up petition should be transferred from the High Court to the NCLT?

ARGUMENTS ADVANCED BY APPELLANTS – 

• According to the counsels representing the appellants, M/S. Abhijeet Projects Ltd and connected parties presented a detailed and multi-faceted set of arguments before the Calcutta HC challenging the suo moto transfer of winding up proceedings from the High Court to the National Company Law Tribunal (NCLT). Their submission centered on procedural jurisdiction, judicial discretion, and the preservation of liquidation processes with due regard to stakeholder interests. 
• A main argument put forward was that the Company Court (High Court) does not have the power to transfer ongoing winding up proceedings to the NCLT on its own without a formal request from one of the parties involved, the appellants highlighted the importance of procedural protections and the need for party involvement in such transfers as described in Section 434(1)(c) of the Companies Act, 2013 and the related transfer rules, they further contended that without a petition, the court does not have the necessary basis to consider the appropriateness or impact of the transfer, making any action taken on its own procedurally incorrect and legally invalid.
• The appellants claimed that even when transfer applications are submitted, the decision to approve such transfers must be made carefully, considering the current state of the winding up and they argued that when liquidation reaches a late or “irreversible” stage, such as when asset realization and creditor claim settlements have significantly advanced or final dissolution orders have been issued, transferring proceedings to the NCLT would be inappropriate and disruptive. 
• The appellants emphasized that the High Court should keep jurisdiction in these cases to effectively finish the winding-up process without causing unnecessary delays or confusion in procedures.
• The appellants highlighted the need to consider the views of stakeholders, particularly the Official Liquidator, secured creditors, and other affected parties, before ordering any transfer and they argued that these stakeholders have important insights into the liquidation process, creditor recovery, and asset management, this information helps determine whether a transfer to the NCLT is helpful or harmful and the appellants stated that transferring without these balanced inputs could undermine creditor rights, create uncertainty in procedures, and damage legitimate expectations.
• While recognizing that the Insolvency and Bankruptcy Code (IBC) and related legislative changes aim to support corporate recovery and restructuring, the appellants argued that this goal does not require automatic transfers; they insisted that the High Court’s choice to keep proceedings intact should remain intact when the corporate entity is nearly winding up and has little chance of recovery. 
• The appellants asked the court to read and apply Section 434 in a way that balances recovery goals with practical business considerations and efficient use of court resources, reducing unnecessary procedures and interruptions in the liquidation process.
• In conclusion, the appellants contended that the company court should exercise careful judicial restraint and procedural fairness, insisting on party applications for transfer and weighing the stage of winding up and stakeholder interests to avoid the premature or unwarranted shifting of the jurisdiction to the NCLT.

ARGUMENTS ADVANCED BY RESPONDENTS – 

• The counsels for the respondents argued that the Section 434(1)(c) of the Companies Act, 2013, along with the Companies (Transfer of Pending Proceedings) Rules, 2016, clearly gives the Company Court the power to transfer winding-up proceedings, not only based on an application but also on its own initiative, they argued that these provisions aim to simplify the process of consolidating jurisdiction and help manage legacy cases more effectively, especially since the NCLT has been established as the specialized tribunal for insolvency and corporate law matters.
• Section 434(1)(c) of the Companies Act, 2013, along with the Companies (Transfer of Pending Proceedings) Rules, 2016, gives the Company Court the power to transfer winding-up cases and this can happen based on an application or on the Court’s own initiative, and with the intent of these provisions is to simplify the process of consolidating jurisdiction, they help manage older cases more effectively and this is particularly important since the NCLT serves as the specialized tribunal for insolvency and corporate law matters.
• The respondents pointed out that the main goal of the recent corporate law reforms and the Insolvency and Bankruptcy Code is to encourage corporate recovery, streamline resolutions, and avoid multiple proceedings, and they stated that moving pending winding up cases to the NCLT supports this aim. This shift allows for consolidated and centralized handling of insolvency issues and helps maintain the chance for corporate restructuring and recovery when possible.
• It was argued that keeping old cases in High Courts could lead to procedural issues, conflicting orders, and could slow down the important insolvency processes that the IBC aims to support, and therefore, transfer orders, including those made on their own, should be welcomed and supported unless the cases have genuinely reached a point where revival or restructuring cannot happen.
• Responding to arguments about the “irreversible stage,” the respondents claimed that there is no outright ban on transfer after liquidation or asset realization has begun; they argued that deciding whether a transfer is appropriate depends on judicial discretion and the overall facts of each case. 
• The respondents believed that the NCLT, as the main authority for insolvency, is capable of managing and completing even complex liquidations, ensuring consistency and efficiency and they also noted that various stakeholders, including Official Liquidators, creditors, and courts, have the authority under the law to work together during transfers, the straightforward progress of liquidation does not prevent transfer unless there is a clear risk of harm or an unavoidable corporate collapse.
• The respondents recognized the importance of the Official Liquidator’s and secured creditors’ opinions in the transfer decision-making process; however, they stressed that while these views guide the court’s judgment, they do not control or mandate it.
• Highlighting administrative and judicial efficiency, the respondents argued that moving winding up cases to the NCLT avoids duplicate judicial work, lowers costs, and simplifies processes for coordinating creditors and realizing assets an they claimed that legacy cases pending in different High Courts pose a barrier to the new insolvency system’s smooth operation and transferring these cases promotes clarity, predictability, and consistency in decision-making.
• The respondents stated that moving the proceedings did not negatively affect the appellants’ rights, either substantive or procedural, and by following proper procedures and making sure all parties received notice and had a chance to present their case, the transfer upheld the principles of natural justice and fairness.
• The respondents noted that the NCLT was created under a special law meant to bring together corporate law and insolvency issues an this law replaced the authority of High Courts in these matters as allowed by the statute, they argued that the legislative and constitutional plan saw the NCLT as the main place for insolvency and liquidation cases, requiring cases to be moved to that tribunal to help achieve this goal.

