03 May 2024 Bankruptcy & Insolvency Law >> Business & Commercial Law  

A company facing liquidation has been granted a lifeline. In a recent court order, a winding up petition was transferred from a company court to the National Company Law Tribunal (NCLT), paving the way for a potentially faster and more creditor-friendly resolution through the corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code (IBC). This decision offers hope for a swifter conclusion for the company's creditors and a potential chance for revival.

Background:

Company Petition No. 317 of 2012 sought to wind up a company. The Official Liquidator, appointed to oversee the liquidation, had only taken possession of the company's registered office and hadn't invited claims from creditors or workers. The petitioner, acting as a creditor, requested the transfer to NCLT for a swifter resolution. They argued that CIRP under the IBC would be faster and allow for more creditor involvement in deciding the company's fate.

Court's Decision:

The court approved the transfer considering the following:

• No significant progress had been made in the winding up process.
• Transferring to NCLT could expedite resolution and give creditors a say in the CIRP.
• The IBC's provisions address potential concerns regarding workmen's claims.

Conditions for Transfer:

The transfer is subject to specific conditions:

• The petitioner must deposit Rs. 3 lacs with the Official Liquidator to cover liquidation expenses.
• The previous order admitting the winding petition is revoked.
• The NCLT will consider the petition as an application to initiate CIRP.
• The company and its directors are barred from selling assets or creating third-party interests until the NCLT initiates CIRP.

Implications:

This order highlights the possibility of transferring winding up petitions to the NCLT for CIRP under the IBC. This can be a faster and more creditor-centric approach to resolving corporate insolvency.

  INSOLVENCY AND BANKRUPTCY CODE, 2016