Case BriefsHigh Courts

Karnataka High Court: S. Sunil Dutt Yadav, J., decided in the matter of a petition which was filed praying to transfer a company petition on the file of the High of Karnataka to the National Company Law Tribunal, Bengaluru under the Insolvency and Bankruptcy Code, 2016.

Company petition had been filed seeking an order of winding-up of the respondent-company claiming that it had committed defaults as regards the payment of; rent, interest on rent, service tax and penalty on service tax.

It was contended that the respondent company had demonstrated its inability to pay the debt and accordingly the winding up proceedings had been initiated and in between the proceeding a company application was filed by the respondent seeking transfer of the company petition to NCLT. The petitioner had opposed the application asserting that no reason was assigned in the application invoking exercise of discretion of the Court in terms of power vested under the fifth proviso to Section 434 (1) of the Companies Act, 2013. On this argument it was contended that provision of transfer of proceedings does not require any explanation.

It was further contended that transfer of proceedings to the NCLT would prejudice the interest of the petitioners’ claim insofar as IBC Code imposes rigours and the ambiguity in the orders of the NCLT and NCLAT as to whether rental dues was an operational debt would prejudice petitioners rights to realise its claims which otherwise was admissible in the present winding up proceedings pending before this court. It was contended that exercise of discretion under the fifth proviso to Section 434(1)(c) could be premised on various considerations including existence of parallel proceedings. It was also contended that exercise of judicial discretion cannot have the effect of prejudicing the rights of the petitioner nor can it be exercised in a manner so as to cause injustice.

It is further contended that transfer of proceedings to the NCLT would deny the petitioner the right to a remedy. It was specifically asserted that the court while exercising judicial discretion ought to also keep in mind as to whether provisions of the IBC in terms of which the winding up proceedings would be decided by the NCLT, would make the claim maintainable failing which the question of transferring the proceedings ought not to be considered at all.

The Court after the hearing both the parties reiterated that in the present case, notice having been served and the matter was pending for admission when the application invoking the fifth proviso under Section 434 of the Companies Act, 2013 had been filed, the manner of disposal of such application was to be done in terms of the fifth proviso and plain reading of the fifth proviso as extracted hereinabove would indicate that any party or parties to any proceedings may file an application for transfer and the court may by order transfer such proceedings to the Tribunal. However, what needs to be looked into was the interpretation placed by the Apex Court relating to the exercise of power under the proviso.

The Court analyzed the judgment of Supreme Court in Action Ispat and Power (P) Ltd. v. Shyam Metalics and Energy Ltd., Civil Appeal Nos. 4042-4043 of 2020 decided on 15-12-2020 and explained that where the winding up proceedings have reached a stage where it is irreversible making it impossible to set the clock back and in such an event, the Company Court must proceed with the winding up instead of transferring the proceedings to NCLT is to be noticed. It further reiterated the relevant context relating to the present case,

“27. …..As has been correctly pointed out by Shri Sinha, a discretionary jurisdiction under the fifth proviso to Section 434(1)(c) of the Companies Act, 2013 cannot prevail over the undoubted jurisdiction of the NCLT under the IBC once the parameters of Section 7 and other provisions of the IBC have been met….” (emphasis supplied)

Court further stated that it is clear that provisions of IBC would prevail over the provisions of the Companies Act relating to winding up proceedings.

It was noted that in the present case, there were no parallel proceedings before the NCLT apart from the present proceedings for winding up but the Court held that even in the absence of parallel proceedings exercise to transfer proceedings may involve taking note of other factors which may include the case made out by the Company demonstrating that if the matter is transferred to NCLT to be disposed off under the IBC, there would be a greater possibility of restructuring and revival of the Company. The Court rejected the contention of petitioner that no reasons need be assigned as long as power is available to be invoked as per the statutory provision thus under the fifth proviso to Section 434 of Companies Act, 2013 the party seeking such transfer must make out grounds.

In the present case, no such grounds are forthcoming as regards the need for restructuring of the Company, if proceedings are transferred to NCLT.

The Company applications were rejected by the Court stating, “The legal regime in winding up proceedings does not disentitle the consideration of winding up merely in light of pre-existing dispute and the considerations for declining to exercise jurisdiction under Section 434 of the Companies Act, 2013 is on different grounds and not necessarily attached to the existence of a dispute in parallel forum.”

