JAIPUR METALS & ELECTRICALS EMPLOYEES ORGANIZATION THROUGH GENERAL SECRETARY MR. TEJ RAM MEENA …APPELLANT VERSUS JAIPUR METALS & ELECTRICALS LTD. THROUGH ITS MANAGING DIRECTOR & ORS. …RESPONDENTS


Hon’ble Mr. Justice R.F. Nariman

Hon’ble Mr. Justice Mukeshkumar Rasikbhai Shah

Hon’ble Mr. Justice Mukeshkumar Rasikbhai Shah

Whether the order of High Court refused to transfer winding up proceedings pending before it to the National Company Law Tribunal (“NCLT”), and has set  aside an order dated 13.04.2018 of the NCLT by which order a financial creditor’s petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“Insolvency Code” or “Code”) has been admitted.?

The Respondent No. 1 company had become a non-performing asset – the BIFR was of the prima facie opinion that the company ought to be wound up, which opinion was forwarded to the High Court.-The High Court ultimately registered the case as Company Petition No. 19/2009 -The Alchemist Asset Reconstruction Company Ltd. (Respondent No. 3) acquired substantially all the financial debts of Respondent No. 1.-in a writ petition filed by a workers’ union, being Writ Petition No. 504/2000, the High Court, directed the Official Liquidator to be provisionally attached to the Court, and to join in the evaluation of the value of goods and material lying in the factory premises of the company so that dues of the workmen could be paid -the Respondent No. 3 herein preferred an application under Section 7 of the Insolvency Code, – the NCLT – admitted the same. – a moratorium was declared in terms of Section 14 of the Code and an interim resolution professional was appointed.-the High Court, refused to transfer the winding up proceedings pending before it, and set aside the NCLT order dated 13.04.2018, stating that it had been passed without jurisdiction –

Apex court held that  It is clear that Respondent No. 3 has filed a Section 7 application under the Code  is an independent proceeding which has nothing to do with the transfer of pending winding up proceedings before the High Court. It was open for Respondent No. 3 at any time before a winding up order is passed to apply under Section 7 of the Code. This is clear from a reading of Section 7 together with Section 238 of the Code – if there is any inconsistency between Section 434 as substituted and the provisions of the Code, the latter must

prevail – the NCLT was absolutely correct in applying Section 238 of the Code to an independent proceeding instituted by a secured financial creditor, namely, the Alchemist Asset Reconstruction Company Ltd. – High Court could not have held that the proceedings before the NCLT were without jurisdiction. – the High Court judgment has to be set aside. The NCLT proceedings will now continue from the stage at which they have been left off. Obviously, the company petition pending before the High Court cannot be proceeded with further in view of Section 238 of the Code. The writ petitions that are pending before the High Court have also to be disposed of in light of the fact that proceedings under the Code must run their entire course. We, therefore, allow the appeal and set aside the High Court’s judgment.