2020 (3) TMI 1057 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - section 60(5) of the Insolvency and Bankruptcy Code, 2016 read with rule 11 of the National Company Law Tribunal Rules, 2016 - can this Adjudicating Authority ratify the Act of the liquidator subsequently, when the Act has specifically said that prior approval is must. And if so at what stage the de facto approval can be sanctioned and the effect of the same on the already filed suit/application? HELD THAT - What ought to be done, if the parties failed to do. It cannot be ratified by the subsequent Act. However, the petitioner counsels vehemently argued that sanction of approval is only a formal Act. Hence, in the interest of justice and the overall view of the enactment for maximisation of the value of the assets of the corporate debtor. An approval will only amount to regularisation of appeal already filed and pending. It is only a formality to regularise the application which was filed before the District Court - The permission to go on appeal against the company under liquidation was obtained by the respondent herein and this Adjudicating Authority by order dated April 8, 2019 has given approval to the respondent to file appeal against the corporate debtor against the award passed by the hon'ble sole arbitrator. Thus, in the interest of justice, keeping in mind the spirit of the IBC, focus of the company in liquidation is to maximisation of the asset - the application is allowed.

Summary

Issues:
Liquidator seeking approval under section 60(5) of the Insolvency and Bankruptcy Code, 2016 for pending arbitration proceedings.

Analysis:
1. The liquidator filed an application under section 60(5) seeking approval for the arbitration proceedings involving the corporate debtor. The corporate debtor was under liquidation, and an arbitration award had been passed partially in favor of the corporate debtor. The respondent objected, citing the requirement of prior approval under section 33(5) of the Insolvency and Bankruptcy Code, 2016.

2. The respondent argued that the application was void ab initio as prior approval had not been obtained from the Adjudicating Authority before initiating the arbitration proceedings. The issue raised was whether the Adjudicating Authority could ratify the liquidator's act subsequently, considering the mandatory requirement of prior approval under section 33(5).

3. The liquidator contended that similar provisions in other laws had been ratified by courts post-facto. Various judgments were cited to support this argument. The question arose whether the inherent jurisdiction of the Tribunal could be invoked to override the specific provision of obtaining prior approval under section 33(5) of the Code.

4. The Tribunal considered the arguments and the spirit of the Insolvency and Bankruptcy Code, focusing on the maximization of assets of the corporate debtor. The Tribunal granted ex post facto approval for the liquidator to proceed with the pending arbitration proceedings under section 34 of the Arbitration and Conciliation Act, 1996, emphasizing the interest of justice and the objectives of the Code.

5. The Tribunal's decision highlighted the importance of balancing legal requirements with the overarching goal of maximizing asset value in the context of insolvency proceedings. By allowing the liquidator to proceed with the arbitration proceedings post-facto, the Tribunal aimed to ensure fairness and efficiency in the resolution of disputes involving the corporate debtor under liquidation.

6. The judgment underscored the need for adherence to statutory provisions while also recognizing the flexibility required to address unique circumstances in insolvency cases. By granting ex post facto approval, the Tribunal demonstrated a pragmatic approach to resolving legal complexities in the context of liquidation proceedings, ultimately serving the broader objectives of insolvency law.