PIVOT MULTIFAR INDUSTRIAL SERVICES LTD.  Vs DSC LIMITED -Judgment by Delhi High Court

* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on : 04 January 2024
Judgment pronounced on : 24 January 2024
+ CO.PET. 510/2016
PIVOT MULTIFAR INDUSTRIAL SERVICES LTD.
….. Petitioner
Through: Mr. Vivek Sharma and Mr.
Pranjal Sharma, Advs.
versus
DSC LIMITED ….. Respondent
Through: Mr. Vineet Tayal and Ms.
Nishtha Wadhwa, Advs.for R-4
CORAM:
HON’BLE MR. JUSTICE DHARMESH SHARMA
J U D G M E N T

1. The instant Company Petition has been moved under Section
433(e) read with Sections 434 and 439(1)(b) of the Companies Act,
1956 seeking winding up of the respondent company � M/s DSC
Limited. The petitioner company has moved the present company
petition against the respondent company on the basis of non-payment
of dues amounting to Rs. 67,70,984/- arising out of a contract for
services entered into between the parties.

FACTUAL BACKGROUND:

2. Briefly stated, the petitioner company is engaged in the business
of providing manpower i.e. labor, supervisors and technical persons
for construction and other works, and had been contracted by the

respondent company for deploying manpower at their various sites in
the year 2008. Said facilities were formalized vide contract dated
01.11.2008 bearing Ref. No. DSC-UP/Link/2008, which contained the
terms and conditions entered into between the parties. The contract
between the parties was renewed on various occasions thereafter on
01.08.2009, 01.04.2010, 29.09.2010, 01.01.2011 and 01.03.2011. Per
the contract, services were provided by the petitioner company
regularly for time to time for which the respondent company made
regular payments up until 2012, and thereafter the respondent
company became negligent in clearing its outstanding dues despite
repeated reminders.
3. It is stated that the petitioner company sent emails dated
17.09.2012 and 04.10.2012 to the respondent company, requesting
them to clear the outstanding amount of Rs. 67.7 lacs, however, the
amount outstanding remained unpaid. Furthermore, it is the case of the
petitioner that the respondent company acknowledged the amount due
to the petitioner, vide email dated 09.04.2013, written by one, Mr.
Nitin Goel of the respondent company, stating that the amount of Rs.
67,70,984/- was in the books of accounts of the respondent company,
as outstanding dues payable to the petitioner company.
4. Since the respondent company failed to clear the dues and
discharge its liability, the petitioner company was constrained to serve
a statutory legal notice dated 11.11.2013, upon the respondent
company, as provided for under Section 434 of the Companies Act,
1956. Since the notice was not replied to by the respondent company,

and neither was the outstanding amount paid to the petitioner
company, a winding up petition was preferred against the respondent
company, bearing CO.PET. 197/2014. Thereafter, a reply was filed by
the respondent company urging its objection to the winding up
petition on the ground that the legal notice under Sections 433 and 434
were not served upon the respondent at its registered office.
5. It may be apposite to note that the parties were directed to
appear before the Delhi High Court Mediation and Conciliation Centre
vide order dated 16.11.2015. The matter was listed for mediation on
several dates � 04.12.2015, 21.12.2015 and finally 05.01.2016.
However, the mediation was not successful.
6. Subsequent to the mediation failing, the petitioner company
moved CO.APPL. 941/2016, seeking permission of this court to
withdraw the winding up petition without prejudice, and serve afresh,
a legal notice upon the respondent at its registered office. The same
was allowed vide order of this court dated 15.03.2016, after which a
legal notice under Section 433 read with 434 of the Companies Act,
1956 was served upon the respondent company at its registered office.
Following this, present winding up petition was moved before this
court on 07.04.2016.

