Liquidator Can Recover Possession: NCLAT Dismisses Appellant’s Plea for Small Cause Court Jurisdiction [Read Order]

The NCLAT Principal Bench of the National Company Law Appellate Tribunal (NCLAT) held that the liquidator is entitled to recover possession of the property and dismissed the appellant’s plea that only the Small Cause Court had jurisdiction in the matter.

In this case, the appeal was filed by Wakai Hospitality Pvt. Ltd under Section 61 of the Insolvency and Bankruptcy Code, 2016 (Code), challenging the order dated 29.02.2024 passed by the National Company Law Tribunal, Mumbai. The respondent in this case is Ms Palak Desai, who is the Liquidator of Rajmal Jewelers Private Limited

3 main issues were raised in the appeal, and one of them was that it was not within the jurisdiction of the Adjudicating Authority to adjudicate inter se disputes between the parties, and for any remedy, the Respondent No. 1 was required to approach the appropriate suitable judicial forum, like the small cause court.

It was submitted by the appellant that the Impugned Order failed to consider any of the contentions raised by the Appellant and the Respondent should have approached the Small Cause Court, as the Adjudicating Authority lacked jurisdiction.

It was submitted by the liquidator that both the Adjudicating Authority and this Appellate Tribunal possess the necessary jurisdiction to adjudicate all matters impacting the insolvency process, particularly those relating to core value maximisation and the facilitation of resolution.

The bench relied on the judgement of the NCLAT, which was upheld by the apex court in the case of Encore Asset Reconstruction Company Pvt. Ltd. vs. Ms. Charu Sandeep Desai (RP of Calyx Chemicals & Pharmaceuticals Ltd.) & Ors, in which the tribunal held that if an asset owned by the corporate debtor is in the possession of a third party or creditor, such party is obligated to hand over possession to the resolution professional under Section 18 of the Code, so long as the title remains with the corporate debtor.

The bench found no merit in the argument of the appellant that the adjudicating authority erred in passing the impugned order or that it is only a small cause court that is competent to adjudicate such matters.

The NCLAT, comprising Justice Rakesh Kumar Jain (Judicial Member), Naresh Salecha (Member Technical), and Indevar Pandey (Technical Member), upheld the impugned order.

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