16 April 2019: The National Company Law Appellate Tribunal has held that shareholders/promoters of a company can file application for approval of settlement with creditors, even after official liquidator has been appointed.
This ruling was made while allowing an appeal filed against the decision of the National Company Law Tribunal, Mumbai bench, which had held that the application filed under Section 391 of the Companies Act 1956( corresponding to Section 230(1), Companies Act 2013) could not have been moved by the shareholders after the appointment of Official Liquidator.
The NCLT reasoned that only the Official Liquidator was entitled to represent the company under liquidation. Holding this to be erroneous after referring to judgments of Supreme Court and several High Courts., the Appellate Tribunal held :
“Liquidator is only an additional person and not exclusive person who can move application under Section 391 of the old Act when the company is in liquidation. Looking to these Judgements, we are unable to support the view taken by NCLT that the Appellant could not have filed the Petition under Section 391 of the old Act”.
In the present matter, the promoter- director had filed a scheme of compromise in winding up proceedings before the Hon’ble Bombay High Court where Liquidator was already appointed. But the matter got transferred to NCLT, Mumbai on the basis of notification dated December 7, 2016.
Having held that the promoter was entitled to move Section 391 application, the NCLAT had to decide where the proceedings should revive – whether at NCLT or High Court.
The NCLAT held that the proceedings should continue in High Court, based on the judgment of Bombay High Court in Sunil Gandhi and Ors. Vs. A.N. Buildwell Private Limited and Ors, which held as follows :
“In the proceedings relating to winding up, as in the present case, applications under the provisions of section 391 of the Companies Act, 1956, for the revival of the company in provisional liquidation, would constitute an exception, and would a fortiori fall outside the purview of independent proceedings which ought to be transferred to the National Company Law Tribunal, under clause 3 of the subject notification”.
The NCLAT gave liberty to the Appellant/ Promoter-Director to approach the Hon’ble Bombay High Court for appropriate orders.