NCLAT Sets Aside Status Quo Order in TIIPL Voluntary Liquidation; Affirms Shareholders’ Right to Replace Liquidator [Read Order]

The National Company Law Appellate Tribunal (NCLAT) has set aside a status quo order issued by the Adjudicating Authority, allowing the shareholders and directors of Transmissions International India Private Limited (TIIPL) to proceed with the replacement of the erstwhile liquidator, Chandra Prakash Chandra Prakash Jain, with a new appointee, Arun Gupta.

The appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, against the order passed by the National Company Law Tribunal, Ahmedabad.

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Coming to the facts of the present case, TIIPL decided to initiate voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code (IBC) in February 2024. The shareholders initially appointed Umesh Ved as the liquidator but later replaced him with Chandra Prakash Jain in September 2024.

They were not satisfied with Chandra Prakash Jain's conduct, especially with allegations of opacity and breaches of statutory duties. The board of directors passed a resolution on February 28, 2025, to replace Chandra Prakash Jain with Arun Gupta, a decision ratified by an extraordinary general meeting (EGM) on 17-3-2025. Despite this, Chandra Prakash Jain challenged his removal before the Adjudicating Authority, which directed a status quo on 28-3-2025, effectively reinstating him.

The NCLAT observed that the voluntary liquidation process under Section 59 of the IBC and the accompanying regulations grants the corporate debtor and its shareholders the unequivocal right to appoint and replace the liquidator without judicial interference.

The tribunal noted that the Adjudicating Authority had overstepped its jurisdiction by imposing the status quo order, as the statutory framework does not require its approval for such replacements.

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The NCLAT further observed that Chandra Prakash Jain had already been validly replaced before the status quo order was issued, rendering the Adjudicating Authority's intervention unnecessary and contrary to the IBC's provisions.

The tribunal comprising Justice Ashok Bhushan (Chairperson), Justice N. Sesha Sayee (Judicial Member), and Barun Mittal (Technical Member) also dismissed objections regarding the delay in filing the appeals, noting that they were filed within the permissible 45-day window under the IBC. It further directed Chandra Prakash Jain to cooperate with the new liquidator, Arun Gupta, by handing over all necessary documents and information as required under the Voluntary Liquidation Regulations.

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