Court holds that once liquidation order is passed under Insolvency and Bankruptcy Code, no suit can proceed against the company without NCLT's permission; suit involving jointly claimed reliefs cannot exclude company under liquidation.
In a significant ruling delivered on September 29, 2026, the Patna High Court (Division Bench comprising Justices Rajeev Ranjan Prasad and Sunil Dutta Mishra) clarified the procedural bar on continuing suits against companies undergoing liquidation. The case, M/s Aneja Constructions (India) Private Limited v. M/s Kanti Bijlee Utpadan Nigam Limited & Ors., involved a commercial dispute where the plaintiff, a subcontractor, sought reliefs jointly against the principal employer and the contractor company which had entered liquidation.
The facts revealed that while the suit was pending, the contractor company (defendant no.4) was placed under liquidation by the National Company Law Tribunal (NCLT), New Delhi, by an order dated January 16, 2020. However, this crucial development was not disclosed in the trial court, leading the Commercial Court in Muzaffarpur to proceed and pass judgment on the suit's merits.
The Patna High Court, upon hearing the appeal, underscored the binding effect of Section 278 and Section 279 of the Companies Act, 2013, and Section 33(5) of the Insolvency and Bankruptcy Code, 2016. These provisions collectively prohibit the commencement or continuation of any suit or legal proceeding by or against a company once a winding up or liquidation order has been passed, except with the leave of the Tribunal (NCLT).
The Court held that the Commercial Court erred in proceeding with the suit without notice to the liquidator and without seeking leave from the NCLT. Furthermore, the plaintiff could not maintain the suit or appeal by simply deleting the company under liquidation from the array of parties because the reliefs were claimed jointly against both defendants. The Court reasoned that deleting the company under liquidation would render the suit unsustainable.
The appeal was allowed to the extent of setting aside the Commercial Court's impugned judgment dated December 16, 2025, and the matter was remanded back to the Commercial Court for fresh consideration, subject to the plaintiff obtaining leave from the NCLT to proceed with the suit.
The Court also condoned a delay of 27 days in filing the appeal, considering it short and unopposed by the respondents, relying on the Supreme Court precedent in State of Maharashtra v. Borse Bros. Engineers & Contractors (P) Ltd. (2021).
This judgment serves as a crucial reminder to litigants and courts alike about the mandatory procedural safeguards once a company enters liquidation. It reinforces the protective mechanism that ensures that no legal proceedings disturb the orderly liquidation process unless authorized by the adjudicating authority.
Bottom Line:
Companies Act, 2013 Section 279 and Insolvency and Bankruptcy Code, 2016 Section 33(5) Once liquidation/winding up order is passed against a company, no pending suit can proceed by or against such company without leave of the Tribunal/NCLT - Commercial suit filed jointly against employer and contractor under liquidation could not have been continued in absence of leave and without notice to liquidator - Plaintiff cannot maintain suit or appeal for joint reliefs by deleting company under liquidation from array of parties - Impugned judgment set aside and matter remitted to Commercial Court to proceed afresh only if leave is granted by NCLT.
Statutory provision(s):
Companies Act, 2013 Sections 278, 279; Insolvency and Bankruptcy Code, 2016 Section 33(5)
