Although the Companies Act, 2013 was enacted more than three 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 a notification on December 7, 2016 bringing into effect the provisions relating to schemes and winding up from December 15, 2016.
Simultaneously, on December 7, 2016, the MCA issued the Companies (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 NCLT.
In case of winding-up proceedings, there is a more elaborate 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.
In order to operationalise the treatment of various types of schemes by the NCLT, the MCA has also issued two sets of rules:
2. the National Company Law Tribunal (Procedure for reduction of share capital of Company) Rules, 2016.
In the case of insolvent companies, these developments have 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.