NCLT Chandigarh Orders Eviction Of Related Parties From Venus Garments Assets, Backs Liquidator Under IBC

On 11 June, the Chandigarh Bench of the National Company Law Tribunal (NCLT), held that the Liquidator under the Insolvency and Bankruptcy Code, 2016 (IBC) has overriding authority to recover possession of liquidation estate assets, and that rent control proceedings cannot obstruct such statutory duties.

Judicial Member Khetrabasi Biswal and Technical Member Shishir Agarwal directed Duke Fashions (India) Ltd. and UV & W Products Pvt. Ltd. to vacate and hand over possession of prime properties in Ludhiana forming part of the liquidation estate of Venus Garments (India) Limited. It held:

“The Rent Controller, even assuming it has territorial jurisdiction, cannot enforce Section 36 of the Code. To direct the Liquidator to proceed before the Rent Controller would not only delay the liquidation but also render the IBC mandate entirely nugatory and reward related parties whose continued occupation has already frustrated five auction attempts. That is not the design of the Code.”

Venus Garments was admitted into the Corporate Insolvency Resolution Process (CIRP) in November 2022 and was ordered into liquidation on 22 July 2025. The Liquidator, Pramod Kumar Misra, filed interlocutory applications seeking possession of two properties: the Karabara Property (2 Kanals 3 Marlas with building), occupied by Duke Fashions under an alleged 30-year lease deed of 2014, and the Hussainpura Property (floors of an annexe building), occupied by UV & W Products under an alleged lease deed of 2018.

Both lease deeds were unregistered, inadequately stamped, and executed between related parties of the suspended board of Venus Garments. No rent was paid or recorded, with occupants claiming “adjustments” instead of formal payments. The Liquidator's five auction attempts failed due to continued occupation.

The respondents argued that the applications had become infructuous after liquidation and that Sections 18 and 25 of the IBC apply only to Resolution Professionals. They further contended that their possession constituted lawful tenancy protected under the East Punjab Urban Rent Restriction Act, 1949, and that eviction could only be pursued before the Rent Controller. They also submitted that non-registration of lease deeds did not defeat tenancy rights and that month-to-month tenancy could arise under the Transfer of Property Act.

The Liquidator submitted that CIRP and liquidation form a continuous statutory process and that applications filed during CIRP survive into liquidation. It argued that Section 35 of the IBC vests the Liquidator with powers equivalent to those of the Resolution Professional, including custody and control of assets. Also that unregistered lease deeds are void under Section 49 of the Registration Act and inadmissible in evidence, and that no rent had ever been paid. It was further argued that Section 238 of the IBC overrides inconsistent laws, including rent control statutes.

The Bench held that the applications were maintainable and that CIRP and liquidation constitute a seamless statutory continuum. It observed that the Liquidator has a mandatory duty under Sections 35 and 36 of the IBC to take custody and recover assets forming part of the liquidation estate. Further, that Sections 18 and 35 of the Code confer similar powers relating to custody and control of assets. It stated:

“The relief sought remains the same; only the statutory provision shifts. That shift is, at most, procedural in character and cannot be permitted to defeat a substantive and mandatory statutory obligation.”

Further, the Tribunal held that the unregistered lease deeds creating alleged 30-year tenancies were void and inadmissible in evidence. It observed:

“The Alleged Lease Deeds are accordingly void in the eyes of the law and have no legal sanctity for the purpose of conferring any right of occupation on the Respondents and cannot be relied upon to resist the Liquidator's exercise of his statutory duty under Sections 35 and 36 of the Code.”

It also noted that the respondents were related parties whose continued occupation obstructed asset realisation and frustrated liquidation, rather than independent occupants asserting bona fide rights.

The Bench also held that Section 238 of the IBC overrides rent control protections under the East Punjab Urban Rent Restriction Act, 1949, and that directing the Liquidator to approach the Rent Controller would defeat the objective of the Code and delay liquidation.

Accordingly, the NCLT directed Duke Fashions (India) Ltd. and UV & W Products Pvt. Ltd. to vacate and hand over possession of the Karabara Property and Hussainpura Property respectively within two weeks. It also granted liberty to the Liquidator to pursue claims for rent arrears as use-and-occupation charges before a competent forum.