01Facts
The Appellant is the successful auction purchaser of the Corporate Debtor (CD), M/s. Gemini Communication Ltd., which was sold as a going concern.
p. 2The sale certificate was issued on 15.10.2021.
p. 2The Appellant filed an interlocutory application before the NCLT Chennai seeking the transfer of various funds, including mutual fund proceeds (Rs. 4,39,771/-) and bank balances (Rs. 26,00,000/-) held by the CD.
p. 2While the Appellant withdrew prayers regarding certain diverted funds and auction proceeds, the NCLT dismissed the remaining reliefs.
p. 2During the appeal, the Appellant provided a "No-Objection" for the CD’s bank balance to be used for the discharge of gratuity dues of erstwhile employees on humanitarian grounds.
p. 3, 4Additionally, a dispute arose regarding ongoing arbitration between the CD and BSNL; Clause 6 of the sale notice specified that any proceeds from this arbitration would go to the creditors, not the Appellant.
p. 502Issues
i.1. Whether the balance funds of the Corporate Debtor should be released to the Appellant or utilized for time-barred gratuity claims of erstwhile employees.
p. 5 / para. 10ii.2. Whether the Liquidator is entitled to utilize the Corporate Debtor’s funds to prosecute arbitration proceedings when the Appellant is excluded from the eventual proceeds of such litigation.
p. 6 / para. 1203Law Applied
The court operated under the Insolvency and Bankruptcy Code, 2016 (IBC).
It applied the principle that a Liquidator has no jurisdiction to accept claims filed beyond the prescribed time limit unless directed by the Adjudicating Authority.
p. 5 / para. 9Furthermore, the court upheld the contractual and procedural sanctity of the Sale Notice (specifically Clause 6), which governs the distribution of litigation proceeds and the Liquidator's right to utilize CD funds to maximize value for stakeholders.
pp. 5-604Reasoning
Regarding the first issue, the court observed that the Liquidator had already rejected the workers' gratuity claims as they were significantly time-barred.
pp. 3-4However, acknowledging the Appellant’s "No-Objection," the court reasoned that while the Liquidator cannot admit these claims unilaterally, if the NCLT subsequently directs the acceptance of these belated claims, the funds should be used for such payments.
p. 5If the claims remain unadmitted, the funds must revert to the Appellant as the owner of the going concern.
p. 5 / para. 10On the second issue, the Appellant argued that since they have no interest in the BSNL arbitration proceeds, the CD's funds should not be used to finance it.
p. 3The court rejected this, analyzing Clause 6 of the sale notice which stipulates that proceeds are for the creditors.
p. 5The court concluded that the Liquidator or Stakeholder Consultation Committee is not prohibited from using the CD's funds to prosecute litigation that ultimately benefits the creditors under the liquidation framework.
p. 6 / para. 1205Holding
The NCLAT modified the impugned order, holding that the CD's bank balance may be utilized to discharge gratuity claims only if such claims are admitted by the NCLT; otherwise, the amount must be permitted for use by the Appellant.
p. 6 / para. 13The court further held that the Liquidator is permitted to utilize the CD’s funds for the BSNL arbitration as the proceeds are designated for the creditors.
p. 6 / para. 12The appeal was disposed of with these specific modifications to the NCLT's order.
p. 6 / para. 13Original Court PDF
Pixtronics Global Technologies Private LimitedvsM.S.Viswanathan
Click to open original judgment
Original judgment, available to read, download and summarize on LawLens.in
