COMPANY UNDER LIQUIDATION BARRED FROM INITIATING CIRP OF ANOTHER COMPANY UNDER I&B CODE.

liquidation

INTRODUCTION

The National Company Law Appellate Tribunal (NCLAT) in an Appeal preferred by Mr. Abhay N. Manudhane, the Liquidator of Gupta Coal India Pvt. Ltd. (‘Corporate Debtor’) against the order dated 30th May, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench has upheld the judgment passed by the Adjudicating Authority, Mumbai Bench whereby an Application filed under Section 9 of the I&B Code by the Liquidator of the Corporate Debtor against another Company was dismissed.

FACTS

An appeal was preferred by the Liquidatpr of the Corporate Debtor, Gupta Coal India Pvt. Ltd. (appellant) against an Order 30.05.2019 passed by the Adjudicating Authority i.e. National Company Law Tribunal, Mumbai Bench (NCLT).

Abhay N. Manudhane, the Liquidator of the Corporate Debtor, Gupta Coal India Pvt. Ltd.,  preferred an Application under Section 60(5) of the I&B Code seeking directions of NCLT Mumbai Bench for the institution of the suit or other legal proceedings on behalf of the Corporate Debtor under Liquidation in the Courts/Tribunals situated within the jurisdiction of NCLT ordering the Liquidation. However, NCLT, Mumbai Bench clarified that as per the statutory provision, case against the company can be filed where the registered office of the company is situated. The NCLT was of the opinion that the statutory provision provides the jurisdiction, and it cannot be changed under the guise of Section 60(5) of the Code. While exercising the jurisdiction under Section 60(5), the jurisdiction of other benches cannot be shifted to Mumbai Bench where the registered office of liquidating company lies. It is beyond the scope of this Bench to shift the jurisdiction of specified cases to Mumbai Bench under the guise of Section 60(5) of the I&B Code.

ARGUMENTS OF THE LIQUIDATOR

The Liquidator i.e., the Appellant herein while arguing his Appeal referred to Section 33(5) of the I&B Code wherein he submitted that ‘no suit or other legal proceeding shall be instituted by or against the corporate debtor’, provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the “prior approval of the Adjudicating Authority”. He further contended that in the background, the Appellant intends to file application under Section 9 against different companies, there being a debt payable to the present ‘Corporate Debtor’ against other companies or against other ‘Corporate Debtors’.

OBSERVATIONS OF NCLAT

After hearing the counsels, the Hon’ble NCLAT was of the opinion that as per Clause (d) of Section 11, a ‘Corporate Debtor’ in respect of whom a liquidation order has been made is not entitled to make application to initiate ‘Corporate Insolvency Resolution Process’ under Chapter II. That means, it cannot file any application under Sections 7 or 9 of the I&B Code. Therefore, no application under Chapter II can be filed by the ‘Corporate Debtor’, which is under Liquidation of which the Appellant is Liquidator. Further taking into consideration Sub-Section (5) of Section 33, the Hon’ble NCLAT held that the said Section is subject to Section 52. The NCLAT was of the opinion that Section 52 of the I&B Code relates to right of Secured Creditor in liquidation proceedings. However, in case where matter does not relate to any secured asset and recovery of any money by the ‘Corporate Debtor’, which is not under Liquidation, a suit or other legal proceedings may be instituted by the Liquidator on behalf of the ‘Corporate Debtor’, but not an application under Section 9 of the I&B Code. Hence, the Hon’ble NCLAT was not inclined to interfere with the Order dated 30.05.2019 passed by NCLT, Mumbai Bench.

Disclaimer: - This article is for the general information and awareness of its readers, In-case of any legal matter in relation with readers, they are expected to have legal opinion before placing reliance on it. Further it contains completely author's views on the subject and completely unbiased based on authors own experience, study and understanding. 

By:- EasyLegalTax Team

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