SUBMISSIONS:

7. Vide order dated 04.12.2023, this court had raised a query upon
the parties � as to why the present petition does not stand to be

transferred to the National Company Law Tribunal1. In this respect, it
has been submitted on behalf of the respondent company that those
petitions which are pending admission and have been served upon the
respondent, shall continue to remain with the High Court, pending
their admission. Reliance has been placed on a judgement of the
Bombay High Court in West Hills Reality Private Limited v.
Neelkamal Realtors Tower Pvt. Ltd.2 In furtherance of this
submission, learned Counsel for the respondent company has also
brought the attention of this court to Rule 5(1) of the Companies
(Transfer of Pending Proceedings) Rules, 20163; per which all
winding up petitions moved under Section 433(e) of the Companies
Act, 1956 that are (i) on the ground of inability to pay debts; and (ii)
where the petition has not been served on the respondent as per Rule
26 of the Companies (Court) Rules, 2016, stand to be transferred to
the NCLT. Further, reliance has been placed on another judgement of
the Bombay High Court � Commissioner of Income Tax � 8,
Mumbai v. Registrar of Companies, Mumbai & Ors.4, wherein the
court noted that those winding up petitions, moved under Section
433(e) of the Companies Act, 1956, which have not been served by
the petitioner upon the respondent on or before 15.12.2016, which is
the date on which the 2016 Rules came into effect, stand to be
transferred to the NCLT as provided for under Rule 5 of the 2016
Rules. In the aforesaid judgement, it was further held that the sine qua

1 NCLT
2 2016 SCC OnLine Bom 10038
3 2016 Rules
4 Company Petition 643/2014 dated 02.05.2017

non for transfer of a winding up petition is the non-service of a
pending petition. In this regard, it is the case of the respondent
company that the petitioner had served a copy of the petition to the
respondent company, to which a reply was also duly filed, prior to the
cut-off date of 15.12.2016.
8. It has also been submitted on behalf of the respondent company
that the present petition is not maintainable on the ground that the
claims put forth by the petitioner company have been rendered
unrecoverable and are as such barred by limitation. This submission
has been urged in the context of the fact that along with the present
petition, the petitioner company has also filed a Civil Suit for recovery
bearing No. 5790/2016 before the learned District Court at Saket. In
the said Suit, the respondent had filed an Application under Section 8
of the Arbitration & Conciliation Act, 1996 which came to be
disposed of vide order dated 17.12.2016, and liberty was granted to
the petitioner to initiate arbitration proceedings. However, since the
petitioner failed to initiate any arbitration proceedings, it is stated that
the claims of the petitioner no longer remain a payable debt and have
become unrecoverable. With regards to this submission, reliance has
been placed on the judgement of the Bombay High Court in the case
of The Jayabharat Credit Limited v. Jalgaon Re-rolling Industries
Ltd.5 wherein the court held that once a debt becomes unrecoverable
as a result of the Suit being barred by limitation, the same seizes to be
a payable debt. Further that, where a debt becomes barred by

51996 SCC OnLine Bom 621

limitation, a winding up petition based on such debt shall not be liable
to be admitted and will therefore, have to be dismissed.

ANALYSIS & DECISION:

9. At the outset, it is apposite to point out that the present winding
up petition is a complete non-starter. A perusal of the record shows
that the proceedings are at a very nascent stage, so much so that
neither a Provisional Liquidator nor an Official Liquidator has been
appointed to the respondent company. As such, no substantive orders
have been passed in these company petitions.
10. In view of the enactment of the Insolvency and Bankruptcy
Code, 2016 as well as the Companies Act, 2013, it is the opinion of
this court that the present petition does not deserve to continue before
this court, and it would be appropriate for the same to be transferred to
the National Company Law Tribunal6. In this regard, it is relevant to
consider Section 434 of the Companies Act, 2013 which provides for
the transfer of proceedings relating to winding up, pending before
High Courts, to the NCLT, and reads as under:

6 NCLT

�434. Transfer of certain pending proceedings
(1) On such date as may be notified by the Central Government in
this behalf,-

(a) all matters, proceedings or cases pending before the Board of
Company Law Administration (herein in this section referred to as
the Company Law Board) constituted under sub-section (1) of
section 10E of the Companies Act, 1956 (1 of 1956), immediately
before such date shall stand transferred to the Tribunal and the
Tribunal shall dispose of such matters, proceedings or cases in
accordance with the provisions of this Act; (b) any person
aggrieved by any decision or order of the Company Law Board

