Prior Approval Of AA Under Section 33(5) Mandatory Before Initiation Of Legal Proceedings By Liquidator: NCLT Mumbai
Udai Yashvir Singh
19 May 2023 12:00 PM GMT
The National Company Law Tribunal, Mumbai Bench, comprising Shri Kuldip Kumar Kareer (Judicial Member) and Smt Anuradha Sanjay Bhatia (Technical Member), while adjudicating an application under Section 7 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in Birla Cotsyn (India) Limited vs Birla Global Corporate Private Limited has held that prior approval of the Adjudicating...
The National Company Law Tribunal, Mumbai Bench, comprising Shri Kuldip Kumar Kareer (Judicial Member) and Smt Anuradha Sanjay Bhatia (Technical Member), while adjudicating an application under Section 7 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in Birla Cotsyn (India) Limited vs Birla Global Corporate Private Limited has held that prior approval of the Adjudicating Authority under Section 33(5) of IBC, 2016 is mandatory before initiating an legal proceedings on behalf of the Corporate Debtor under Liquidation.
Background Facts
Birla Cotsyn (India) Limited (“Financial Creditor”) had granted a loan of Rs. 2,00,73,991/- to Birla Global Corporate Private Limited (“Corporate Debtor”) during 2014-15. Corporate Insolvency Resolution Process (“CIRP”) was initiated against the Financial Creditor vide an order dated 20.11.2018. The CIRP Period expired on 19.08.2019 and the Liquidation process was initiated against the Financial Creditor vide an order dated 24.09.2019 and a Liquidator was appointed.
The Liquidator while perusing the ledger of the Corporate Debtor maintained by the Financial Creditor found that there was an outstanding amount of Rs. 3,18,19,231/- owed by the Corporate Debtor and in pursuance of the same, the Liquidator issued an E-mail dated 19.02.2021 to the Corporate Debtor to repay the outstanding amount. In reply, the Corporate Debtor issued an Email dated 07.04.2021 admitting an amount of Rs. 3,18,19,231/- as outstanding.
It was contended by the Corporate Debtor that the Liquidator of the Financial Creditor had failed to take the approval of the Tribunal under Section 33(5) of IBC, 2016 to initiate any Suit or Legal Proceeding on behalf of the Financial Creditor. It was further contended that there is no date of default mentioned in the Petition and the debt is barred by limitation.
Findings of the Tribunal
It was observed by the Tribunal that the Financial Creditor was undergoing Liquidation and the petition was filed by the Liquidator of the Financial Creditor. Section 33(5) of IBC, 2016 is needed to be construed as that a company under Liquidation is disbarred from initiating any legal proceedings without seeking the prior approval of the Adjudicating Authority. This provision was mandatory in nature. Since no prior approval was taken of the Adjudicating Authority prior to filing of the petition, the Liquidator is incompetent to initiate Section 7 proceedings.
With the aforesaid observations, the Tribunal dismissed the petition.
Case:Birla Cotsyn (India) Limited vs Birla Global Corporate Private Limited
Case No. IA. NO. 80 of 2022 & C.P. 565 OF 2021
Counsels for the Applicants:Adv. Dhananjay Sud
Counsel for the Respondent :Adv. Nausher Kohli
Click Here To Read/Download Order
