Omkara Assets Reconstruction Pvt Ltd Vs Sahjun Impex Trading Pvt Ltd (Bombay High Court)
Summary: The Bombay High Court dismissed an appeal filed by Omkara Assets Reconstruction Pvt Ltd challenging the order of the learned Single Judge transferring a winding-up petition to the National Company Law Tribunal (NCLT) under Section 434(1)(c) of the Companies Act, 2013. The Division Bench of A. S. Gadkari and Kamal Khata, JJ., held that an erstwhile financial creditor holding more than 50% of the company’s financial debt was entitled to seek transfer of the winding-up proceedings for revival under the rehabilitative framework of the Insolvency and Bankruptcy Code, 2016 (IBC).
The appeal arose from an order dated 3 February 2026 by which the learned Single Judge allowed an application seeking transfer of the captioned Company Petition to the NCLT. Omkara Assets Reconstruction Pvt Ltd had intervened in the application and objected to the transfer, principally contending that irreversible steps had already been taken in the liquidation proceedings.
The Appellant submitted that the company had been in winding up since 2008 and that its net worth had eroded as early as 1997. It relied upon the Board for Industrial and Financial Reconstruction’s direction under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985, asserting that the company was no longer a going concern and lacked functional manufacturing units or operational assets. According to the Appellant, the learned Single Judge had incorrectly applied the test of “corporate death” and treated the possibility of revival as a mere theoretical possibility.
The Appellant further relied upon sales of core industrial and factory assets at Aurangabad (Walunj), Chakan, Bhosari and Pimpri, Pune, through Debt Recovery Tribunal proceedings. It contended that these sales had been confirmed by statutory authorities and had extinguished the base assets, making reversal impossible. It alleged that the learned Single Judge had misread and misapplied the Supreme Court decisions in A. Navinchandra Steels Private Limited Vs SREI Equipment Finance Limited and Others and Action Ispat and Power Pvt Ltd Vs Shyam Metalics and Energy Limited. The Appellant also alleged suppression of the DRT proceedings and subsequent asset sales by the Applicant and contended that the rights of secured creditors had been disregarded.
The Respondent opposed the appeal, submitting that there was no justification for refusing revival of the company. It pointed out that the Applicant represented more than 50% of the total financial debt owed by the company and, as an erstwhile financial creditor, was entitled to seek revival. It maintained that the application under Section 434(1)(c) had been filed in accordance with law and that the learned Single Judge had correctly appreciated the facts and applicable legal framework.
The Division Bench found merit in the Respondent’s submissions. It held that a financial creditor is entitled in law to seek transfer of winding-up proceedings to the NCLT for revival of the company, particularly where the Applicant seeks such transfer in a time-bound manner within the rehabilitative framework of the IBC. The Court relied upon the Supreme Court’s decision in Action Ispat and Power Private Limited Vs Shyam Metalics and Energy Limited, which requires the Company Court to examine whether winding up has reached an irreversible stage before transferring proceedings to the NCLT.
The Court observed that mere admission of a winding-up petition, appointment of a provisional liquidator or even the liquidator taking possession of assets does not by itself establish an irreversible position. It further held that the Appellant’s case was not that no assets existed which could enable revival. Whether revival would be beneficial was a matter for investors to determine.
The Court also relied upon A. Navinchandra Steels Private Limited Vs SREI Equipment Finance Limited & Ors., holding that if there remained a possibility of revival under the IBC framework, sale of assets by secured creditors standing outside the winding-up proceedings did not by itself constitute an irreversible step warranting refusal of transfer.
On the factual position, the Court noted that the company still possessed assets situated at Thane, Bangalore and Pune, which were in the custody of the DRT-appointed receiver. Certain plots at Aurangabad and Pune had been sold outside the winding-up proceedings, while other assets at Pune and Gujarat remained in the custody of the Official Liquidator. The Court found that the steps taken by the Official Liquidator were limited and could not be characterised as irreversible or amounting to “corporate death”.
Consequently, the Court found the impugned order to be well-reasoned and declined to interfere. The appeal was dismissed with no order as to costs. The connected Interim Application did not survive and was accordingly disposed of.
Cases Discussed
- Action Ispat and Power Private Limited Vs Shyam Metalics and Energy Limited
- A. Navinchandra Steels Private Limited Vs SREI Equipment Finance Limited & Ors.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1) By the present Appeal, the Appellant seeks to set aside the Order dated 3rd February, 2026, passed by the learned Single Judge in the Company Application filed by the Applicant seeking transfer of the captioned Company Petition to the Hon’ble National Company Law Tribunal under the provisions of Section 434(1)(c) of the Companies Act, 2013. By the impugned Order, the learned Single Judge has allowed the transfer of the captioned Company Petition to N.C.L.T.
