2024 (2) TMI 142 - AT - Insolvency and Bankruptcy

Liquidators must obtain prior approval under Section 33(5) before instituting legal proceedings on behalf of corporate debtors

In Re : CA Rajeev Bansal Liquidator of Isolux Corsan India Engineering & Construction Pvt. Ltd.

NCLAT Principal Bench held that liquidators must obtain prior approval under Section 33(5) of the Code before instituting legal proceedings on behalf of ... Authorization of Applicant/ Liquidator to defend all of any of the suit, prosecution or other legal proceedings, civil or criminal in the nature of and on behalf of the Corporate Debtor initiated both prior and post the commencement of liquidation proceedings of the Corporate Debtor - requisition to the Courts, Tribunals and such government authorities for expeditious disposal of matters pending in the name of and against the Corporate Debtor - blanket/de-facto approval for the institution of the suit or any other legal proceedings by the Liquidator on behalf of the Corporate Debtor in near future so as to ensure appropriate recovery in favour of the Corporate Debtor for its beneficial liquidation - HELD THAT:- There cannot be any exception to requirement of law as contained in Section 33(5) of the Code i.e. legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the Adjudicating Authority. When the application was filed by the Liquidator being I.A. No.405 of 2021, this was with intent and purpose to obtain prior approval of the Adjudicating Authority to instituted legal proceeding on behalf of the Corporate Debtor, which application was allowed by the Adjudicating Authority by the order passed on 28.04.2022. The subsequent application became necessary as the objection was raised to the maintainability of the Writ Petition on the ground that there is no prior approval with regard to filing of the Writ petition. Though it is not disputed that there was no specific approval for filing Writ Petition, however, when the Adjudicating Authority has allowed the Liquidator to prosecute on behalf of the Corporate Debtor, the Adjudicating Authority ought to have issued necessary order as prayed in I.A. No.1081 of 2023 to clarify that the Liquidator was fully entitled to peruse the Writ Petition on behalf of the Corporate Debtor. The impugned order cannot be sustained. Order dated 29.11.2023 is set aside. Appeal disposed off. Issues involved:The judgment involves the issue of whether the Liquidator had the authority to file and defend legal proceedings on behalf of the Corporate Debtor without prior approval from the Adjudicating Authority.Issue (i):The Appellant was appointed as Liquidator for the Corporate Debtor and filed an application seeking authorization to defend legal proceedings on behalf of the Corporate Debtor.Details:The Liquidator filed an application (I.A. No.405 of 2021) seeking permission to defend legal proceedings initiated prior to and post the commencement of liquidation proceedings of the Corporate Debtor. The application was allowed by the Adjudicating Authority by an order dated 28.04.2022.Issue (ii):The Liquidator filed a Compliance Affidavit listing pending litigations to be filed and defended on behalf of the Corporate Debtor.Details:The Compliance Affidavit filed by the Liquidator included a detailed list of pending litigations involving the Corporate Debtor, as required by the order dated 28.04.2022.Issue (iii):The Liquidator filed a Writ Petition without prior approval from the Adjudicating Authority, leading to objections during the proceedings.Details:The Liquidator filed a Writ Petition seeking to quash a Re-assessment order and demand raised by the Commercial Tax Department. Objections were raised during the Writ Petition proceedings regarding the lack of prior approval from the Adjudicating Authority.Issue (iv):The Liquidator filed an application (I.A. No.1081 of 2023) seeking approval for the continuation of the Writ Petition and other incidental legal proceedings.Details:The Liquidator filed I.A. No.1081 of 2023 requesting approval to continue the Writ Petition and pursue other related legal proceedings. The application was dismissed, leading to the filing of the present Appeal.Judgment:The Adjudicating Authority's order rejecting I.A. No.1081 of 2023 was challenged in the Appeal. The Appellant argued that the previous order allowed the Liquidator to prosecute legal proceedings on behalf of the Corporate Debtor. The Tribunal held that while specific approval for the Writ Petition was lacking, the Adjudicating Authority's approval in the earlier order covered such actions. The impugned order was set aside, and I.A. No.1081 of 2023 was allowed, confirming the Liquidator's authority to pursue the Writ Petition.