JUDGEMENT – 

• The Hon’ble High Court of Calcutta pointed out that the scope and intent of Section 434(1)(c) of the Companies Act, 2013, gives the Company Court (High Court) the power to transfer pending winding-up cases to the National Company Law Tribunal (NCLT), the Court noted that the legal wording, when considered with the Companies (Transfer of Pending Proceedings) Rules, 2016, and relevant Supreme Court cases, created a system aimed at consolidating authority over corporate insolvency and liquidation issues. 
• The Court stated that transfers do not have to happen only when a party requests them; they can also occur on the Court’s own initiative. This shows the lawmakers’ goal to make insolvency decisions more efficient and reduce scattered proceedings.
• While recognizing the ability to transfer suo motu, the Court highlighted that this choice must be made carefully and with attention to fairness and the current status of the winding-up proceedings and it pointed out that judicial discretion is not unlimited and must be guided by the facts, including how assets are being realized, the interests of creditors, and the chances of a corporate revival. The Court emphasized the need to make sure that any transfer does not interfere with ongoing liquidation steps that are close to finishing or harm stakeholders whose rights could be impacted.
• The Court focused on the stage of the proceedings as a key factor in deciding whether to transfer the case, it looked at whether the winding up was at an early phase, which could allow for revival and restructuring, or if it had reached an irreversible point marked by final dissolution, asset sales, and distribution of proceeds further citing Supreme Court rulings, the Court concluded that while transferring the case can lead to more consistent decision-making, it should not happen when the winding up is at a late stage, with corporate death becoming unavoidable. 
• The Court recognized the importance of the opinions and submissions from the Official Liquidator, secured creditors, and other affected parties as useful signs of the appropriateness of the transfer, however, it made it clear that while these stakeholder views help in making decisions, they are not final or obligatory, the Court holds the ultimate power to consider all factors and interests to reach a fair, effective, and legally compliant decision.
• The Court explained the use of transfer powers in relation to the policy framework of the Insolvency and Bankruptcy Code (IBC) and corporate law reform, this framework aims to help revive companies, prevent multiple lawsuits, and ensure effective insolvency resolution, the Court noted that having centralized jurisdiction in the NCLT helps streamline proceedings, improves coordination among creditors, and fits with the goals of modern insolvency management.
• The court held that no rigid or mechanical rule governs transfer decisions; rather, each case demands a nuanced and fact-sensitive approach, weighing all considerations at the stage of liquidation, stakeholder interests, potential for revival, and the public interest in uniform and efficient adjudications. 
• In conclusion the Calcutta HC affirmed the legality and prudence of transferring winding up proceedings to the NCLT under section 434 (1) (c) including on the court’s own motion subject to reasoned discretion and the court underscored that transfer order must be calibrated to the progress of the matter, ensuring that cases near completion remain in HC jurisdiction while those suitable for revival or requiring integrated insolvency adjudication move to the NCLT. 

CONCLUSION – 

The Calcutta High Court’s decision in M/S. Abhijeet Projects Ltd vs Yogesh Khanna makes it clear that, while Section 434(1)(c) of the Companies Act, 2013 allows the Company Court to transfer pending winding up cases to the NCLT even on its own initiative this power needs to be used carefully, the Hon’ble Court emphasized the importance of considering the stage of the proceedings, the interests of stakeholders, and the possibility of corporate recovery, by advocating for a case-by-case, fact-driven approach, the Court avoided a rule that would automatically transfer cases, this ensures that complex or “irreversible” winding-up cases stay with the High Court, helping to maintain efficiency and avoid disrupting procedures.

This judgment balances the legislative goal of consolidating insolvency jurisdiction under the NCLT, as outlined by the IBC, with the need to acknowledge the practical and business realities of ongoing liquidation. It further emphasizes that judicial discretion should align statutory goals with fairness to stakeholders, and this approach prevents bias while encouraging a smooth and effective insolvency resolution when revival remains an option.

This article has been written by Mayur Shrestha (Presidency University Bengaluru School of Law).