Companies Act Section 364

Companies Act, Section 364: Appeal by Creditor Against the Decision of the Official Liquidator

Section 364 of the Companies Act, 2013 provides a mechanism for creditors to appeal against decisions made by the Official Liquidator during the settlement of claims under Section 363. It also outlines the powers of the Central Government to decide on such appeals and take appropriate actions, including the ability to refer matters to the Tribunal if necessary. This section ensures a fair and transparent process by granting creditors a legal remedy in cases where they believe their claims have not been justly assessed or accepted by the Official Liquidator.

1. Right of Appeal for Aggrieved Creditors:

If a creditor is dissatisfied or aggrieved by the decision of the Official Liquidator regarding the acceptance or rejection of their claim as communicated under Section 363 they are entitled to file an appeal. This appeal must be made to the Central Government, and it must be filed within thirty (30) days from the date on which the creditor receives the decision from the Official Liquidator.

This provision gives creditors a formal and time-bound opportunity to challenge the decision, particularly in cases where they believe that their claims were unfairly rejected, undervalued, or improperly assessed.

2. Central Government’s Power to Decide the Appeal:

Upon receiving an appeal from a creditor, the Central Government is required to consider the matter carefully. As part of this process, the Central Government may call for a report from the Official Liquidator to understand the rationale and the records supporting the original decision.

After examining the appeal and the Liquidator’s report, the Central Government has the authority to take one of the following actions:

Dismiss the appeal, if it finds no merit in the creditor’s challenge and upholds the decision of the Official Liquidator, or modify the decision of the Official Liquidator, if it finds that the creditor's appeal has merit and that the original assessment should be changed either partially or in full.
This ensures a supervisory check over the decisions made by the Official Liquidator and provides a level of administrative review in the interest of fairness.

3. Payment to Creditors with Accepted Claims:

As part of the claim settlement process, the Official Liquidator is responsible for making payments to all creditors whose claims have been accepted whether such acceptance is made initially by the Liquidator or later as a result of an appeal decided by the Central Government.

This payment must be made in accordance with the applicable liquidation rules and the priority of claims as established under the Companies Act and other relevant laws.

4. Referral to Tribunal by the Central Government:

At any point during the claim settlement process, if the Central Government forms the opinion that the matter involves complex issues, legal interpretation, or requires judicial oversight, it may refer the matter to the Tribunal (i.e., the National Company Law Tribunal, or NCLT) for appropriate orders.

This discretionary power allows the Central Government to escalate certain issues to a judicial forum to ensure that decisions are made with legal authority and procedural propriety, particularly in cases involving significant disputes or legal complexities.