Bombay High Court Upholds NCLT Transfer of 2008 Winding-Up Case; Holds Prior Asset Sales Do Not Establish Irreversible Corporate Death Where Revival Remains Possible
Bombay High Court Refuses to Block IBC Revival of Company in Liquidation; Holds Irreversible Stage Not Reached Despite Long-Pending Winding-Up and Asset Sales
Facts
The appeal was filed by Omkara Assets Reconstruction Pvt. Ltd. against an order dated 3 February 2026 by which a Single Judge of the Bombay High Court transferred pending winding-up proceedings concerning Patheja Forging & Auto Parts Manufacturing Ltd. (in liquidation) to the National Company Law Tribunal under Section 434(1)(c) of the Companies Act, 2013.
The appellant had intervened before the Single Judge and opposed the transfer principally on the ground that the winding-up proceedings had already reached an irreversible stage. Its case was that the company had been under winding-up since 2008, its net worth had eroded as far back as 1997, and the Board for Industrial and Financial Reconstruction had already found that the company was no longer a going concern and lacked functioning manufacturing units or operational assets.
The appellant further relied upon sales of industrial and factory assets situated at Aurangabad, Walunj, Chakan, Bhosari and Pimpri through Debt Recovery Tribunal proceedings. According to it, such sales had extinguished the company’s core asset base and rendered revival speculative and practically impossible.
The respondent, Sahjun Impex Trading Pvt. Ltd., opposed the appeal. It claimed to represent more than 50% of the total financial debt of the company and sought transfer to the NCLT in order to pursue revival through the rehabilitative framework of the Insolvency and Bankruptcy Code.
The Division Bench therefore considered whether the winding-up proceedings had progressed so far that transfer to the NCLT would be legally impermissible.
Issues
The principal issues were:
- Whether the winding-up proceedings had reached an irreversible stage or “corporate death” such that transfer to the NCLT under Section 434(1)(c) should be refused.
- Whether sale of some major assets by secured creditors through DRT proceedings constituted an irreversible step sufficient to defeat a request for transfer.
- Whether the continued existence of other assets and the possibility of revival under the IBC justified permitting the transfer.
- Whether a financial creditor representing more than 50% of the company’s financial debt was entitled to seek transfer and attempt revival.
- Whether the Single Judge had correctly applied the Supreme Court decisions in Action Ispat and Power Pvt. Ltd. v. Shyam Metalics and Energy Ltd. and A. Navinchandra Steels Pvt. Ltd. v. SREI Equipment Finance Ltd.
Appellant’s Arguments
Omkara ARC argued that the company was, for all practical purposes, beyond revival.
It submitted that the company had remained in winding-up since 2008 and had ceased to be a going concern much earlier. According to the appellant, the BIFR record itself established that the company’s industrial operations had effectively collapsed.
It further argued that irreversible steps had already been taken because core industrial assets had been sold through DRT proceedings. Once these sales had been confirmed by statutory authorities, there was no realistic possibility of reversing them or restoring the company’s operational base.
The appellant also contended that the applicant seeking transfer had suppressed relevant DRT proceedings and subsequent sale developments. According to it, transfer to the NCLT would unsettle concluded proceedings and prejudice secured creditors who had already exercised statutory recovery rights.
It therefore submitted that the Single Judge had misapplied the Supreme Court’s tests concerning irreversibility and corporate revival.
Respondent’s Arguments
The respondent contended that there was no legal basis to deny the company an opportunity for revival.
It submitted that it represented more than 50% of the company’s financial debt and, as an erstwhile financial creditor, was entitled to seek transfer of the proceedings to the NCLT under Section 434(1)(c).
The respondent argued that the IBC fundamentally favours revival over liquidation where a viable opportunity remains, and that the mere sale of some assets did not prove that the company had reached the point of no return.
It therefore supported the Single Judge’s conclusion that the proceedings should be transferred so that investors and creditors could examine revival within the IBC framework.
