Liquidation Order U/S 33 Of IBC Cannot Be Set Aside When Third Party Has Taken Possession Of Property After Sale Conducted By Liquidator: NCLAT
The National Company Law Appellate Tribunal (NCLAT) Chennai bench of Justice Rakesh Kumar Jain (Judicial Member) and Mr. Jatindranath Swain (Technical Member) has held that the order passed under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (Code), directing the liquidation of the corporate debtor, cannot be set aside once the Successful Auction Purchaser has taken...
The National Company Law Appellate Tribunal (NCLAT) Chennai bench of Justice Rakesh Kumar Jain (Judicial Member) and Mr. Jatindranath Swain (Technical Member) has held that the order passed under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (Code), directing the liquidation of the corporate debtor, cannot be set aside once the Successful Auction Purchaser has taken possession of the corporate debtor's property pursuant to the sale conducted by the liquidator.
Brief Facts:
The Appellant has filed this appeal to challenge an order passed under section 33(2) of the Code by which the liquidation of the corporate debtor was ordered and Respondent No. 1 was appointed as the Liquidator.
The Corporate Debtor had borrowed a sum of Rs.10.76 crores from Respondent No.2 on 30.03.2011 and on 14.03.2014, had mortgaged the factory premises at SIPCOT Industrial Complex, Gummudipoondi Taluk along with another property situated at Ponneri against to the said loan.
The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (CIRP) Proceedings by an order passed on 30.07.2019, the Adjudicating Authority on an application filed by M/s. Sri Balaha Chemicals Private Limited.
Contentions:
The Appellant submitted that until the 6th meeting, the Committee of Creditors (CoC) awaited the decision in the writ proceedings as the corporate debtor's assets were subjudice and it refrained from issuing an EoI.
It was further submitted that however, in the 9th meeting, the CoC decided to liquidate the corporate debtor with malafide intent on the ground that the corporate debtor was non-operational since 2015 while ignoring that it was non-operational due to symbolic possession under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
It was also argued that Respondent No.1 and Respondent No.2 have colluded to push the Corporate Debtor into liquidation with the sole intent of selling the assets of Corporate Debtor,
It was also submitted that Respondent No. 2 did not issue any EoI and sought lquidation solely to lift the moratorium in the sale of the corporate debtor's land under the SARFAESI proceedings. If the liquidation order is set aside, there remains a chance to save the corporate debtor's land from auction and achieve a successful resolution of the insolvency which the objective of the code.
Per contra, the Liquidator submitted that the liquidation order was passed in accordance with section 33(2) of the code which mandates that the liquidation shall be ordered only when the CoC approves the same. Given that the liquidation process is complete, the Successful Auction Purchaser has taken possession of the corporate debtor's property and an application under section 54 of the code for dissolution is pending, the instant appeal no longer holds any merit.
Observations:
The court observed that the Appellant did not dispute the completion of liquidation. It was argued that the High Court had set aside the Debt Recovery Appellate Tribunal (DRAT) order by which the order of Debt Recovery Tribunal (DRT) setting aside the sale had been set aside. However subsequent proceedings in the DRAT and his challenge to the order of the DRAT failed because the liquidator pressed for the liquidation and withdrew the writ petition. be it what it may, the liquidation is complete, assets have been sold and possession has been handed over.
The Tribunal also observed that the impugned order dated 27 January, 2021 logically followed the Resolution passed by the CoC in its 9th meeting by which the liquidation was recommended. Based on the CoC's decision and consent of the Resolution Professional, the Adjudicating Authority ordered the liquidation and this decision has not been passed in contravention of any provisions of the Code.
The Tribunal held that since the liquidator has completed the sale creating third party interest, the appeal deserves to be dismissed and the claim for indemnification ceases as the auction purchaser now holds the possession.
Accordingly, the present appeal was dismissed.
Case Title: P. Navcen Chakravarlhy V Ramakrishnan Sadasivam.
Case Number:Company Appeal (AT) (CH) (Ins) No.32/2021 (IA No.74/2021)
Order Date: 01/04/2025
For Appellant : Mr. B. Deepak Narayanan, Advocate
For Respondent : Mr. T. Ravichandran, Advocate for R1 Mr. M.L. Ganesh, Advocate for R2
