In an authoritative ruling clarifying property recovery powers during liquidation, the National Company Law Appellate Tribunal (NCLAT) has established that a court-appointed liquidator is not required to initiate independent eviction proceedings under state rent control legislation to secure possession of a corporate debtor's commercial assets. The appellate bench affirmed that possession can be directly sought and enforced through the company law tribunal handling the insolvency proceedings.
Appeals of Duke Fashions and UV&W Products Dismissed
A two-member appellate bench dismissed the petitions moved by two Ludhiana-based entities, Duke Fashions and UV&W Products, thereby affirming the prior directions issued by the Chandigarh bench of the National Company Law Tribunal (NCLT). The original tribunal order had instructed both commercial occupants to vacate two properties situated in Karabara and Hussainpura within a deadline of two weeks. Discontented with the eviction directive, both entities approached the appellate tribunal seeking judicial protection.
Unregistered Lease Deeds and Tenancy Defenses Rejected
The appellants contended that a 30-year lease deed conferred them legal tenancy protections, asserting that any eviction effort had to proceed exclusively before a rent controller under the East Punjab Urban Rent Restriction Act of 1949. However, the appellate tribunal dismissed these contentions, pointing out that the underlying lease instruments were never legally registered and therefore could not be admitted as valid evidentiary proof in court. The tribunal further took judicial note of the fact that directors in both appellant entities were close relatives of the suspended directors of the corporate debtor.
Statutory Duty Under Section 35 and Overriding Force of Section 238
The appellate authority underscored that Section 35 of the Insolvency and Bankruptcy Code (IBC) imposes a mandatory statutory responsibility on the liquidator to take custody and physical control of all corporate assets. Crucially, Section 238 of the IBC contains an overriding non-obstante clause that accords supremacy to the bankruptcy statute over any conflicting general or local legislations. Consequently, regional tenancy statutes cannot restrict or delay an insolvency liquidator from exercising core statutory duties.
Proceedings Stem From Venus Garments Liquidation
The litigation traces its origins to the financial distress of Venus Garments (India). The textile firm was initially admitted into the Corporate Insolvency Resolution Process (CIRP) by the NCLT Chandigarh bench. Following the failure to achieve an acceptable resolution, the tribunal officially ordered the company's liquidation on July 22, 2025, triggering asset recovery actions across its corporate holdings.
