NCLT opines that IBC is a self-contained code focused on maximizing value effectively

 

The NCLT, Kochi Bench observed that Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) is a self-contained code that effectively ensures the maximization of value. The Code already contains modes of execution, and therefore, it is irrelevant to go to any other Act for the same. It was expounded that it is ultra vires the IBC to invoke provisions of the Companies Act for execution petition. It was further propounded that Section 231 of IBC ousts the jurisdiction of the Civil Court. 

Brief Facts:

An order of liquidation was passed for M/s. Archana Motors Pvt. Ltd (hereinafter referred to as the “Corporate Debtor”), and thereafter, a Liquidator was appointed who is the Applicant in the present case. The Respondents are erstwhile directors of the Corporate Debtor.

It was discovered that the Respondents committed fraudulent acts during the process of Liquidation. 

 Thereafter, an application was filed under Section 66 of the IBC for the recovery of a certain amount of money from the Respondents to the Corporate Debtor, and the said application was allowed. 

 

The present execution application is filed under Section 424(3) of the Companies Act, 2013, to attach and sell properties of Respondent No.3 as the Respondents have failed to pay the said amount.

Contentions of the Respondents:

It was argued that Respondent No. 3 is an aged, reputed, and non-executive director who was not even actively involved in the management of the Corporate Debtor and hence, is irrelevant to decide the application. 

 

Further, the Application is not in accordance with Form No.8 of NCLT Rules, 2016, as properties without boundaries are not properly described.

Observations of the Tribunal: 

The Tribunal remarked that the objections of the Respondent are procedural and not substantive in nature.

It was noted that the present petition was filed under the Companies Act, 2013 read with NCLT Rules, 2016. The Tribunal opined that IBC is a self-contained code that effectively ensures the maximization of value. The Code already contains modes of execution, and therefore, it is irrelevant to go to any other Act for the same. It was expounded that it is ultra vires the IBC to invoke provisions of the Companies Act.

It was propounded that Section 231 of IBC ousts the jurisdiction of the Civil Court, and therefore, the present application cannot proceed under the Companies Act, 2013. 

 

The Applicant, however, argued that the Companies Act 2013 was invoked as the Adjudicating Authority had explicitly directed the Applicant to do so.

The Tribunal opined that Section 35(2) of the IBC empowers the liquidator to take possession and control of the properties of the Corporate Debtor, and in the present case, the Corporate Debtor failed to pay the due amount. The Liquidator is then entitled to recover the amount by attaching the properties and selling them to distribute the proceeds to the creditors.

The Tribunal remarked that it was necessary to attach the properties and communicate the same to the Sub-Registrar’s office to prevent the Respondents from encumbering the properties and caution the public not to deal with them. 

 

The decision of the Tribunal:

The Tribunal directed the Liquidator to sell the property under Regulation 33 Schedule I to the IBBI (Liquidation Process) Regulations, 2016, and accordingly, the application was disposed of.

Case Title: Ashok Velamur Seshadri, Liquidator of M/s. Archana Motors Pvt. Ltd. V. Shibu Job Cheeran Suspended Managing Director of Archana Motors Pvt. Ltd & Ors. 

 

Coram: Shri P. Mohan Raj (Judicial Member), Shri Satya Ranjan Prasad (Technical Member)

Case No.: IBA/133/2019 (Chennai Bench)

Advocates for Petitioner: Advs. Mr. Vinod P.V. and Mr. Reetha D.

Advocate for Respondent: Adv. Mr. Sankar P. Panicker 

 

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