NCLAT held that as per Section 11 of the Code, the liquidator on behalf of the Corporate Debtor can not initiate insolvency proceedings under the Code against other Corporate Debtor, but he can initiate other proceedings against such Corporate Debtor like recovery proceedings etc.
In the instant case titled Abhay N. Manudhane vs. Gupta Coal India Pvt. Ltd. the issue that was raised before the NCLAT was:
Whether a Liquidator & the resolution professional initiate CIRP against other Corporate Debtor?
NCLAT relied on Section 11 of the Code, which states that:
“11. Persons not entitled to make application.— The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process under this Chapter, namely:–
(a) a corporate debtor undergoing a corporate insolvency resolution process; or
(b) a corporate debtor having completed the corporate insolvency resolution process twelve months preceding the date of making of the application; or
(c) a corporate debtor or a financial creditor who has violated any of the terms of the resolution plan which was approved twelve months before the date of making of an application under this Chapter; or
(d) a corporate debtor in respect of whom a liquidation order has been made. Explanation.—For the purpose of this section, a corporate debtor includes a corporate applicant in respect of such corporate debtor”.
The NCLAT noted that clause (d) of Section 11 of the Code expressly stipulates that a Corporate Debtor in respect of whom a liquidation order has been issued is not allowed to file an application to begin Chapter II insolvency proceedings. Section 33(5) of the Code is also subject to Section 52 of the Code, according to NCLAT. The right of a secured creditor in liquidation proceedings is addressed in Section 52.
Hence, after analysing Section 11 of the Code in conjunction with Section 33 of the Code, the NCLAT determined that, while the Liquidator is permitted to file any suit or legal proceeding against other corporate debtors for the recovery of any money owed to the Corporate Debtor, an application under Chapter II of the Code is not maintainable.