Liquidator's Discretion Upheld in Arbitration Appeal Dismissal

The National Company Law Appellate Tribunal dismissed the appeal against an Impugned Order related to arbitration proceedings involving a Corporate Debtor in liquidation. The Liquidator's discretion in deciding whether to defend legal proceedings was recognized, and it was held that the Liquidator could choose not to participate in arbitration proceedings. The Tribunal found that the Liquidator's decision not to defend the arbitration proceedings was valid, leading to the dismissal of the appeal at the admission stage due to lack of merit. No costs were awarded in the judgment.

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Issues: Liquidator's duty to defend legal proceedings, Arbitration proceedings during liquidation

In this judgment by the National Company Law Appellate Tribunal, the Appellant filed an appeal against an Impugned Order related to arbitration proceedings against a Corporate Debtor undergoing liquidation. The Appellant had initiated arbitration proceedings before the Corporate Insolvency Resolution Process (CIRP) began, but the proceedings were affected by the moratorium during CIRP. The Liquidator, after the liquidation order, appeared once before the arbitrators but did not actively participate, leading to the arbitration proceedings being struck down.

The Appellant argued that under Section 35(k) of the Insolvency and Bankruptcy Code, the Liquidator is obligated to defend legal proceedings, emphasizing that the Liquidator's duty includes defending any suits or proceedings. The Liquidator's role in investigating the financial affairs of the Corporate Debtor was also highlighted as a reason for the Liquidator's obligation to participate in the arbitration proceedings.

On the other hand, the Respondent, representing the Liquidator, contended that the arbitration proceedings pertained to an inter-shareholders dispute that did not directly involve the Corporate Debtor. Therefore, the Liquidator decided not to contest the arbitration proceedings based on this distinction.

The Tribunal noted that the duty of the Liquidator includes defending legal proceedings, but it also recognized the Liquidator's discretion in deciding whether to defend a particular proceeding based on the circumstances. The Tribunal held that if the Liquidator made a conscious decision not to defend the arbitration proceedings, the Appellant could not compel the Liquidator to participate.

Ultimately, the Tribunal found no merit in the appeal and dismissed it at the admission stage, stating that the appeal lacked substance and did not warrant interference with the Impugned Order. No costs were awarded in the judgment.

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