Winding Up Proceedings On Nascent Stage , To Be Transferred To NCLT: Delhi High Court

The bench held that:

“It is but evident that the present company petition has not yet reached an advanced stage and no substantive orders have been passed towards the winding up of the respondent company.”

Brief Facts:

The Respondent Company is engaged in the business of providing drilling services for the oil and gas sector and is incorporated as a foreign company under the Companies Act, 1956. Following discussions and negotiations, the Respondent Company placed a purchase order with the Petitioner Company for the supply of casing material to be delivered to Kolkata Port which amounted to US$ 738,380. Due to disagreements regarding the terms of delayed payment charges, subsequent correspondence led to an agreement, which stipulated a 1% per month charge for delayed payments and waiving liquidated damages. Another purchase order was placed by the Respondent for US$ 199,466.50.

The Petitioner claimed it duly supplied the goods as per the orders and raised invoices totaling US$ 818,496.58. The Respondent company made partial payments totaling US$ 147,111.66, with the last payment made in August 2015, but did not pay the remaining amount. Additional invoices for delayed payment charges amounted to US$ 66,957.34. Despite repeated assurances and reminders, the Respondent failed to pay the outstanding dues which led the Petitioner to issue a statutory legal notice under Section 434 of the Companies Act. The Respondent received the notice but did not respond or comply with the demand. Thereafter, the Petitioner approached the Delhi High Court (“High Court”) for winding up of the Respondent company.

Observations by the High Court:

The High Court noted that the petition was based on the Respondent Company's failure to pay outstanding dues amounting to US$ 723,193.03 with due interest. According to Section 2(10) of the Companies Act, a "company" is defined under Section 3 to include those formed and registered under the Act or existing companies as defined in clause (2), which pertains to companies incorporated under previous company laws.

The High Court noted that the Respondent Company, having failed to pay its debts, fell under the purview of an unregistered company that could be wound up as per Section 583(4) of the Companies Act, 1956. This section stipulates that an unregistered company can be wound up if it is unable to pay its debts, dissolved, or ceased to carry on business except for winding up purposes, or if it is just and equitable to wind it up. Furthermore, the High Court referred to Section 375 of the Companies Act, 2013, which is similar to Section 583 of the 1956 Act.

However, given that the proceedings were still at a nascent stage with no substantive orders passed towards the actual winding up of the respondent company, the High Court considered the legislative changes brought by the Insolvency and Bankruptcy Code, 2016, and the Companies Act, 2013. Section 434 of the Companies Act, 2013, provides for the transfer of winding-up proceedings from High Courts to the National Company Law Tribunal (NCLT).

The High Court referred to the decision of the Supreme Court Action Ispat v. Shyam Metalics and held that winding-up proceedings that had not progressed significantly should be transferred to the NCLT. Given that no substantive steps had been taken in the present case, the High Court held it appropriate to transfer the winding-up proceedings to the NCLT.

The parties were directed to appear before the NCLT on July 9, 2024.

Case Title: Arabian Oilfield Suppliers & Services Vs Greka Drilling (India) Limited

Citation: 2024 LiveLaw (Del) 637

Case Number: CO.PET. 88/2016 & CO.APPL. 381/2016, CO.APPL. 382/2016, CO.APPL. 1514/2018

Advocate for the Petitioner: Mr. Saurabh Jain & Mr. Prayag Jain.

Advocate for the Respondent: Mr. Yogesh Jagia, Mr. Amit Sood & Mr. Chandan Dutta.

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