On January 18, 2017, NICCO Corporation Limited ("NICCO") was accepted into the corporate insolvency resolution process under Section 10 of the IBC, 2016. NICCO owns 1,17,00,000 shares of NICCO Parks and Resorts Private Limited, or 25% of each company. In accordance with its articles of association, NICCO also has the authority to nominate directors to serve on the board of NICCO Parks. Since October 17th, 2017, NICCO has been in liquidation pursuant to the requirements of the IBC, 2016.
A joint sector agreement between NICCO and two state-owned corporations (West Bengal Tourism Development Corporation Limited and West Bengal Industrial Development Corporation Limited) allowed NICCO Parks, which had been founded on March 17th, 1989, to become a "Joint Sector Undertaking" on February 23rd, 1990. According to this shareholding, NICCO Parks is owned 25% by NICCO, 26% by two State-Owned Corporations, and the remaining 80% by the general public. Additionally, NICCO and each of the two State-Owned Corporations have the right to nominate three directors to the NICCO Parks Board.
In the instant case titled Rajive Kaul v. Vinod Kumar Kothari & Ors, the issue raised for clarification before the NCLAT was:
Who holds the authority to remove nominee directors?
With regard to this issue, the NCLAT ruled in this instance that the liquidator has the authority to oust the nomination directors of the Corporate Debtor (CD) from the board of another firm. Due to their lack of cooperation, attitude, and a number of other factors, the liquidator of NICCO Parks and Resort Limited intended to remove appellants as the CD's nominee from the board. The Appellants rejected it on the grounds that they were no longer nominated directors and had been reappointed by the shareholders to serve as directors in their individual capacities.
The authority of the liquidator was also questioned regarding claims that it had any other authority beyond the CD to intervene in or supervise the company's operations. The liquidator contacted the AA and requested that the appellants resign their positions as nominee directors. Additionally, NCLAT confirmed the order of the Adjudicating Authority (AA), noting that a company in liquidation acts through the liquidator, who fills the role of the company's board of directors in carrying out statutory obligations.
Additionally, NCLAT confirmed the order of the AA, noting that a company in liquidation acts through the liquidator, who fills the role of the company's board of directors in carrying out statutory obligations. The appellants were not permitted to derive any advantage or benefit from the CD's or its assets' liquidation since they were ineligible under Section 29A of the law. Furthermore, it was decided that the liquidator had the necessary authority to depose the appellants as nominated directors and nominate new ones.
The NCLAT categorically stated that,
"Moreover, any personnel of Corporate Debtor or Promoter does not render assistance or cooperation to the Insolvency Resolution Professional, the Adjudicating Authority (‘NCLT’) is to pass appropriate orders. Any instructions/ directions issued by an Adjudicating Authority cementing on an Application filed under Section 19 (2) of the Code shall be binding on such personnel or others as the case may be."