24 September 2021
Matter: M/s. Mohan Gems & Jewels Private Limited v. Vijay Verma and Anr.
Order dated: 24 August 2021.
Summary:
In this case, the NCLAT set aside an order of the NCLT where the NCLT rejected an application by the liquidator seeking closure of the liquidation process as the corporate debtor was being sold as a going concern under the Insolvency and Bankruptcy Board of India (Liquidation process) Regulations, 2016 (Liquidation Process Regulations). The NCLT stated that if the process of sale as a going concern in liquidation will be in violation of the company concept. It was observed by the NCLT that the Insolvency and Bankruptcy Board of India (IBBI) may bring in subordinate procedure for implementation of the Code but cannot rewrite the procedure.
It was submitted by the liquidator that as per the Liquidation Process Regulations he is authorized and allowed to sell the corporate debtor as a going concern and that the IBBI is empowered under the Code to make regulations to carry out the provisions of the Code.
The NCLAT observed that the power to frame regulations is conditioned by two requirements i) regulations have to be consistent with the provisions of the Code and the rules framed by the Central Government and; ii) the regulations must be to carry out the provisions of the Code. The NCLAT held that IBBI was well within its delegated power to make regulations. Further, the sale of the corporate debtor was carried out by the liquidator in accordance with the Liquidation Process Regulations and accordingly allowed the appeal.
For further information, please contact:
Souvik Ganguly, Partner, Acuity Law
al@acuitylaw.co.in