2) Mr. Shinde, learned counsel appearing on behalf of the Appellant submits that, the Appellant intervened in the Application, objecting to the transfer of the Petition to N.C.L.T mainly on the ground that the steps taken by the official liquidator in the company liquidation were irreversible. He contends that the learned Judge erroneously applied the test of ‘corporate death’ to the present case.
3) He further submits that, the learned Single Judge failed to consider that, the company had been in winding up since 2008, with its net worth having eroded as early as 1997. The Board for Industrial and Financial Reconstruction (B.I.F.R.) affirmed the direction to wind up under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985, finding that the company was no longer a going concern and lacked functional manufacturing units or operational assets. The impugned Order proceeded on a mere theoretical possibility of revival, contrary to the material on record, which establishes that the company had crossed the point of no return. He contends that any revival is illusory and speculative.
4) Mr. Shinde submitted that, irreversible steps had been taken, including the sale of core industrial and factory assets at Aurangabad (Walunj) and Chakan / Bhosari / Pimpri, Pune through the D.R.T. proceedings, whereby the base assets have been extinguished. These sales were confirmed by statutory authorities, and there is no possibility of reversal. He further submits that the learned Judge misread and misapplied the Supreme Court decisions in A. Navinchandra Steels Private Limited vs. SREI Equipment Finance Limited and Others, reported in 2021 4 SCC 435, and Action Ispat and Power Pvt Ltd vs. Shyam Metalics and Energy Limited reported in 2021 2 SCC 641 particularly paragraph 25 thereof. The learned single Judge also failed to undertake a fact-intensive enquiry mandated in A. Navinchandra Steels Pvt Ltd (supra), resulting in unsettlement of the concluded proceedings.
5) He further submits that the conduct of the Applicant was also overlooked. In particular, the Applicant had suppressed the ongoing and concluded D.R.T. proceedings, and material subsequent developments were not placed on record. The Applicant failed to disclose the sale of critical assets, which would have rendered the entire C.I.R.P. proceedings meaningless. He contends that impugned Order disregarded the statutory rights of the secured creditors. He reiterates that, with core assets having been sold, there remains no possibility of the company’s revival or transfer to N.C.L.T.
6) Per contra, Mr. Behramkamdin, senior counsel appearing on behalf of the Respondent, submits that there is no justification for refusing to revive the company, particularly as the Applicant now represents more than 50 percent of the total financial debt owed by the company and stands as an erstwhile financial creditors entitled to seek revival. He submits that the Application was filed in accordance with law under Section 434 (1)(c) of the Companies Act and that the learned Single Judge correctly appreciated both the law and the facts, warranting dismissal of the Appeal.
7) We have heard the learned counsel for the Appellant as well as the Respondent and have carefully examined the impugned Order and the entire record.
8) We find merit in the submissions of Mr. Behramkamdin, representing the erstwhile financial creditors now holding more than 50 percent of the company’s financial debt. A financial creditor is entitled in law to seek a transfer of proceedings to N.C.L.T. for the revival of the company. We find no justifiable reason to reject such an Application by an erstwhile financial creditor, particularly where the Applicant seeks to do the same in a time bound manner and within the rehabilitative framework provided under the I.B.C.
9) The Supreme Court in Action Ispat and Power Private Limited vs. Shyam Metalics and Energy Limited (supra), held that the power of the company Court to transfer winding up proceedings to the N.C.L.T. under Section 434(1)(c) of the Companies Act must be exercised by examining whether winding up has reached an irreversible stage. Mere admission of a winding-up Petition and appointment of a provisional liquidator, or even the liquidator taking possession of the assets, does not by itself constitute an irreversible position.
10) In our view, the Appellant’s case is not that no assets exists to enable company’s revival. It is for the investors to decide whether revival would be beneficial to their interest. Consequently, if there exists a possibility to revive the company under the IBC framework, the sale of assets by the secured creditors standing outside the winding-up proceedings does not by itself constitute an irreversible step warranting refusal of transfer. We are fortified by the decision of the Supreme Court in A. Navin Chandra Steels Pvt. Ltd. (supra).
11) The record shows that the company possesses assets located at Thane, Bangalore and Pune, currently in the custody of the receiver appointed by the Debt Recovery Tribunal (the D.R.T.). There are also certain plots at Aurangabad and Pune that were sold outside the winding up proceedings; certain other assets located at Pune and Gujarat remain in the custody of the official liquidator. The record indicates that the Official Liquidator took only limited steps, which cannot be characterized as irreversible or amounting to corporate death. We find the impugned Order to be well-reasoned, having considered all material facts and applicable law, and see no justifiable reason to set it aside.
12) The Appeal accordingly is dismissed with no order as to costs.
13) In view of disposal of Appeal, Interim Application does not survive and is accordingly disposed off.
