One blanket approval from NCLT covers all future litigation for a liquidator.

One Blanket Approval, Two Tribunals, and a ₹Crore Tax Demand

When CA Rajeev Bansal took over as the liquidator of Isolux Corsan India Engineering & Construction Pvt. Ltd. in February 2020, he knew the company was in deep financial trouble. What he probably didn't anticipate was that two years later, he'd be fighting not just the tax department, but also a procedural objection from his own tribunal. The stakes: a reassessment order and demand notice from the Commercial Tax Department, Bihar, potentially worth crores. The question: did a general permission to litigate cover a specific writ petition filed later, or did the liquidator need to run back to the tribunal for a fresh approval every time a new tax notice landed?

The Liquidation and the Blanket Permission

The National Company Law Tribunal, Chandigarh Bench, ordered the liquidation of Isolux Corsan on 6 February 2020. CA Rajeev Bansal was appointed liquidator. Under Section 33(5) read with Section 35(1)(k) of the Insolvency and Bankruptcy Code, 2016, a liquidator needs the tribunal's prior approval to institute or defend legal proceedings on behalf of the corporate debtor. So Bansal did what any prudent liquidator would do: he filed IA No.405/2021 seeking a general permission to handle all litigation.

On 28 April 2022, the NCLT Chandigarh allowed that application. The order permitted the liquidator to defend all litigation listed in Annexure C-2 and to prosecute any consequential proceedings arising from those cases. It was a blanket approval — broad, forward-looking, and designed to avoid the absurdity of the liquidator having to file a separate application for every single court case that might crop up during the liquidation process.

The Tax Reassessment That Changed Everything

Then came the Commercial Tax Department, Bihar. Acting under Section 33 of the Bihar Value Added Tax Act, 2005, the department initiated reassessment proceedings against the corporate debtor. A demand notice followed. The liquidator, acting on the strength of the April 2022 blanket approval, filed a writ petition — CWJC No.13042 of 2022 — before the Patna High Court, seeking to quash the reassessment order and the demand.

That's when the trouble started. The respondent — the tax department or whoever was opposing the writ — raised a preliminary objection: the liquidator had not obtained specific prior approval from the NCLT for this particular writ petition. The blanket approval, they argued, didn't cover it. The High Court didn't decide the issue; it was left hanging. The liquidator, to be safe, went back to the NCLT Chandigarh and filed IA No.1081/2023, seeking ex-post facto ratification — essentially asking the tribunal to say, "Yes, we approve of what you did."

The Tribunal Says No

On 29 November 2023, the NCLT Chandigarh dismissed the ratification application. The tribunal's reasoning, as far as the judgment reveals, was that the liquidator should have obtained specific prior approval before filing the writ petition. The blanket order of April 2022, in the tribunal's view, did not extend to a fresh proceeding initiated after the approval was granted. The liquidator was stuck: the Patna High Court writ was pending, the tax demand was alive, and now the tribunal had refused to bless the very proceeding meant to protect the corporate debtor's assets.

Bansal appealed to the National Company Law Appellate Tribunal, Principal Bench, New Delhi. The appeal was heard by a three-member bench comprising Justice Ashok Bhushan (author), Barun Mitra, and Arun Baroka.

What the Liquidator Argued

The liquidator's case was straightforward. The April 2022 order was a blanket approval. It covered all litigation — both existing and future — that the liquidator might need to institute or defend in the course of the liquidation. The writ petition against the tax reassessment was squarely within that scope. The liquidator had not acted outside the authority granted; he had simply exercised the permission already given. The tribunal's refusal to ratify was, in effect, a misinterpretation of its own earlier order.

The respondent, presumably, argued the opposite: that the April 2022 approval was limited to the cases listed in Annexure C-2 and any consequential proceedings arising from those specific cases. A fresh reassessment proceeding by the tax department was not a "consequential proceeding" of any listed case. Therefore, the liquidator needed a fresh approval. The tribunal's dismissal was correct.

The NCLAT's Answer: One Approval Is Enough

The NCLAT allowed the appeal on 1 February 2024. The operative order is crisp: the order dated 29 November 2023 is set aside. IA No.1081/2023 is allowed. The writ petition CWJC No.13042/2022 is declared to be fully covered by the approval granted on 28 April 2022 in IA No.405/2021.

Justice Ashok Bhushan, writing for the bench, held that the earlier blanket approval was sufficient. The writ petition was a proceeding to protect the corporate debtor's interest against a tax reassessment — exactly the kind of litigation the liquidator is expected to handle. The NCLAT did not mince words: the Adjudicating Authority, when faced with an objection about the scope of its own earlier order, ought to issue clarificatory orders rather than dismiss the ratification application. The tribunal had the power to clarify; it chose to reject. That was wrong.

The Doctrine That Matters: General Approval Covers the Field

This judgment is not about a new legal principle. It is about the practical operation of Section 33(5) of the IBC. The provision says a liquidator can institute legal proceedings "with the prior approval of the Adjudicating Authority." The key word is "prior." Does it mean prior to each individual proceeding, or prior to a class of proceedings?

The NCLAT's answer: prior approval can be general. Once the tribunal grants a blanket approval covering litigation to protect the corporate debtor's assets, the liquidator does not need to come back for a separate approval for every new case that falls within that scope. The purpose of Section 33(5) is to ensure the tribunal has oversight, not to create a procedural trap that paralyzes the liquidation process.

THE PLAY: If you are a liquidator, get a general/blanket approval from the NCLT at the outset covering all litigation — existing and future — that may be needed to protect the corporate debtor's assets. One application, one order, and you're covered for the entire liquidation.

Why This Matters in Practice

For liquidators, this is a practical lifeline. Tax reassessments, contractual disputes, and recovery proceedings can spring up at any time during a liquidation. If every new proceeding required a separate trip to the NCLT for prior approval, the liquidation process would grind to a halt. The liquidator would spend more time filing applications than actually recovering assets.

For CFOs and founders who may end up as respondents in liquidation-related litigation, the takeaway is different: don't assume that a liquidator's failure to obtain specific prior approval for a particular proceeding means the proceeding is invalid. The NCLAT has made it clear that a general approval can cover the field. If you're opposing a liquidator's action, you need to look at the scope of the original approval order, not just the absence of a specific one.

For advocates, the judgment is a reminder of the importance of drafting approval applications broadly. The liquidator in this case had listed specific cases in Annexure C-2, but the order also covered "consequential proceedings." The NCLAT read that language expansively. A narrower order might have led to a different result. Draft your applications to cover "all proceedings that may be necessary to protect the corporate debtor's assets and interests," and get the tribunal to say yes to that language.

The Bottom Line

One blanket approval from the NCLT under Section 33(5) IBC is enough to cover a liquidator's subsequent writ petition against a tax reassessment — the liquidator does not need to run back to the tribunal for a separate prior approval for every new proceeding that falls within the scope of the original order.