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National Company Law Tribunal, Chennai: The Bench of S. Ramathilagam, J., Judicial Member, and Anil Kumar B, Technical Member held that the tribunal has the power to replace the liquidator of a Corporate Debtor in a liquidating process if the tribunal finds necessary grounds for such replacement.

Factual Background and Submissions made

A Corporate Insolvency Resolution Process was initiated against the Corporate Debtor, the applicant on 25-02-2019. On 29-05-2020 the liquidation process was initiated and Mr. Venkata Sivakumar was appointed as the Liquidator (respondent) for the liquidation process of the applicant.

The applicant submitted that the respondent did not process a valid Authorisation for Assignment as required under Regulation 7 A of the Insolvency and Bankruptcy Board of India (Resolution Professionals) Regulations, 2016 on the date of appointment as the liquidator, and therefore sought removal of the respondent as the liquidator.

The respondent submitted that there is no provision under the Insolvency and Bankruptcy Code, 2016 (hereinafter as IBC) to change the liquidator, and also the liquidator cannot be changed at the behest of the stakeholders unless or otherwise a serious allegation of corruption has been made.

Analysis and decision

Firstly, the Bench observed the provision under Section 16 of the General Clauses Act, 1897 which states that the power to appoint includes the power to suspend or dismiss. Therefore, the Bench opined that when Section 16 is being read with Section 33 of the IBC, the tribunal which has the power to appoint a person, equally has the power to suspend or dismiss the Liquidator, in the absence of any specific powers conferred thereto. Hence, the tribunal has the power to dismiss the liquidator under Sections 33 and 34 of the IBC.

Further, the Bench observed that the provisions of IBC do not explicitly state the grounds on which the liquidator can be removed. Therefore, in the absence of such provisions, provisions under Section 276 of the Companies Act, 2013 have to be considered to determine the removal of the Liquidator. As per the provision under the section, a liquidator may be removed or replaced on the grounds of misconduct, fraud, professional incompetence, inability to act, due care and diligence, etc.

Therefore, the bench held that in the present case, the respondent failed to exercise due care and diligence in the performance of the powers and functions while discharging his duties as a liquidator as he had shared the valuation report with the prospective scheme proponents. Therefore, he was required to be replaced.

Hence, NCLT allowed the application for the removal of the liquidator under Section 60(5) of the IBC read with Rule 11 of the National Company Law Tribunal Rules, 2016 and Section 276 of the Companies Act, 2013.

[IDBI Bank Ltd. Represented by Dy General Manager v. V. Venkata Sivakumar, 2022 SCC OnLine NCLT 212, decided on 01-07-2022]

Advocates who appeared in this case :

Varun Srinivasan, NVS & Associates, Advocates, for the Applicant;

V. Venkata Sivakumar, Party in Person, Advocate, for the Respondents.

National Company Law Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, Hyderabad Bench: The Coram of Madan B Gosavi (Judicial Member) and Veera Brahma Rao Arekapudi (Technical Member) was of the view that the pertinent case was a fit case to pass liquidation order in consonance with the commercial wisdom in terms of Section 33(1) of the Insolvency and Bankruptcy Code, 2016 (Code).

In the instant matter, Resolution Professional had sought for liquidation of Corporate Debtor, Ind-Barath Power Gencom Ltd. under Section 33 (2) and 34 (1) of the Code. The Corporate Debtor was supplying electricity to Tamil Nadu Generation and Distribution Corporation Ltd. (TANGEDCO) and it owed an amount of Rs. 157,85,71,585 to the Corporate Debtor. And even the deposit of Rs 36 crores in fixed deposit under garnishee orders by TANGEDCO, could not improve the financial position of the Corporate Debtor. Further, it was stated that the Committee of Creditors (CoC) in its commercial wisdom had rejected the resolution plans.

While stating the reason the Tribunal referred to K Sashidhar v. Indian Overseas Bank, (2019) 148 LA 497 (SC) which further held,

“The Adjudicating Authority (NCLT) is not expected to do anything more; but is obliged to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors”.

Therefore, falling in line with the CoC wisdom to not accept any of the resolution plans for revival of the Company and having been resolved with 81% voting share in favor of the liquidation of the Company, the Adjudicating Authority found no reason to go against and hold a contrary view in terms of Section 33(1) (a) of the Code.[Axis Bank Ltd. v. Ind-Barath Power Gencom Ltd., 2021 SCC OnLine NCLT 371, decided on 13-08-2021]

Agatha Shukla, Editorial Assistant has reported this brief.

Counsel for the Parties:

For Applicant: Shri V.V.S.N, Raju, Advocate

Legislation UpdatesRules & Regulations

The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy Board of India (Liquidation Process) (Third Amendment) Regulations, 2020.

The Regulations require the committee of creditors to fix the fee payable to the liquidator.  Where the fee has not been fixed by the committee of creditors, the Regulations provide for a  fee as a percentage of the amount realised and of the amount distributed by the liquidator. There have been instances where a liquidator realises the amount while another liquidator distributes  the same to stakeholders. The amendment made to the Regulations today clarifies that where a  liquidator realises any amount, but does not distribute the same, he shall be entitled to a fee corresponding to the amount realised by him. Likewise, where a liquidator distributes any  amount, which is not realised by him, he shall be entitled to a fee corresponding to the amount distributed by him.

Read the regulations here: REGULATIONS

Insolvency and Bankruptcy Board of India

[Notification dt. 05-08-2020]