NCLAT Refuses to Interfere in Liquidation Process, Dismisses Suspended Director’s Appeal [Read Order]

The National Company Law Appellate Tribunal (NCLAT) dismissed an appeal filed by Mr. Rakesh Verma, the suspended director of a company under liquidation, reaffirming that once a company enters the liquidation stage under the Insolvency and Bankruptcy Code (IBC), individual objections from suspended directors, especially those not rooted in legal merit, cannot delay or derail the process.

The case revolved around Vasudeva Buildcon Pvt. Ltd., a company that entered liquidation after undergoing CorporateInsolvency Resolution Process (CIRP). Mr. Verma had challenged the liquidation proceedings initiated by the Adjudicating Authority (NCLT), arguing that the process lacked transparency and due opportunity, and raised concerns about the manner in which the liquidator was functioning.

Mr. Verma’s core grievance was that despite being a former director, he wasn’t given enough opportunity to represent his case before the Adjudicating Authority. He also alleged that the liquidator was acting in violation of procedural rules, particularly regarding asset valuation and sale of properties. He claimed the liquidation was not being conducted in a fair and just manner and sought a stay on the entire process.

After hearing both sides, the NCLAT made it clear that liquidation under the IBC is not meant to be stalled by individual directors once the process has been initiated in accordance with the law. The Bench pointed out that the CIRP had run its course, and with no resolution plan receiving approval from the Committee of Creditors (CoC), the Adjudicating Authority had no choice but to order liquidation, exactly as the Code prescribes.

The Appellate Tribunal observed that Mr. Verma had already raised similar concerns earlier, and that this appeal was an attempt to re-litigate settled issues under a different pretext.

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The NCLAT held that there was no procedural irregularity or violation of natural justice that would justify interference. It said that Mr. Verma, as a suspended director, no longer had the right to manage or represent the company and could not use the appellate process to delay liquidation, especially when no CoC-approved resolution plan was in place.

The two-member bench of the National Company Law Appellate Tribunal comprising Justice Rakesh Kumar Jain (Judicial Member) and Mr. Inderdev Pandey (Technical Member) also reaffirmed that the liquidator, being a professional appointed under the Code, is expected to carry out their duties in line with the IBBI regulations and subject to the oversight of the Adjudicating Authority.

The ruling serves as a reminder that once a company enters liquidation under the IBC, suspended directors have a very limited role.

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