NCLT passed liquidation order for CIRP without approved resolution plan by CoC: NCLAT

Case Details: Rakesh Gupta v. Nitin Narang, Liquidator of Gupta Marriage Halls (P.) Ltd. - [2022] 145 taxmann.com 337 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Rakesh Kumar, Judicial Member & Dr Ashok Kumar Mishra, Technical Member
  • Vikas Mehta, Ashish Choudhury, SC Dass & Anand Kamal, Advocates for the Appellant.
  • Mohak Sharma & Abhishek Anand, Advocates for the Respondent.

Facts of the Case

In the present case, the financial creditor advanced a term loan to the corporate debtor, and an overdraft was sanctioned which was enhanced from time to time. Later, an account of the corporate debtor was declared NPA and a notice under section 13(2) of the SARFAESI Act, 2002 was sent. At the request of the corporate debtor, loan was restructured.

However, despite the corporate debt’s acknowledgement, it remained outstanding, and, therefore, an application was filed under section 7 which was admitted by the NCLT and Corporate Insolvency Resolution Process (CIRP) was initiated against the corporate debtor.

During CIRP, since the CoC approved no resolution plan, the RP filed a petition under section 33(2) for the initiation of liquidation proceedings against the corporate debtor and same was admitted by the NCLT by the impugned order. Pursuant to which, an appeal was preferred.

On appeal, the appellant contended that the basic object of the IBC is to continue corporate debtor in running condition and liquidation is the last resort. However, the RP hurriedly approached the NCLT with a plea to initiate liquidation proceedings without taking any sincere effort to obtain an appropriate resolution plan and without approval of resolution plan approached the NCLT for liquidation in arbitrary manner and thus, the NCLT also made an error in admitting the same.

Not constituting CoC as per the provisions of the Code and Regulations made thereunder is serious contravention and not submitting reply to Board shows utter disregard and a casual approach on the part of the IRP.

NCLAT Held

Hon’ble NCLAT held that since CIRP was initiated long back and even after expiry of statutory period of 90 days no resolution plan could be approved, RP had no alternative but to proceed with the petition under section 33. Also, once RP made a prayer to liquidate the corporate debtor, NCLT had no option but to pass an order for liquidation.

Hon’ble NCLAT held that there was no error in the order passed by NCLT. Accordingly, the appeal stands dismissed without cost.

List of Cases Reviewed

• • Order of NCLT (New Delhi) in IA No. 5289(ND)/2021 in CP No. (IB) No. 979(ND) of 2019, dated 4-1-2020 (para 11) affirmed.