NCLAT New Delhi: Liquidator Must Follow Clause 12 Of Schedule 1 Of Liquidation Process Regulations, 2016, And Not Lay Its Owns Terms And Conditions In The EOI For Period Of Payment Of Balance Sale Consideration

The Appellate Tribunal held that the Liquidator is required to follow the terms and conditions of Clause 12 of Schedule 1 of the Liquidation Process Regulations, 2016, and cannot lay down its own terms and conditions in the EOI regarding the period for payment of balance sale consideration.

Background Facts:

Expression of Interest (‘EOI’) was issued by Mr. Vinod Kumar Kothari (Liquidator) of Nicco Corporation Ltd. on 08.07.2020, i.e. after the date of amendment of the period for payment of balance sale consideration to 90 days in Liquidation Regulations. In the EOI, the period was mentioned to be 15 days by the liquidator, whereas the applicant sought an extension up to 90 days from the date of demand in terms of the amendment dated 25.07.2019.

The Respondent argued that it is incumbent upon the Liquidator to have followed Clause 12 of Schedule 1 and could not have laid down its own terms and conditions because the EOI was given on 08.07.2020 after the amendment dated 25.07.2019. In the EOI, the period was given 15 days whereas the Respondent had been asking for 90 days from the date of demand in terms of amendment dated 25.07.2019.

The question before the Appellate Tribunal was as to whether the parties are bound by the terms and conditions fixed by the Liquidator in the EOI dated 08.07.2020 or whether the Liquidator was required to follow the terms and conditions of Clause 12 of Schedule 1 of the Regulations which was amended on 25.07.2019.

NCLAT Verdict:

The NCLAT dismissed the appeal and held that the Liquidator is required to follow the terms and conditions of Clause 12 of Schedule 1 of the Liquidation Process Regulations, 2016, and cannot lay down its own terms and conditions in the EOI regarding the period for payment of balance sale consideration.

The Appellate Tribunal observed that the circular dated 26.08.2019 has already been withdrawn and that the amendment dated 25.07.2019 was in vogue as of 08.07.2020, it was incumbent upon the Liquidator to follow the provisions of Regulation 33 much less Schedule 1 (Clause 12) of the Regulations which has not been followed and the terms and conditions have been provided by the Liquidator on its own in the EOI overlooking the terms and conditions as envisage in Schedule 1. It pointed out that the action of the Liquidator is totally unsustainable.

Case Title: Vinod Kumar Kothari Liquidator of Nicco Corporation Ltd. vs. Sneha Techno Equipments Pvt. Ltd.

Case No.: Company App. (AT) (Ins) No. 316 of 2023

Counsel for Appellant: Mr. Abhijeet Sinha, Mr. Gautham Shivshankar, Mr. S. Sinha, Advocates

Counsel for Respondent: Mr. Sumant Batra, Ms. Aishwarya, Advocates

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