NCLAT Dismisses Liquidator's Appeal, Upholds Inquiry into Liquidation Process

ENA Sectors 2024-11-25 17:49:24 Chennai, Nov 25 (KNN) In a significant ruling, the National Company Law Appellate Tribunal (NCLAT), Chennai, dismissed an appeal filed by the liquidator of M/s RLS Alloys Pvt. Ltd., challenging the directions given by the National Company Law Tribunal (NCLT) to conduct an inquiry into the liquidator's conduct. The NCLAT emphasised that the appeal was premature and ruled that the liquidator could not invoke a Section 61 appeal against the NCLT's directive to the Insolvency and Bankruptcy Board of India (IBBI) for a fact-finding investigation. The NCLAT, consisting of Justice Sharad Kumar Sharma (Member Judicial) and Jatindranath Swain (Member Technical), clarified that the inquiry ordered by the NCLT was a preliminary fact-finding exercise, not a punitive measure. It also upheld a previous ruling by the Delhi High Court, which had stated that the liquidator should have an opportunity to respond to the inspection report before any final decision was made. In its judgment, the NCLAT reinforced that the liquidator could not initiate Section 61 proceedings at this early stage, as the inquiry was ongoing and not conclusive. It further noted that the IBBIs inquiry was an internal process focused on the liquidator's conduct and found no grounds for appellate intervention until the inquiry was completed. Consequently, the appeal was dismissed, with the tribunal underlining that the investigation was merely an initial step in evaluating the legality of the liquidator's actions. The appellant, Ramasamy Shanmuggam, the official liquidator of M/s RLS Alloys Pvt. Ltd., had challenged the NCLT's judgment, which called for a detailed inspection into his handling of the liquidation process. The liquidation process came under scrutiny after multiple irregularities were reported during an e-auction conducted to sell the companys assets. Key issues included the liquidators decision to accept a lower bid despite a higher one being submitted, the lack of prior notice regarding the auction, and the questionable allowance of a suspended bidder to participate. Given these concerns, the NCLT observed a lack of transparency in the process and ordered IBBI to conduct an inquiry to ascertain whether the liquidator's actions were in violation of the law and insolvency rules. The tribunal emphasised that this was not a punitive action but merely a fact-finding exercise to determine whether the allegations were substantiated. While the appeal was pending before the NCLAT, the liquidator had also filed a parallel petition before the Delhi High Court challenging the NCLT's order. The High Court directed that the liquidator be provided with a copy of the inspection report and allowed a window for him to file a response to the show-cause notice issued by IBBI. Furthermore, the court instructed IBBI to conclude the inquiry and issue a final decision within four weeks of receiving the liquidators response. (KNN Bureau) 40035 https://knnindia.co.in/news/newsdetails/sectors/nclat-dismisses-liquidators-appeal-upholds-inquiry-into-liquidation-process 2024-11-25 17:49:24 knnindia.co.in NCLAT Dismisses Liquidator's Appeal, Upholds Inquiry into Liquidation Process