New Delhi: A liquidator can approach the National Company Law Tribunal (NCLT) directly to recover possession of a corporate debtor’s properties and need not initiate separate proceedings under rent-control law, the National Company Law Appellate Tribunal (NCLAT) has ruled.
A two-member NCLAT bench dismissed appeals filed by Ludhiana-based Duke Fashions (India) and UV&W Products, upholding an order of the NCLT’s Chandigarh bench directing them to vacate two commercial properties at Karabara and Hussainpura within two weeks.
The two firms had challenged the NCLT order, claiming tenancy rights over the properties under 30-year lease deeds.
They argued that they could be evicted only through proceedings before the Rent Controller under the East Punjab Urban Rent Restriction Act, 1949, and not through the NCLT.
NCLAT, however, rejected the argument. It noted that the lease deeds had not been registered and therefore could not be relied upon as evidence of the claimed long-term tenancy.
The tribunal also took note of the relationship between the parties, observing that directors of the two appellant firms were close relatives of the suspended directors of the corporate debtor.
NCLAT held that Section 35 of the Insolvency and Bankruptcy Code (IBC) places a statutory duty on a liquidator to take control and custody of the corporate debtor’s assets.
It further held that Section 238 gives the IBC overriding effect over inconsistent provisions of other laws, including the rent-control law relied upon by the appellants.
The tribunal said allowing a related-party occupant that was not paying rent to block recovery of the company's property would undermine the liquidation process under the IBC.
NCLAT also rejected the appellants’ argument that landlord-tenant matters fall within the states’ exclusive legislative domain and therefore could not be dealt with under the IBC.
The tribunal held that the IBC is fundamentally an insolvency law. Any impact that insolvency proceedings may have on possession of a property is incidental to the implementation of the insolvency and liquidation framework.
The case relates to Venus Garments (India), which was admitted to the Corporate Insolvency Resolution Process (CIRP) by the Chandigarh bench of the NCLT and subsequently ordered into liquidation on July 22, 2025.
The ruling clarifies that occupants cannot necessarily compel a liquidator to undertake separate rent-control proceedings when possession of a corporate debtor’s assets is required for liquidation under the IBC.
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