The Himachal Pradesh High Court has ruled that winding-up petitions under the Companies Act, 1956, should be transferred to the National Company Law Tribunal (NCLT) for revival under the Insolvency and Bankruptcy Code (IBC), provided the company’s demise is not irreversible. This decision emphasizes the preference for resolution over liquidation when revival is feasible.

Elecon Engineering Company Limited filed a petition for the winding up of a respondent company due to non-payment of approximately ₹3.26 crore. The respondent, however, applied to transfer the case to the NCLT under Section 434(1)(c) of the Companies Act, which was allowed by the Company Judge. The appellant appealed this decision, arguing that the transfer was legally incorrect and based on inapplicable precedents.

The Division Bench, comprising Justices Tarlok Singh Chauhan and Sushil Kukreja, upheld the transfer to the NCLT. The court emphasized that winding-up proceedings should be transferred to the NCLT unless the company’s demise is inevitable or the proceedings have reached an irreversible stage, making revival impossible. This approach aligns with the legislative intent of the IBC, which aims to facilitate the revival of distressed companies.

This judgment underscores the judiciary’s commitment to the IBC’s objectives, favoring revival over liquidation when a company’s revival is possible. It also highlights the importance of adhering to the legislative framework governing corporate insolvency and the role of the NCLT in resolving such matters.

Sources