Kamal Kumar Harlalka vs Sudha Sarma
- CitationComp. App (AT) (Ins) No. 287 of 2025
Ratio decidendi
The rule this decision rests on
Once a corporate debtor's business has been sold as a going concern in liquidation, the litigation of the corporate debtor, including pending civil suits, vests in the liquidator under Section 33 of the Insolvency and Bankruptcy Code, and a suspended director has no standing to pursue such proceedings on the corporate debtor's behalf. Where the law provides that the liquidator alone is to pursue litigation on behalf of the corporate debtor after liquidation has commenced, the Adjudicating Authority does not err in refusing leave to a suspended director to continue civil litigation, and possible conflict of interest between the director and the liquidator does not displace that statutory allocation.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI Comp. App (AT) (Ins) No. 287 of 2025 & I.A. No. 1106 of 2025 IN THE MATTER OF: Kamal Kumar Harlalka ...Appellants Versus Sudha Sharma ...Respondents Liquidator & Ors.
Present: For Appellant : Mr. Rajesh Rai, Mr. Rohan Rai, Ms. Amisha Ray, Advocates. For Respondents : CS Sudha Sarma- Liquidator of R1.
ORDER
(Hybrid Mode)
07.03.2025: I.A. No. 1106 of 2025
This is an application praying for condonation of 11 days' delay in filing
the appeal. Ld. Counsel for the appellant submitted that although order was
passed on 20.12.2024 but copy was made available only after a week later
and certified copy was filed on 08.01.2025 and therefore some time was taken
in finalising the draft. Cause shown is sufficient. Delay condoned.
CA (AT)(Ins) NO. 287 of 2025
2. This appeal has been filed against the order dated 20.12.2024 passed
by National Company Law Tribunal, Guwahati Bench, Guwahati. An
interlocutory application bearing IA No. 117/GB/2024 was filed by the
appellant who is Suspended Director of the CD seeking leave of the court to
pursue the tile suite bearing 334 of 2021 filed against the financial creditor in
the Civil Court. The Adjudicating Authority in the order has noticed that in the liquidation proceeding the CD has already been sold as going concerned
and it is the liquidator of who is entitle to pursue the proceedings on behalf of
the corporate debtor as per Section 33 of the Insolvency and Bankruptcy
Code. Adjudicating Authority rejected the application and did not grant the
leave to appellant to pursue the proceeding. Adjudicating Authority in
paragraph 7 & 11 of the order has made following observations:-
"7. It is trite law that the application filed by the Applicant is now infructuous and he has no locus standi to even file this application, as the CD has already been sold as a going concern and therefore, only the successful bidder can pursue or continue any related litigation. Moreover, after being sold a going concern, all the assets of the CD are required to be handed over to the purchaser, as per the judgment that has been laid down in the matter of Visisth Services Limited Vs. S. V. Ramani & Ors. 2022 sec Online NCLAT 24. Henceforth, the Title Suit No. 334/2021, filed by the CD, belongs solely to the CD and it alone is entitled to any proceeds, which makes it clear that the Applicant's prayer to pursue and defend the afore-mentioned Title Suit cannot be allowed.
11. It has very well been established by various authorities that this Adjudicating Authority has no powers to review an order and the recalling of an order can be done in cases of procedural error. Presently, there is no procedural error which occurred during the passing of the Order dated 18.12.2023 and if the relief sought for in the Application is granted, it would amount to adjudication upon the matter which has earlier been dealt with in the Order dated 18.12.2023. Moreover, the Liquidator/Respondent has distributed and proceeded with liquidation estate in terms of provisions enshrined in the Code. The process of sale of the business of the Corporate Debtor has been already resorted. Therefore, at this juncture allowing the prayers made by the Applicant would amount to undoing the liquidation process/sale as going concern."
2 of 3 Comp. App (AT) (Ins) No. 287 of 2025 & I.A. No. 1106 of 2025
3. Ld. Counsel for the appellant submits that the liquidator cannot
be allowed to pursue the proceeding since there maybe conflict of
interest with the appellant and the liquidator. When the law provides
that it is only the liquidator after the liquidation proceedings has to
pursue litigation on or behalf of the corporate debtor, we fail to see any
error in the order of the Adjudicating Authority refusing leave to the
appellant to pursue the civil litigation. Hence, we do not find any error
in the order, appeal is dismissed.
[Justice Ashok Bhushan] Chairperson
[Barun Mitra] Member (Technical)
harleen/NN
3 of 3 Comp. App (AT) (Ins) No. 287 of 2025 & I.A. No. 1106 of 2025
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