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APPLICATION FOR APPROVING SETTLEMENT WITH CREDITORS, EVEN AFTER APPOINTMENT OF LIQUIDATOR, CAN BE FILED BY SHAREHOLDER: National Company Law Appellate Tribunal (NCLAT)

Team SoOLEGAL 16 Apr 2019 12:37pm

APPLICATION FOR APPROVING SETTLEMENT WITH CREDITORS, EVEN AFTER APPOINTMENT OF LIQUIDATOR, CAN BE FILED BY SHAREHOLDER: National Company Law Appellate Tribunal (NCLAT)

In a matter before National Company Law Appellate Tribunal (NCLAT), the Director had filed a scheme of compromise in winding up proceedings before the Hon'ble Bombay High Court where Liquidator was already appointed. But, the High Court transferred the matter to NCLAT, Mumbai.

The reasoning of NCLAT was that only the person who is appointed as the official liquidator can be allowed to represent the company when being liquidated. Hearing this, the NCLAT held this reasoning as erroneous in the following words:

"Liquidator is only an additional person and not exclusive person who can move application under Section 391 of the old Act when the company is in liquidation. Looking to these Judgements, we are unable to support the view taken by NCLT that the Appellant could not have filed the Petition under Section 391 of the old Act." 
The Appellate Tribunal held that the promoter was entitled to move an application under Section 391. The question before the Appellate Tribunal was that where would the proceedings be continued: whether at NCLT or High Court. The Appellant was given the liberty to approach the Bombay High Court to get appropriate orders.

It was held that the proceedings should continue in High Court. The judgment in Sunil Gandhi and Ors. Vs. A.N. Buildwell Private Limited and Ors was taken as the base for such holding. The following was held in the Sunil Gandhi case:

"In the proceedings relating to winding up, as in the present case, applications under the provisions of section 391 of the Companies Act, 1956, for the revival of the company in provisional liquidation, would constitute an exception, and would a fortiori fall outside the purview of independent proceedings which ought to be transferred to the National Company Law Tribunal, under clause 3 of the subject notification". 
The National Company Law Appellate Tribunal has thus held that shareholders/promoters of a company are competent to file application for approval of settlement with creditors, even after official liquidator has been appointed.



Tagged: National Company Law Appellate Tribunal   Creditor   Settlement   Appointment of Liquidator  
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