Analysis of the Law
The Division Bench relied on the principle that the decisive consideration under Section 434(1)(c) is whether the winding-up proceedings have reached such an advanced and irreversible stage that transfer to the NCLT would be meaningless or legally inappropriate.
The Court referred to Action Ispat and Power Pvt. Ltd. v. Shyam Metalics and Energy Ltd., where the Supreme Court held that mere admission of a winding-up petition, appointment of a provisional liquidator, or even taking possession of assets by the liquidator does not automatically make winding-up irreversible.
The inquiry is therefore practical and fact-specific. The Court must determine whether genuine corporate revival remains legally and commercially possible.
The Bench further relied upon A. Navinchandra Steels Pvt. Ltd. v. SREI Equipment Finance Ltd. in support of the principle that transfer can remain permissible so long as the liquidation process has not crossed the point where revival is realistically impossible.
Precedent Analysis
1. Action Ispat and Power Pvt. Ltd. v. Shyam Metalics and Energy Ltd., (2021) 2 SCC 641
This was the principal authority governing the issue.
The Supreme Court had held that the Company Court must examine whether winding-up has reached an irreversible stage before refusing transfer to the NCLT.
The Bombay High Court reiterated that neither admission of a winding-up petition, appointment of a provisional liquidator, nor even possession of assets by the liquidator is by itself conclusive of irreversibility.
2. A. Navinchandra Steels Pvt. Ltd. v. SREI Equipment Finance Ltd., (2021) 4 SCC 435
This authority was relied upon for the broader rehabilitative approach favouring transfer to the IBC mechanism where revival remains possible.
The Division Bench used it to support the proposition that sale of some assets outside the winding-up process does not, by itself, establish corporate death or render revival legally impossible.
Court’s Reasoning
The Court rejected the appellant’s submission that sale of certain assets necessarily established an irreversible stage.
It observed that the appellant’s case was not that the company had absolutely no assets left. The record showed that assets remained at Thane, Bangalore and Pune in the custody of the DRT-appointed Receiver, while additional assets at Pune and Gujarat remained with the Official Liquidator.
The Bench therefore distinguished between:
- sale of some assets by secured creditors standing outside the winding-up process; and
- complete dismantling of the company’s asset structure or winding-up process to a point where revival is impossible.
The former, by itself, was not sufficient.
The Court further held that it was for investors and creditors to assess whether revival would ultimately be commercially beneficial. The Company Court was not required to conclusively decide the commercial viability of revival before permitting access to the IBC mechanism.
The Bench also found that the Official Liquidator had taken only limited steps, which could not be characterised as irreversible or as amounting to “corporate death”.
Accordingly, there was no reason to interfere with the Single Judge’s exercise of discretion.
Conclusion
The Bombay High Court dismissed Omkara Assets Reconstruction Pvt. Ltd.’s appeal and upheld the transfer of the winding-up proceedings to the NCLT.
The Court held that the sale of some industrial assets through DRT proceedings did not, by itself, establish that the winding-up had reached an irreversible stage.
Since the company continued to possess other assets and there remained at least a possibility of revival within the IBC framework, the transfer under Section 434(1)(c) was justified.
The Court also accepted that a financial creditor representing more than 50% of the company’s financial debt was entitled to seek such transfer and pursue revival in a time-bound manner under the IBC.
The appeal was accordingly dismissed with no order as to costs, and the connected Interim Application was disposed of as infructuous.
Case Details
Case: Omkara Assets Reconstruction Pvt. Ltd. v. Sahjun Impex Trading Pvt. Ltd., in the matter of KSL & Industries Ltd. v. Patheja Forging & Auto Parts Manufacturing Ltd. (In Liquidation)
Court: High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction
Case Number: Appeal (L) No. 6326 of 2026 with Interim Application (L) No. 6779 of 2026
Judges: Justice A.S. Gadkari and Justice Kamal Khata
Date: 20 August 2026; reserved on 22 July 2026
Result: Appeal dismissed; transfer of the winding-up proceedings to NCLT under Section 434(1)(c) upheld; Court found no irreversible corporate death and held that prior asset sales did not foreclose IBC revival.
