Transfer of Winding Up Cases from High Courts to NCLT

When the Code came into force, thousands of winding up petitions were pending in High Courts, many for years. Parliament had to decide what would happen to them: should they continue under the old law, or move to the NCLT and the new insolvency process? The answer was a staged transition through section 434 of the Companies Act and the transfer rules, later refined by the Supreme Court. This note explains how pending cases were dealt with and when a High Court must let go of a winding up.

1. The Shift in Jurisdiction

• Before the Code. Under the Companies Act, 1956, a creditor could petition the High Court for winding up of a company unable to pay its debts (section 433(e)), and the official liquidator then took charge; proceedings often ran for decades.
• The Code. Through the Eleventh Schedule, the Code amended the Companies Act, 2013 to remove inability to pay debts as a ground for winding up under section 271, so insolvency of companies is now dealt with only under the Code.
• Residual winding up. The NCLT may still wind up a company under section 271 on other grounds, such as a special resolution, acts against the sovereignty of India, fraudulent conduct, default in filing statements or the just and equitable ground.

Figure 1: Winding up and insolvency after 2016

2. Section 434 and the Transfer Rules

• Section 434(1)(c). As substituted by the Code, it provides for the transfer to the NCLT of proceedings relating to winding up pending before High Courts, in the manner prescribed by the Central Government.
• Unserved petitions. Under the Companies (Transfer of Pending Proceedings) Rules, 2016, as amended in 2017, petitions for winding up on the ground of inability to pay debts in which notice had not been served on the company were transferred to the NCLT and treated as applications under sections 7, 8 or 9 of the Code.
• Information and abatement. The petitioner had to furnish the information required by the Code within the prescribed period, failing which the petition abated, though a fresh application under the Code remained possible.
• Served petitions. Petitions in which notice had been served, and winding up on other grounds, remained with the High Courts and continued under the Companies Act, 1956.

3. The 2018 Proviso

The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 added a proviso to section 434(1)(c) allowing any party to winding up proceedings pending before a court to apply for their transfer to the NCLT. The court may by order transfer the proceedings, which are then dealt with by the NCLT as an application for initiation of the CIRP under the Code. This opened a route for cases that had stayed in the High Courts to move to the Code.

Figure 2: Key steps in the transition

4. The Supreme Court's Approach

• Forech India v Edelweiss ARC, 2019. The Supreme Court held that a winding up petition pending in a High Court does not bar a creditor from filing an application under section 7 of the Code before the NCLT, at least where the petition had not yet been admitted, and that such a petition could be transferred to the NCLT.
• Action Ispat and Power v Shyam Metalics, 2020. Decided on 15 December 2020 by Nariman, K.M. Joseph and Krishna Murari JJ, it held that the High Court may transfer winding up proceedings to the NCLT even after a winding up order and appointment of the official liquidator, so long as the proceedings have not reached an irreversible stage, such as sale or distribution of assets; possession by the liquidator alone does not make them irreversible.
• Parallel proceedings. The Court disapproved of parallel proceedings in the High Court and the NCLT, and said that the High Court should consider whether revival under the Code is still possible.
• A. Navinchandra Steels v SREI Equipment Finance, 2021. The Supreme Court held that a section 7 application can proceed despite a pending winding up petition that has not reached the irreversible stage, and emphasised that the Code's rehabilitative object should be preferred.

Figure 3: Will a pending winding up move to the NCLT?

5. The Test in Practice

High Courts continue to apply these principles to old cases. In August 2026, for example, a Division Bench of the Bombay High Court upheld the transfer of a winding up petition filed in 2008, holding that the sale of some assets through debt recovery proceedings did not show that revival was impossible while other assets remained. The question in each case is whether the company can still be rescued; if it can, the Code is preferred.

6. Frequently Asked Questions

Can a creditor file a section 7 application when a winding up petition against the company is pending in the High Court?

Yes, if the winding up has not reached an irreversible stage. Forech India (2019) and A. Navinchandra Steels (2021) held that the pending petition is no bar.

Once a High Court has ordered winding up and appointed the official liquidator, can the case still go to the NCLT?

Yes. Action Ispat (2020) held that transfer is possible after a winding up order, so long as no irreversible steps, such as sale or distribution of assets, have been taken.

Can the NCLT wind up a company today on the ground that it cannot pay its debts?

No. That ground was removed from section 271 of the Companies Act, 2013; inability to pay debts is addressed through the CIRP and liquidation under the Code.

What happened to unserved petitions whose petitioners did not furnish the required information?

They abated under the Transfer Rules, but the petitioner was free to file a fresh application under the Code.

7. Related Topics

• Topic 2: Pre-IBC Regime. SICA, BIFR and winding up.
• Topic 11: Section 7. CIRP application by a financial creditor.
• Topic 87: IBC vs Companies Act Winding Up. The two regimes compared.