{"id":280454,"date":"2022-12-27T14:00:52","date_gmt":"2022-12-27T08:30:52","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=280454"},"modified":"2023-01-06T17:08:40","modified_gmt":"2023-01-06T11:38:40","slug":"nclat-no-liquidator-has-any-personal-rights-to-continue-in-liquidation-process-adjudicating-authority-can-order-for-replacement-of-liquidator","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2022\/12\/27\/nclat-no-liquidator-has-any-personal-rights-to-continue-in-liquidation-process-adjudicating-authority-can-order-for-replacement-of-liquidator\/","title":{"rendered":"NCLAT | No Liquidator has any \u2018personal rights\u2019, to continue in Liquidation Process; Adjudicating Authority can order for replacement of Liquidator"},"content":{"rendered":"
\n

   <\/p>\n

National Company Law Appellate Tribunal<\/b> | The bench comprising of M. Venugopal, J. and Naresh Salecha*<\/b> (Technical Member) held that the Adjudicating Authority which had the powers to appoint the Liquidator also have the power to remove the ‘Liquidator for any fit, just, valid and proper reasons.<\/p>\n

“…no Liquidator, has any ‘personal rights’, to continue in ‘Liquidation’ and the ‘Adjudicating Authority’, can order for ‘Replacement’ of the ‘Liquidator’, recording sufficient reasons, as per ‘Law’.”<\/i><\/p>\n

Factual Matrix<\/b><\/p>\n

In the instant matter, an application under S. 7 IBC was admitted by the Adjudicating Authority (NCLT) as Corporate Debtor (Jeypore Sugar Company Ltd.) failed to repay various loans taken from the financial creditors including respondent no. 1 (IDBI Bank Limited – Secured Financial Creditor of Corporate Debtor). NCLT appointed applicant, Mr. V. Venkata Sivakumar as ‘Liquidator’ and ordered for liquidation of the Corporate Debtor on 29-05-2020.<\/p>\n

During the annual performance review of all ‘Insolvency Professionals’ empanelled with the bank, for continuation of the services of ‘Insolvency Professionals’ declarations were called for verification and review. Regulation 7-A of the Insolvency Regulation 2017 mandates that the ‘Insolvency Professionals’ must have the Authorisations for Assignment (AFA) in order to take assignments. The Respondent no. 1 sent many emails to the appellant to furnish the copy of AFA but did not receive any response. Later, he came to know that the appellant did not have valid AFA from IDBI website.<\/p>\n

The respondent no. 1 filed an application before NCLT for removal of appellant and NCLT vide impugned order dated 01-07-2022, replaced the appellant by new liquidator, Mr. S. Hari Karthik under Ss. 33 & 34 IBC read with S. 16<\/a> of General Clauses Act, 1897<\/a> read with S. 276<\/a> of the Companies Act, 2013<\/a>. The appellant filed the present appeal against the impugned order passed by the NCLT.<\/p>\n

Appellant’s Contention<\/b><\/p>\n

The appellant contented that NCLT in open court acknowledged that appellant got fresh ‘AFA’ and stated “As the Madras High Court has granted Interim Stay and since the matter is solved by issuing fresh AFA, this petition becomes infructuous”<\/i> but contrary to its oral orders made in the open court, pronounced judgment to remove him as a Liquidator thus making it a case of judicial misconduct.<\/i><\/p>\n

The appellant contended that respondent no. 1 had malafied<\/i> intention behind removing the appellant as Liquidator and had filed several petitions stating complete non-cooperation from the appellant and ignored that appellant got proper AFA and Madras High Court had given Interim Stay. The appellant further stated that respondent no. 1 was against him as he refused to accept ‘Resolution Plan’ submitted by ‘Benamies’ and ‘Ex-Promoters’.<\/p>\n

The appellant contended that Technical (Member) of the NCLT had bias against him and the impugned order was passed with malafide intentions exercising arbitrary powers, total abuse of judicial process resulting into gross violation of principles of natural justice and miscarriage of justice.<\/i><\/p>\n

The appellant contended that by the time respondent no. 3’s decision was communicated to the appellant, the fresh ‘AFA’ was issued to him and since he had valid AFA, question of his removal does not arise.<\/p>\n

Respondent’s Contention<\/b><\/p>\n

The respondents contended that the appellant’s removal was valid on several grounds including non-possession of the AFA and illegal sharing of valuation report of the Corporate Debtor with prospective Resolution Applicants. The respondent also contended that the appointing authority of the Liquidator also has adequate powers to remove the Liquidator.<\/p>\n

The respondents contended that Madras High Court’s interim stay order has no relevance in the present case. The respondents stated that the appellant had illegally shared the valuation report of the Corporate Debtor with the Resolution Applicant thus violating Clause 21 of Insolvency Bankruptcy Board of India (Insolvency Professionals) Regulation 2016<\/a>. The respondents further contended there is no retrospective applicability of AFA and actions taken by appellant prior to 30-12-2020 are null & void .<\/p>\n

Moot Points<\/b><\/p>\n

    \n
  1. \n

    Whether the appellant had valid AFA on the date of his appointment as the Liquidator of the Corporate Debtor?<\/p>\n<\/li>\n

  2. \n

    Whether the AFA was deemed to have been issued in terms of Regulation 12A of the ‘Insolvency and Bankruptcy Board of India (Model Bye-laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016?<\/p>\n<\/li>\n

