Official Liquidator Cannot Institute S. 61 Proceedings To Challenge Directions Issued To IBBI: NCLAT Chennai

The National Company Law Appellate Chennai comprising of Justice Sharad Kumar Sharma (Member Judicial) and Jatindranath Swain (Member Technical) dismissed an appeal filed by the Liquidator of the Corporate Debtor M/s RLS Alloys Pvt. Ltd stating that the appeal is a pre-mature appeal and that the Liquidator cannot institute a Section 61 proceedings to challenge the directions given to the IBBI.Facts of the Case The appellant who is the official liquidator of the Corporate Debtor M/s RLS Alloys Pvt. Ltd has partially challenged the Impugned Judgement of the adjudicating authority before the National Company Law Appellate Tribunal (Chennai). The Appellant has challenged the order of the detailed inspection into the conduct of the applicant pertaining to the Corporate Debtor in order to find out the irregularities in the process. According to impugned judgement of the adjudicating authority, during the liquidation process an e-auction was held wherein the issue of irregularities was raised. Subsequently it is also seen that the liquidator allowed a lower bid to prevail even though a higher bid was placed. Subsequently an e-auction was also held without giving any prior notice of the initiation of the auction. The price in the new auction was also set low from the previously valid bid. The liquidator also allowed a suspended bidder to participate in the auction process. As a result, NCLT stated that there was lack of transparency in the liquidation process.NCLT Direction to IBBIDue to the lack of transparency in the liquidation process and in the conduct of the liquidator, the tribunal ordered IBBI to conduct a inquiry into the acts of the liquidator. The NCLT also clarified that the inquiry is a fact-finding process and is not a punitive action against the liquidator. Aggrieved by the order of the NCLT, the liquidator filed a case appealing the order of NCLT before NCLAT, Chennai.Parallel Proceedings The liquidator also filed a parallel proceeding before the High Court of Delhi challenging the order of the NCLT. The High court stated that the liquidator should be provided with a copy of the inspection report and should also be given a chance to file a reply to the show cause notice. The High Court also stated that the IBBI must make decision with the period of 4 weeks after receiving the reply of the liquidator. Judgement of the Court The NCLAT stated that the Liquidator cannot institute a Section 61 proceedings to challenge the directions given to the IBBI to conduct an inquiry. The tribunal stated that the such a form of inquiry is an internal matter of the liquidator registering body which will decide whether the conduct of liquidator was lawful or not and whether the allegations against him are justified. The tribunal also upheld the order of the High court of Delhi stating that at this stage there is no action that the appellant could use to invoke appellate jurisdiction as the investigation is fact-finding and a preliminary inquiry and no final decision has been made yet. The Appeal was dismissed. Case Title: CA Ramasamy Shanmuggam, Liquidator of RLS Alloys Pvt. Ltd. Vs Insolvency and Bankruptcy Board of India Case Number: Company Appeal (AT) (CH) (Ins) No.413/2022Tribunal: National Company Law Appellate Tribunal (NCLAT), Chennai Coram: Justice Sharad Kumar Sharma (Member Judicial) and Jatindranath Swain (Member Technical)For Appellant: Mr. A.G. Sathyanarayana, AdvocateFor Respondent: Mr. K. S. Jeyaganeshan, Senior Panel AdvocateDate of Judgement: 20.11.2024Read/Download Order Here

Official Liquidator Cannot Institute S. 61 Proceedings To Challenge Directions Issued To IBBI: NCLAT Chennai

Pratham Kapoor

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