In first judgement, Chennai NCLAT saves liquidator from ignominy; asks NCLT to remove adverse remarks

In its first judgement, the Chennai bench of the National Company Law Appellate Tribunal (NCLAT) came to the rescue of liquidator of Excel Glass – Ravindra Chaturvedi – as it ordered the Kochi Bench of the NCLT to remove from one of its order a para that made demeaning remarks on the liquidator.

The said para of the order dated 10 December 2020, the Kochi NCLT had made the statement: “Further, from a reading of the reply of the Liquidator, it is seen that there is a collusion by the Liquidator with the applicant Kopran Limited in filing the present MA (Miscellaneous Application) in order to defeat the rightful claims of the ex-workers of their legitimate dues. This will be clear from the counter filed by him in the present MA.”

The Chennai bench of the NCLAT said in its order that the remarks of the Adjudicating Authority scarring the liquidator as a tainted person cannot be supported and hence ordered the para to be expunged from the order.

Facts of the case

The said remarks by the Kochi bench of NCLT were made while dismissing a petition filed by Kopran Limited, an unsecured financial creditor of the Excel Glass. The application was filed by the unsecured creditors to oppose applications filed by workmen and employees of the corporate debtor before the tribunal. Kopran Limited had argued that those applications filed by the workers and employees of Excel Glass was motivated, misplaced and misconceived in law.

“Those applications have been filed in order to delay and overturn the entire process of recovering pending dues from the Corporate Debtor, who happens to have debts amounting to crores of rupees to various creditors,” argued Korpan Limited.

Also read: When a Sydney-based liquidator diverged insolvent Co. funds to personal accounts

The liquidator, who was the respondent in the MA filed by Kopran Limited, had filed a counter application without opposing Kopran’s application. The liquidator has in his counter application maintained that the a per the waterfall mechanism under Section 53 of the IBC, the dues of the workmen have much higher priority when compared to that of the applicant, and therefore, the applicant being an unsecured financial creditor, will be directly affected if any amount over and above what is actually payable is paid to the workmen.

In an application filed by the workers against that of Kopran petition, the workers had argued that the payment of gratuity dues was a matter only concerning with the workmen and the Corporate Debtor, and that Kopran has no authority to make any contribution to the determination of workmen claims.

The workers in their petition also accused the liquidator of conspiring against the workmen by supporting such a frivolous petition of Kopran. “The present petition is a part of the measures adopted by the Liquidator and the creditors to deny the workmen their due claims,” said the workers in their application.

The Kochi NCLT while dismissing Kopran Ltd’s petition the tribunal had accused the liquidator of colluding with Kopran Ltd in filing the petition in order to defeat the rightful claims of the ex-workers of their legitimate dues.

Following those disparaging remarks by the Kochi bench of the NCLAT, the liquidator moved NCLAT arguing that such remarks were unwarranted.

NCLAT order

The NCLAT in its order said that the observations and remarks made with respect to the conduct of the liquidator are unwarranted and brook interference.

The appellant authority said that the judicial intervention in the matter is called for as not interfering with such remarks has very serious consequences in regard to conduct of proceedings by the Liquidator, besides branding him for life with a scar affecting his reputation.

“From the tone and tenor of the observations made in para 24 an impression can be gathered that the liquidator was in collusion with the respondent, Kopran Ltd., which implies meeting of minds and collaboration in an act of omission or commission bordering on criminal activity with the Appellant/liquidator either being a collaborator in crime or intentionally aiding the occurrence. This conclusion could not be deduced from the admitted facts of the case,” said the NCLAT.

The NCLAT observed that it could be a case lacking merit or even frivolous or vexatious, but that does not justify the conclusion that the liquidator was either the instigator or the collaborator in such act of commission, which admittedly related to legitimate dues of workmen at whose behest the application was filed.