⚖️ When Liquidation Steps Beyond the NCLT – The Role of District Courts in Recovery Proceedings

The process of company liquidation is usually associated with the National Company Law Tribunal (NCLT) — the authority empowered under the Companies Act, 2013 to oversee the winding up of companies.
However, in practice, the work of a Liquidator often extends well beyond the NCLT’s chambers. Once appointed, the Liquidator becomes responsible not just for selling assets and settling claims, but also for pursuing civil or criminal proceedings necessary to recover the company’s outstanding dues.

This is where the District Courts play a crucial supporting role.

🏛️ Liquidation and the Need for Court Action

After a winding-up order is passed, the Liquidator steps into the shoes of the company.
Among their statutory duties are:

• Collecting and taking control of company assets,

• Recovering debts owed to the company,

• Representing the company in any pending or fresh litigation, and

• Distributing proceeds to creditors and shareholders in accordance with law.

When a defaulter refuses payment or denies liability, court intervention becomes essential.
The Liquidator may need to file:

• Civil suits for recovery of debts or assets,

• Execution petitions for enforcing earlier orders, or

• Applications under the Companies Act for directions related to sale or distribution.

In such cases, District Courts and Civil Courts serve as the practical forum for execution and enforcement — especially when the amounts involved or the parties’ location fall within their territorial jurisdiction.

⚖️ Jurisdictional Coordination Between NCLT and Civil Courts

While the NCLT handles the insolvency or winding-up process, not every dispute or recovery action lies within its purview.
Matters concerning recovery from individuals, contractual enforcement, or property-related issues may still require civil court jurisdiction.

Therefore, Liquidators often coordinate proceedings across two fronts:

1. NCLT – for compliance, reporting, and permission-related directions.

2. District Court – for recovery actions, injunctions, and enforcement of claims.

This dual engagement ensures that the liquidation process does not stall at the procedural level, and that the company’s residual value is effectively realized.

🧩 Challenges Faced by Liquidators in Court Proceedings

Representing a company under liquidation before the District Court is not a routine civil matter.
Some of the frequent challenges include:

• Establishing locus standi as Liquidator and ensuring proper authorization under the Companies Act.

• Locating and proving assets or liabilities of defaulter parties.

• Dealing with uncooperative respondents or evasive debtors.

• Coordinating between multiple forums — NCLT, District Court, and banks.

• Ensuring compliance with timelines under the Insolvency and Bankruptcy Code (IBC) or Companies (Winding Up) Rules.

Despite these complexities, timely action before local courts often leads to faster realization of assets and deterrence against defaulting directors or debtors.

⚖️ District Courts as the Enforcement Arm

In many cases, District Courts function as the enforcement arm of the liquidation process.
Once a claim is verified and accepted, the Liquidator may seek:

• Attachment or sale of property,

• Recovery through execution of decrees,

• Civil imprisonment for willful default, or

• Orders for disclosure of assets.

Such proceedings help transform the Liquidator’s theoretical control over assets into actual recovery — an essential step for equitable distribution among creditors.

🔍 Conclusion

Liquidation is not confined to a single forum.
While the NCLT provides the supervisory framework, District Courts remain indispensable for enforcing recovery, executing decrees, and handling local disputes.
For a Liquidator, effective recovery action through the District Court system can make the difference between a mere procedural closure and a meaningful realization of company assets.

The evolving interplay between corporate insolvency mechanisms and traditional civil litigation shows that justice, in the end, still depends on both — procedure and persistence.