[Nitesh Residency Hotels (P) Ltd. v. Archdiocese of Bangalore, 2021 SCC OnLine Kar 14704, decided on 28-09-2021]

For the applicant: Sri K.G. Raghavan, Senior Advocate for Sri Nischal Dev B.R., Advocate

For the respondent: Sri Naman Jabakh, Advocate for Sri S. Vivek Holla, Advocate; Sri C.K. Nandakumar, Advocate as Amicus CURIE

Sri Shivabhushan S. Hatti Advocate for Smt Maneesha Kongovi, Advocate

Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsSupreme Court

Supreme Court: With a view to provide an alternative to seeking transfer of proceedings on account of inability of a party to contest proceedings at a place away from their ordinary residence on the ground that if proceedings are not transferred it will result in denial of justice, the bench of A.K. Goel and U.U. Lalit, Jj held that in matrimonial or custody matters or in proceedings between parties to a marriage or arising out of disputes between parties to a marriage, wherever the defendants/respondents are located outside the jurisdiction of the court, the court where proceedings are instituted, may examine whether it is in the interest of justice to incorporate any safeguards for ensuring that summoning of defendant/respondent does not result in denial of justice.

Availability of video conferencing facility; availability of legal aid service; deposit of cost for travel, lodging and boarding in terms of Order XXV CPC; E-mail address/phone number, if any, at which litigant from out station may communicate, were some of the safeguards suggested by the Court.

The Bench noticed that transfer is not always a solution acceptable to both the parties. It may be appropriate that available technology of video conferencing is used where both the parties have equal difficulty and there is no place which is convenient to both the parties. The Court said that wherever the facility of video conferencing is available, it ought to be fully utilized and all the High Courts should issue appropriate administrative instructions to regulate the use of video conferencing for certain category of cases.

The Bench further added that to combat the issue of ignorance about availability of suitable legal services, Legal Aid Committee of every district should make available selected panel of advocates whose discipline and quality can be suitably regulated and who are ready to provide legal aid at a specified fee. Such panels should be notified on the websites of the District Legal Services Authorities/State Legal Services Authorities/National Legal Services Authority. This may enhance access to justice consistent with Article 39A of the Constitution.

It was also said that every district court must have at least one e-mail ID. Administrative instructions for directions can be issued to permit the litigants to access the court, especially when litigant is located outside the local jurisdiction of the Court. A designated officer/manager of a district court may suitably respond to such e-mail in the manner permitted as per the administrative instructions. Similarly, a manager/ information officer in every district court may be accessible on a notified telephone during notified hours as per the instructions. [Krishna Veni Nagam v. Harish Nagam, 2017 SCC OnLine SC 236, decided on 09.03.2017]

Tripura High Court
Case BriefsHigh Courts

Tripura High Court: While deciding a reference arising from a batch of transfer petitions, the Court held that the High Court in exercise of power under Section 24 of the Civil Procedure Code  has the power to transfer matrimonial proceedings from one Family Court to another Family Court or Family Court to District Court or District Court to Family Court and similarly, the High Court has also the power to transfer a proceedings under Chapter IX of the Criminal Procedure Code from the Family Court to the Magisterial Court and from Magisterial Court to Family Court and vice versa.
The issues for consideration before the Division Bench were:
(1) Whether petitions can be transferred from the Court of the District Judge to the Family Court in another District?
(2) Whether the proceedings pending before the Family Court in one District can be transferred to a District Judge in another District where there is no Family Court?

The Court observed that clearly the proceeding before the Family Court shall be dealt with, as per the procedure prescribed in the Act itself. The procedural law  prescribed in CPC which is not in conflict and/or inconsistent with the provisions of the Family Courts Act and Rules framed thereunder shall apply. Admittedly, in the scheme of the Family Courts Act, there is no provision of transfer of a proceeding from one Family Court to another Family Court or from a Family Court to a District Court and from a District Court to Family Court. Since there is no such provision prescribed in the Family Courts Act, the general provision prescribed under Section 24 of the Code of Civil Procedure in respect of all civil proceedings, shall apply which authorizes the High Court to transfer any suit or proceeding from one Civil Court to another Civil Court under its jurisdiction.

Observing that the High Court  in exercise of power under Section 24 CPC and Section 407 CrPC could transfer cases, the Court held that, “it cannot be said that once a proceeding from Family Court to a District Court is transferred, the parties will be deprived of the special provisions of the Family Courts Act. Be that as it may, the Family Courts Act has not as a whole excluded the application of CPC or CrPC. The provisions of the procedural law prescribed in CPC, CrPC or in the Evidence Act which is not in conflict and/or inconsistent with the provisions of the Family Courts Act shall apply in respect of proceedings to which the Family Court exercises jurisdiction. Once, the Family Court is also a court subordinate to the High Court, the High Court’s power to transfer a proceeding from the Family Court to any other District Court or from the District Court to the Family Court cannot be said to have excluded or restricted. The High Court in exercise of power under Section 24 CPC, in our considered opinion has the power to transfer matrimonial proceedings from Family Court to Family Court or Family Court to District Court or District Court to Family Court and similarly, the High Court has also the power to transfer a proceedings under Chapter IX of the CrPC from the Family Court to the Magisterial Court and from Magisterial Court to Family Court and vice versa.” [Dipika Sharma (Chakraborty) v. Sudip Sharma2016 SCC OnLine Tri 505 , decided on September 16, 2016]