  3. \n

    Whether the AFA issued after taking up assignment by the appellant, absolve appellant of meeting requirement of Regulation 7-A of IBBI ‘Insolvency Professional’ Regulation 2016<\/a>?<\/p>\n<\/li>\n

  4. \n

    Whether the Regulation 12A of the ‘Insolvency and Bankruptcy Board of India (Model Bye-laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 Vide Notification No. IBBI\/2016-17\/GN\/REG001, dated 21-11-2016 will prevail over Regulation 7-A of IBBI ‘Insolvency Professional’ Regulation 2016?<\/p>\n<\/li>\n

  5. \n

    Whether the order passed by Madras High Court has any bearing on the current case?<\/p>\n<\/li>\n

  6. \n

    Can the NCLT remove the Liquidator?<\/p>\n<\/li>\n<\/ol>\n

    Tribunal’s Observation and Decision<\/b><\/p>\n

    The Tribunal observed that Regulation 7-A of IBBI (Resolution Professional) Regulation 2016<\/a> clearly states that no Insolvency Professional shall accept or undertake any assignment after 31-12-2019 unless he holds a valid AFA on the date of acceptance or commencement of such assignment and the appellant did not have the valid AFA on date of acceptance of the Liquidator.<\/p>\n

    The Tribunal observed that all the assignments as an ‘Interim Resolution Professional’, ‘Resolution Professional’, ‘Liquidator’ etc. are to be treated as independent assignments and one assignment cannot automatically give extension to next assignment. It is thus natural that the ‘Appellant’ needs to comply with the requirements of the particular appointment.<\/i> Therefore, the AFA issued subsequent to taking up assignment by the appellant, does not absolve appellant of meeting requirement of Regulation 7-A of IBBI ‘Insolvency Professional’ Regulation 2016<\/a>.<\/p>\n

    The Tribunal observed that as per Regulation 12A of the Model Bye – Laws IPA Regulations, the appellant is required to apply for and obtain the AFA thus Regulation 12A of the IBBI (Model Bye-laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016<\/a> will prevail over Regulation 7-A of IBBI ‘Insolvency Professional’ Regulation 2016<\/a>.<\/p>\n

    Relying on Tax Officer, Alleppey<\/i> v. MC Ponnoose<\/i>, (1969) 2 SCC 351<\/a>, the Tribunal further observed that the AFA cannot be ratified retrospectively in the absence of any such provisions in the law and the appellant did not hold valid AFA on the date of acceptance of the assignment.<\/p>\n

    The Tribunal observed that the order passed by Madras High Court does not have any bearing on the current case and stated that this ‘Appellate Tribunal’ do not find prima-facie any restrain on the ‘Adjudicating Authority’ to adjudicate in this case and no conflict is found.<\/i><\/p>\n

    Relying on State of T.N.<\/i> v. M.N. Sundararajan<\/i>, (1980) 4 SCC 592<\/a> and Subrata Maity<\/i> v. Amit C. Poddar<\/i>, Company Appeal (AT) (Ins.) No. 1234 of 2022, order dated 13-10-2022, where it was held that<\/p>\n

    “The Liquidator does not have any personal right to continue in the Liquidation Process and the reasons which have been noted in the order are sufficient to exercise even the inherent power by NCLT to replace the Liquidator. It is not a fit case to interfere in exercise of our Appellate Jurisdiction.”<\/b><\/p>\n

    the Tribunal opined that NCLT is vested with the power to appoint Liquidator under Ss. 33 and 34 IBC and can remove the Liquidator by the virtue of the S. 16<\/a> of the General Clauses Act, 1897<\/a>.<\/p>\n

    The Tribunal held that there is no error in impugned order and the appeal is devoid of merits and therefore dismissed.<\/p>\n

    [Venkata Sivakumar v. IDBI, 2022 SCC OnLine NCLAT 1616<\/a>, decided on 20-12-2022<\/span>]<\/p>\n\n

    Advocates who appeared in this case:<\/p>\n

    Mr. V. Venkata Sivakumar, Counsel for the Appellant\/Liquidator;<\/p>\n

    Mr. Arun Kathpalia (Senior Advocate) and Mr. Varun Srinivasan, Counsel for the Respondent No. 1\/Caveator;<\/p>\n

    Mr. P. Wilson (Senior Advocate) and Ms. N. Kalaivani, Counsel for the Successful Bidder;<\/p>\n

    Mr. J. Manivannan, Counsel for the New Liquidator.<\/p>\n\n

    *Ritu Singh, Editorial Assistant has put this report together.<\/span><\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

        National Company Law Appellate Tribunal | The bench comprising of M. Venugopal, J. and Naresh Salecha* (Technical Member) held that <\/p>\n","protected":false},"author":67011,"featured_media":279124,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,11],"tags":[43781,30596,22814,34534,30182,22014,12521,34025],"class_list":["post-280454","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-tribunals_commissions_regulatorybodies","tag-cirp","tag-corporate-debtor","tag-corporate-insolvency-resolution-process","tag-liquidator","tag-national-company-law-appellate-tribunal","tag-nclat","tag-nclt","tag-resolution-professional"],"yoast_head":"\nNCLAT | No Liquidator has any \u2018personal rights\u2019, to continue in Liquidation Process; Adjudicating Authority can order for replacement of Liquidator | SCC Times<\/title>\n<meta name=\"description\" content=\"The bench comprising of M. 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