NCLT has the power to replace the liquidator under the Insolvency and Bankruptcy Code, 2016 : NCLT Chennai

0

National Company Law Court, Chennai (NCLT) made up of Justice S Ramathilagam and Mr. Anil B Kumar held that the NCLT has the power to replace the liquidator during the process of winding up a corporate debtor under the Insolvency and Bankruptcy Code, 2016. (IPC/Code)

NCLT has initiated the corporate insolvency resolution process (CIRP) of Jeypore Sugar Company Limited (Jeypore Sugar) on 25.02.2019 and then initiated the liquidation process of Jeypore Sugar on 29.05.2020 and appointed Mr. Venkata Sivakumar as liquidator.

Conflicts of parties

The petitioner bank IDBI filed a petition with NCLT to request the dismissal of the liquidator. It was argued on behalf of the Petitioner that the liquidator did not have valid authorization at the time of his appointment and that by giving his written consent for the appointment as liquidator he deleted the material fact before NCLT.

The liquidator objected to the application on the grounds that there is no provision in the IBC to change/remove the liquidator and that the liquidator cannot be changed at the request of the stakeholders by the NCLT during the liquidation process.

Decision/Analysis by NCLT

NCLT rejected the liquidator’s claim relying on section 16 of the General Terms Act 1897, which states that the power to appoint also includes the power to suspend or dismiss as well. NCL held that on reading section 33 of the IBC together with section 16 of the General Terms Act 1897, the NCLT has the power to remove the liquidator since the NCLT has the power, under sections 33 and 34 of the IBC, to appoint a liquidator.

Further, the NCLT observed that although the IBC does not provide grounds on which the liquidator may be removed, recourse may be had to section 276 of the Companies Act 2013 which provides grounds dismissal of the liquidator such as misconduct, fraud, professional incompetence and others.

The Chamber held that in this case, the liquidator had shared the debtor company’s valuation report with the potential promoters of the plan and that this act would amount to a failure to exercise due diligence and that, by therefore, the liquidator could be changed.

Therefore, NCLT granted the request and removed Mr. Venkata Sivakumar as liquidator and appointed Mr. S Hari Karthik as liquidator of Jeypore Sugar.

Case details: Axis Bank vs. Venkata Sivakumar

Plaintiff’s lawyer: Varun Srinivasan

Liquidator’s Council: Venkata Sivakumar, party in person

Click here to read/download Order

Share.

About Author

Comments are closed.