Prior Approval Of Adjudicating Authority Before Initiating Legal Proceedings Against Any Party U/S 33(5) Of IBC Is Mandatory: NCLT Guwahati

The National Company Law Tribunal (NCLT) Guwahati bench of Rammurti Kushawaha (Judicial Member) and Yogendra Kumar Singh (Technical Member) has held that prior approval of the Adjudicating Authority under section 33(5) is mandatory before initiating any legal proceedings against a party and such party is not required to be heard at the approval stage. The present application has been filed by the Liquidator of the Corporate Debtor under section 33(5) of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking permission to initiate legal proceedings against Kamakhya Biofuels Private Limited for the recovery of outstanding dues. The Applicant relied on the Judgment of the National Company Law Appellate Tribunal (NCLAT) in Slimline Realty Pvt. Ltd. v. Jigar Bhatt where it was held that prior approval of the Adjudicating Authority for initiating any legal proceedings under section 33(5) proviso of the IBC is mandatory and not merely directory. The use of prohibitory language even in the absence of any consequences for non-compliance further fortifies its mandatory nature. It also held that the party against whom such proceedings are to be initiated is not required to be heard at this stage. The Tribunal noted that the Liquidator has established with proper evidence that the said amount remains unpaid despite several demand notices and letters being issued to the Respondent during Corporate Insolvency Resolution Process (CIRP) and after commencement of the Liquidation Process respectively. The Respondent instead of clearing the dues filed claims before the Liquidator which was rejected. Additionally, the Suspended Management of the Corporate Debtor via letters issued alleged that the Respondent manipulated records to deny liability. In light of the above discussion, the Tribunal concluded that based on the judgment of the NCLAT in Slimline Realty Pvt. Ltd and factual matrix of the case, prior approval under section 33(5) of the IBC is mandatory before instituting any legal proceedings against any party and such party is not required to be heard at the approval stage. Accordingly, the Liquidator was allowed to initiate the proceedings for recovering the outstanding dues. The Liquidator was directed to inform the Adjudicating Authority of the proceedings and outcome of such proceedings. Case Title:Purshotam Gaggar, Liquidator of Sree Bajrang Infracon Private Limited Case Number: IA(IBC)/42/GB/2025 In CP(IB)/7/GB/2023 Order Date: 02/07/2025 Click Here To Read/Download The Order

Prior Approval Of Adjudicating Authority Before Initiating Legal Proceedings Against Any Party U/S 33(5) Of IBC Is Mandatory: NCLT Guwahati

Mohd Malik Chauhan

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