2018 (12) TMI 2032 - HC - IBC

Liquidator power to pursue or defend pre existing legal proceedings affirmed, with impleadment allowed and amendment ordered.

Interpretation of liquidator powers under the Insolvency and Bankruptcy regime determines that the liquidator may pursue pre existing suits and be ... Power of liquidator to institute or defend legal proceedings - effect of liquidation order on institution of suits - continuation of existing proceedings vis-a -vis institution of proceedings - interpretation of Section 33(5) and Section 35(1)(k) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The present case is not a case where the Official Liquidator would be instituting the proceedings but would be pursuing the proceedings already executed. Even Section 35(1) recognizes various powers as conferred on the liquidator subject to directions of the Adjudicating Authority (NCLT). On a plain reading of this provision it can be clearly seen that the powers are substantive and which includes power to take such measures and protect the property of the corporate debtor. Sub­section (1)(k) of Section 35 provides that the liquidator would have power to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the corporate debtor. On a conjoint reading of Section 33(5) read with Section 35(1) and more particularly 35(1)(k), I am of the opinion that there is no embargo on the Official Liquidator to be impleaded as a party to the present proceedings and for the Official Liquidator to prosecute this proceeding. Accordingly, the chamber summons is required to be allowed. It is allowed in terms of prayer clause (a). Necessary amendment be carried out within a period of one week from today. Copy of the amended application be served on the parties. As section 11 application is pending for last since two years, it would be necessary to hear the parties on the Section 11 application. Accordingly, list the Section 11 application for hearing on 19 December 2018. Issues: Whether the Official Liquidator can be impleaded and prosecute/continue pending proceedings on behalf of the corporate debtor after a liquidation order, by amendment of the Section 11 application.Analysis: Section 33(5) of the Insolvency and Bankruptcy Code, 2016 bars instituting suits or legal proceedings by or against the corporate debtor after a liquidation order, while its proviso permits institution by the liquidator with prior approval of the Adjudicating Authority. Section 35(1) of the Insolvency and Bankruptcy Code, 2016 (including clause (k)) confers substantive powers on the liquidator to institute or defend suits and to take measures necessary to protect the corporate debtor's property, subject to directions of the Adjudicating Authority. The present proceedings were instituted prior to the liquidation order and are sought to be continued; the Official Liquidator is not instituting a new proceeding but seeking to prosecute an existing one and to be impleaded pursuant to the liquidator's statutory powers and the liquidation order which vested management powers in the liquidator.Conclusion: The Official Liquidator may be impleaded and may continue to prosecute the pending proceedings on behalf of the corporate debtor; the chamber summons for amendment to implead the liquidator is allowed in favour of the applicant.