made before such date may file an appeal to the High Court within
sixty days from the date of communication of the decision or order
of the Company Law Board to him on any question of law arising
out of such order: Provided that the High Court may if it is satisfied
that the appellant was prevented by sufficient cause from filing an
appeal within the said period, allow it to be filed within a further
period not exceeding sixty days; and
(b)all proceedings under the Companies Act, 1956 (1 of 1956),
including proceedings relating to arbitration, compromise,
arrangements and reconstruction and winding up of companies,
pending immediately before such date before any District Court or
High Court, shall stand transferred to the Tribunal and the Tribunal
may proceed to deal with such proceedings from the stage before
their transfer: Provided that only such proceedings relating to the
winding up of companies shall be transferred to the Tribunal that
are at a stage as may be prescribed by the Central Government.
Provided further that only such proceedings relating to cases other
than winding-up, for which orders for allowing or otherwise of the
proceedings are not reserved by the High Courts shall be
transferred to the Tribunal [Provided also that]-
(i) all proceedings under the Companies Act, 1956 other than the
cases relating to winding up of companies that are reserved for
orders for allowing or otherwise such proceedings; or
(ii) the proceedings relating to winding up of companies which
have not been transferred from the High Courts; shall be dealt with
in accordance with provisions of the Companies Act, 1956 and the
Companies (Court) Rules, 1959.]
Provided also that proceedings relating to cases of voluntary
winding up of a company where notice of the resolution by
advertisement has been given under subsection (1) of section 485
of the Companies Act, 1956 but the Company has not been
dissolved before the 1st April, 2017 shall continue to be dealt with
in accordance with provisions of the Companies Act, 1956 and the
Companies (Court) Rules, 1959.�

11. Reliance may also be placed on the decision of the Supreme
Court in the case titled Action Ispat and Power Limited v. Shyam
Metalics and Energy Limited7, whereby it was held that those
winding up proceedings pending before High Courts, which have not

7 (2021) 2 SCC 641

progressed to an advanced stage, ought to be transferred to the NCLT.
The relevant extract of the said decision is as follows:

�22. Given the aforesaid scheme of winding up under Chapter XX
of the Companies Act, 2013, it is clear that several stages are
contemplated, with the Tribunal retaining the power to control the
proceedings in a winding up petition even after it is admitted. Thus,
in a winding up proceeding where the petition has not been served
in terms of Rule 26 of the Companies (Court) Rules, 1959 at a
preadmission stage, given the beneficial result of the application of
the Code, such winding up proceeding is compulsorily transferable
to the NCLT to be resolved under the Code. Even post issue of
notice and pre admission, the same result would ensue. However,
post admission of a winding up petition and after the assets of the
company sought to be wound up become in custodia legis and are
taken over by the Company Liquidator, section 290 of the
Companies Act, 2013 would indicate that the Company Liquidator
may carry on the business of the company, so far as may be
necessary, for the beneficial winding up of the company, and may
even sell the company as a going concern. So long as no actual
sales of the immovable or movable properties have taken place,
nothing irreversible is done which would warrant a Company Court
staying its hands on a transfer application made to it by a creditor
or any party to the proceedings. It is only where the winding up
proceedings have reached a stage where it would be irreversible,
making it impossible to set the clock back that the Company Court
must proceed with the winding up, instead of transferring the
proceedings to the NCLT to now be decided in accordance with the
provisions of the Code. Whether this stage is reached would
depend upon the facts and circumstances of each case.�

12. In view of the foregoing discussion, it is the opinion of this
Court, that since no substantive proceedings have been undertaken
towards winding up of the company, the present petition does not
deserve to be continued before this Court. The present company
petition is at a very nascent stage and no effective orders as such have
been passed towards the winding up of the company. Before parting

with this matter, it would be suffice to state that the three decisions8
have no bearing on the matters in issue in view of categorical
directions of the Supreme Court in the above noted case of Action
Ispat and Power Limited (supra).
13. In view of the above, the present company petition as well as
pending applications, if any, is accordingly disposed of.
14. Hence, the instant petitions are transferred to the NCLT. Parties
to appear before the NCLT on 01.04.2024. The interim orders passed
by this Court in these petitions, if any, shall continue till the said date.
15. It is left to the NCLT to consider the matter and pass
appropriate orders in accordance with law.
16. The electronic record of the instant petitions be transmitted to
the NCLT within a period of one week by the Registry. List before the
NCLT on 01.04.2024.

8 West Hills Reality Private Limited, Commissioner of Income Tax-8, Mumbai, The Jayabharat
Credit Limited

DHARMESH SHARMA, J.
JANUARY 24, 2024
Sadique