NEW DELHI: The National Company Law Appellate Tribunal (NCLAT) said that a liquidator of a company can recover possession of a corporate debtor‘s assets from occupants directly through the NCLT, without resorting to rent-control proceedings.
A two-member bench of the appellate tribunal has dismissed appeals by two Ludhiana-based firms — Duke Fashions and UV&W Products — and upheld the order passed by the Chandigarh bench of the National Company Law Tribunal (NCLT) in this matter.
The NCLT had directed Duke Fashions (India) and UV&W Products to vacate two commercial properties – Karabara and Hussainpura – within two weeks.
This was challenged before the appellate tribunal, contending that they have tenancy rights under 30-year lease deeds and argued eviction could only be sought under the East Punjab Urban Rent Restriction Act, 1949, before the Rent Controller.
However, NCLAT rejected the plea, observing the leases were never registered and hence inadmissible as evidence, and that the directors of both appellant firms were close relatives of the corporate debtor’s suspended directors.
The appellate tribunal held that under Section 35 of the Insolvency and Bankruptcy Code (IBC), recovering possession of the corporate debtor’s assets is a mandatory statutory duty of the liquidator, and that Section 238 of the IBC gives it overriding effect over the Rent Act.
“The proposition that a related-party non-rent-paying occupant can defeat the entire liquidation mandate of the NCLT on the basis of a constitutional argument of this nature would subvert the constitutional design of the IBC,” said NCLAT.
It also rejected a constitutional challenge that eviction fell within the states’ exclusive legislative domain over landlord-tenant relations, holding that the IBC is insolvency legislation and any effect on possession of premises is incidental to that.
The matter is related to Venus Garments (India), the corporate debtor in this case, which was admitted into the Corporate Insolvency Resolution Process (CIRP) by NCLT, Chandigarh, and was subsequently ordered into liquidation on July 22, 2025.
