NCLAT Says Liquidators Can Recover Corporate Debtor Properties From Related-Party Occupants
New Delhi | September 23, 2026: The National Company Law Appellate Tribunal (NCLAT) has upheld the authority of a company liquidator to directly recover possession of a corporate debtor's property through the NCLT, without first pursuing eviction proceedings under rent-control laws.
The ruling came in a dispute involving two Ludhiana-based firms occupying commercial properties linked to Venus Garments (India). NCLAT upheld directions requiring the occupants to vacate the properties after rejecting their claimed tenancy rights under 30-year lease deeds that had not been registered.
NCLAT Upholds Eviction Through Insolvency Proceedings
A two-member NCLAT bench dismissed appeals filed by Duke Fashions (India) and UV&W Products against an order of the Chandigarh bench of the NCLT.
The NCLT had directed the two firms to vacate the commercial properties known as Karabara and Hussainpura within two weeks.
The occupants argued that they had tenancy rights under 30-year lease agreements and that any eviction should be pursued before the Rent Controller under the East Punjab Urban Rent Restriction Act, 1949.
Unregistered 30-Year Leases Rejected
NCLAT did not accept the tenancy claim, noting that the alleged 30-year leases had never been registered.
The tribunal held that the unregistered leases could not be relied upon as evidence to establish the claimed tenancy rights in the circumstances of the case.
The relationship between the occupants and the corporate debtor also formed part of the tribunal's consideration. Directors of both appellant companies were described as close relatives of the suspended directors of the corporate debtor.
Liquidator Has Statutory Duty to Recover Assets
The tribunal relied on Section 35 of the Insolvency and Bankruptcy Code (IBC), which imposes duties on a liquidator relating to taking control and custody of the corporate debtor's assets and recovering property belonging to it.
NCLAT held that recovering possession of the corporate debtor's assets is part of the liquidator's statutory responsibility.
This means an occupant cannot necessarily require the liquidator to pursue a separate rent-control eviction process when the dispute arises within the liquidation framework and concerns recovery of the corporate debtor's assets.
IBC Gets Overriding Effect in the Case
NCLAT also relied on Section 238 of the IBC, which gives the insolvency law overriding effect where its provisions conflict with other laws.
The tribunal rejected the argument that landlord-tenant regulation falls exclusively within the states' legislative domain and therefore prevented insolvency authorities from dealing with possession.
It held that the IBC is insolvency legislation and that any impact on possession of premises is incidental to carrying out that framework.
Why Property Owners and Occupants Should Care
The ruling has significance for commercial properties belonging to companies undergoing liquidation.
For property occupants dealing with an insolvent company, the case highlights the importance of establishing a legally valid and properly documented right to occupy the premises.
For liquidators and insolvency professionals, the ruling reinforces the ability to pursue recovery of corporate assets through the insolvency process rather than automatically shifting the dispute into separate rent-control proceedings.
The judgment is particularly relevant where alleged occupants are connected to the corporate debtor or its management.
Case Involves Venus Garments
The proceedings concern Venus Garments (India), which entered the Corporate Insolvency Resolution Process before the Chandigarh NCLT.
The company was subsequently ordered into liquidation on July 22, 2025.
The dispute over possession of the Karabara and Hussainpura properties arose during the liquidation process, leading to the NCLT's eviction order and the subsequent appeals before NCLAT.
What Happens Next
With NCLAT dismissing the appeals, the tribunal's order requiring Duke Fashions and UV&W Products to vacate the properties stands.
The decision also provides further guidance on how possession disputes involving corporate debtor assets can be handled during liquidation, particularly where occupants rely on unregistered lease arrangements and have links to the debtor's former management.