NCLT Have The Power To Replace Liquidator Under Insolvency And Bankruptcy Code, 2016: NCLT Chennai
National Company Law Tribunal, Chennai (NCLT) comprising of Justice S Ramathilagam and Mr. Anil B Kumar held that the NCLT have the power to replace the liquidator during the liquidation process of a Corporate Debtor under the Insolvency and Bankruptcy Code, 2016. (IBC/Code) NCLT initiated the Corporate Insolvency Resolution Process (CIRP) of Jeypore Sugar Company Limited (Jeypore...
National Company Law Tribunal, Chennai (NCLT) comprising of Justice S Ramathilagam and Mr. Anil B Kumar held that the NCLT have the power to replace the liquidator during the liquidation process of a Corporate Debtor under the Insolvency and Bankruptcy Code, 2016. (IBC/Code)
NCLT initiated the Corporate Insolvency Resolution Process (CIRP) of Jeypore Sugar Company Limited (Jeypore Sugar) on 25.02.2019 and thereafter initiated the liquidation process of Jeypore Sugar on 29.05.2020 and appointed Mr. Venkata Sivakumar as the Liquidator.
Contentions Of Parties
The Applicant IDBI bank filed an application before NCLT seeking removal of the liquidator. It was contended on behalf of the Applicant that the liquidator did not have the valid authorisation at the time of his appointment and by giving his written consent for appointment as Liquidator, he has suppressed material fact before NCLT.
The liquidator opposed the application on the ground that there is no provision under the IBC to change/remove the liquidator and also the liquidator cannot be changed at the behest of the stakeholders by the NCLT during the liquidation process.
Decision/Analysis By NCLT
NCLT negated the contention of Liquidator by relying upon Section 16 of the General Clauses Act, 1897 which states that the power to appoint also includes power to suspend or dismiss also. NCL held that on conjoint reading of Section 33 of IBC and Section 16 of the General Clauses Act, 1897 shoes that the NCLT has the power to dismiss the liquidator since NCLT has the powers under Section 33 & 34 of IBC to appoint a liquidator.
Furthermore, the NCLT observed that though IBC does not provide for grounds on which liquidator can be removed but recourse can be made to Section 276 of the Companies Act, 2013 which provides for ground of removal of Liquidator such as misconduct, fraud, professional incompetence and others.
The Bench held that in the present case, the liquidator shared the valuation report of the Corporate Debtor with the prospective scheme proponents and the said act would amount to failure to exercise due and diligence and therefore, the liquidator can be changed.
Consequently, NCLT allowed the application and removed Mr. Venkata Sivakumar as the liquidator and appointed Mr. S Hari Karthik as the liquidator of Jeypore Sugar.
Case Details: Axis Bank v. Venkata Sivakumar
Counsel for Applicant: Varun Srinivasan
Counsel for Liquidator: Venkata Sivakumar, Party in Person