years ago, its provisions have been brought into effect in a phased manner. One
of the important chunks of the new legislation relating to schemes of
arrangement and winding up were yet to be brought into force. However, this
position has since changed because the Ministry of Corporate Affairs (MCA) issued
on December 7, 2016 bringing into effect the provisions relating to schemes and
winding up from December 15, 2016.
(Transfer of Pending Proceedings) Rules, 2016, which provides for transfer
of pending legal proceedings relating to schemes and winding-up from the High
Court to the relevant bench of the National Company Law Tribunal (NCLT). These
Rules adopt a bifurcated approach for proceedings relating to winding-up and
those that do not involve winding-up. In case of proceedings not involving
winding-up, viz. compromise, arrangement, reconstruction and arbitration, they
shall all be transferred from the High Court to the NCLT. However, in case of proceedings
that are reserved for orders for allowing these proceedings (or otherwise),
they shall continue with the High Court and shall not be transferred to the
treatment depending on the nature of the winding-up. In case of proceedings
initiated on account of inability of the company to pay its debts, where the
petition has not been served on the respondent, the proceedings shall be
transferred to the NCLT. In cases where an opinion has been forwarded by the
Board for Industrial and Financial Reconstruction (BIFR) for winding-up, and
where no appeal is pending, the winding-up proceedings shall continue to be
dealt with by the High Court. In case of winding-up proceedings other than for
inability to pay debts, they shall all be transferred to the respective benches
of the NCLT.
schemes by the NCLT, the MCA has also issued two sets of rules:
Law Tribunal (Procedure for reduction of share capital of Company) Rules, 2016.
to be considered in the light of the repeal of the Sick Industrial Companies
Act, 1985 and also the effectiveness of the Insolvency and Bankruptcy Code,
2016, as discussed here.
All of these steps are significant in streamlining the provisions relating to
mergers, corporate restructuring and winding-up.