Bombay High Court Validates Transfer of Legacy Winding-Up Proceedings to NCLT Despite Prior Asset Liquidations

The transition of corporate distress resolution from the traditional winding-up mechanisms to the modern rehabilitative framework of the Insolvency and Bankruptcy Code, 2016 (IBC) has frequently generated complex jurisdictional and procedural disputes. A recurring legal friction point is the determination of when a company in liquidation has crossed the threshold of "corporate death," thereby precluding any attempts at statutory revival.

In a significant judicial pronouncement, the Bombay High Court, in the matter of Omkara Assets Reconstruction Pvt Ltd Vs Sahjun Impex Trading Pvt Ltd, has provided crucial clarity on this subject. The Division Bench decisively ruled that the mere sale of certain corporate assets by secured creditors, or the initiation of liquidation steps by an Official Liquidator, does not automatically constitute an irreversible stage that would bar a majority financial creditor from transferring the proceedings to the National Company Law Tribunal (NCLT) for a potential resolution under the IBC.

This comprehensive analysis delves into the factual matrix, the competing legal arguments, and the jurisprudential principles relied upon by the High Court in affirming the transfer of the winding-up petition under Section 434(1)(c) of the Companies Act, 2013.

The Genesis of the Dispute

The legal controversy stems from an order dated 3 February 2026, delivered by a Single Judge of the High Court, which permitted an application to transfer a long-pending company petition to the NCLT. The corporate debtor in question had a protracted history of financial distress.

According to the historical timeline presented during the proceedings, the company's net worth had suffered complete erosion as far back as 1997. Subsequently, the entity was subjected to the scrutiny of the Board for Industrial and Financial Reconstruction (BIFR). The BIFR eventually issued directives for winding up the entity under the provisions of Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985, concluding that the enterprise had ceased to operate as a going concern and was devoid of functional manufacturing facilities. Formal winding-up proceedings had been active since 2008.

The present appeal was mounted by an asset reconstruction company, acting as an intervener, who vehemently opposed the Single Judge's decision to shift the jurisdiction to the NCLT.

Contentions Raised by the Appellant

The appellant challenged the transfer order on multiple fronts, primarily anchoring their argument on the doctrine of irreversibility. The core submissions presented to the Division Bench included: