2020 (6) TMI 556 - AT - Insolvency and Bankruptcy

Institution of suit or other legal proceedings on behalf of the 'Corporate Debtor' under Liquidation - jurisdiction of NCLT ordering Liquidation - HELD THAT - From clause (d) of section 11, it is clear that a 'Corporate Debtor' in respect of whom a liquidation order has been made is not entitled to make application to initiate 'Corporate Insolvency Resolution Process' under Chapter II. That means, it cannot file any application under section 7 or 9 of the I B Code. Therefore, no application under Chapter II can be filed by the 'Corporate Debtor', which is under Liquidation of which the Appellant is Liquidator. In so far as, sub-section (5) of section 33 is concerned, it is subject to section 52. Section 52 relates to right of secured creditor in liquidation proceedings. If the Adjudicating Authority has refused to grant permission to file application under section 9 of the I B Code, we are not inclined to interfere with the impugned order dated 30th May, 2019 - Appeal dismissed.

Summary

Issues:
- Appeal against rejection of application under section 60(5) of the Insolvency and Bankruptcy Code, 2016 for institution of suit or other legal proceedings on behalf of the Corporate Debtor under Liquidation.
- Interpretation of sections 33(5) and 11 of the I&B Code regarding the authority to file legal proceedings by the Liquidator on behalf of the Corporate Debtor.

Analysis:
1. The appeal was filed by the Liquidator of a Corporate Debtor against the rejection of an application under section 60(5) of the Insolvency and Bankruptcy Code, 2016 by the Adjudicating Authority. The Liquidator sought permission to institute suits or legal proceedings on behalf of the Corporate Debtor under Liquidation within the jurisdiction of NCLT, which was denied.

2. The Appellant's counsel referred to section 33(5) of the I&B Code, highlighting that no suit or legal proceeding can be initiated by or against the Corporate Debtor, except by the Liquidator with prior approval of the Adjudicating Authority. The Appellant intended to file applications under section 9 against different companies owing debts to the present Corporate Debtor or other Corporate Debtors.

3. The rejection of the submission was based on section 11 of the I&B Code, which specifies persons not entitled to initiate corporate insolvency resolution processes. Clause (d) of section 11 specifically prohibits a Corporate Debtor under liquidation from filing applications under Chapter II of the Code, including sections 7 or 9. Therefore, the Corporate Debtor under liquidation, represented by the Appellant as the Liquidator, cannot file applications under section 9.

4. It was clarified that section 33(5) is subject to section 52, which pertains to the rights of secured creditors in liquidation proceedings. The Liquidator can initiate legal proceedings on behalf of the Corporate Debtor not under liquidation for recovery of money if it does not involve secured assets, but not under section 9 of the I&B Code.

5. The Tribunal upheld the Adjudicating Authority's decision to refuse permission for filing an application under section 9 of the I&B Code. Given the restrictions outlined in section 11 and the interpretation of related sections, the appeal was dismissed without costs.