Dissolution Of Corporate Debtor u/s 54 of IBC can be Sought after Complete Liquidation: NCLAT [Read Order]
It was observed that since the liquidation proceedings have not been undertaken and resorting to Section 54 could not have been taken as per the scheme of the IBC
NCLAT – NCLAT Delhi – National Company Law Appellate Tribunal – Insolvency Bankruptcy Code – TAXSCAN
NCLAT – NCLAT Delhi – National Company Law Appellate Tribunal – Insolvency Bankruptcy Code – TAXSCAN
In a significant case, the New Delhi bench of the National Company Law Appellate Tribunal ( NCLAT ) held that the scheme of the Insolvency Bankruptcy Code ( IBC ), 2016 clearly provides that dissolution is a step subsequent to the Corporate Debtor having been completely liquidated. In the present case, the liquidation proceedings have not been undertaken and resorting to Section 54 for dissolution could not have been taken as per the scheme of the IBC.
Janak Jagjivan Shah Resolution Professional (“RP”) of Infrabuild Pvt. Ltd. has filed the appeal challenging order passed by NCLT. By the impugned order, the Adjudicating Authority has rejected application filed by the RP praying for dissolution of the Corporate Debtor (“CD”).
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On an Application filed under Section 7 of the IBC by AVB Global Ventures Pvt. Ltd., claiming dues of Rs.2,38,95,357/- the Adjudicating Authority passed an order on 09.11.2023 admitting Section 7 Application and appointing Janak Jagjivan Shah as the Interim Resolution Professional (“IRP”). The RP informed the CoC that since permitted period of CIRP is going to over on 06.05.2024 and no EoI has been received, liquidation process should be initiated. The CoC resolved not to initiate liquidation process and decided to file an application for dissolution of the CD.
In pursuance of the resolution passed by the CoC in its fifth Meeting dated 29.04.2024, an IA was filed by the RP which came to be rejected by the Adjudicating Authority. The Adjudicating Authority took the view that Application under Section 54 for dissolution of the Corporate Debtor can be filed only when assets of the Corporate Debtor are liquidated.
The Adjudicating Authority has also referred to the provisions of IBBI (Liquidation Process) Regulations, 2016 ( “Liquidation Regulations”) Regulation 14 and Section 54 of the IBC and opined that in exercise of power conferred under Section 54 of the IBC, the Adjudicating Authority is not inclined to order dissolution of the CD. Consequently, the Application was rejected.
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The appellant submitted that the CoC decided not to bear any expenses on liquidation, hence, the dissolution of CD was approved. Form-G was twice published under the decision of the CoC and no EoI was received. The CoC rejected the resolution to initiate the liquidation and with 100% majority approved the resolution for direct dissolution.
The Bench of Justices Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Arun Baroka (Technical Member) observed that in the CoC Meeting, it was noted that CIRP is coming to an end in May 2024, the CIRP having already come to an end on 06.05.2024, there being no prayer for extension of CIRP period, we fail to see any reason for direction of transaction audit as directed by the Adjudicating Authority.
It was found that the Adjudicating Authority has not exercised its jurisdiction in allowing the application filed by the CD for dissolution referring to Section 54 of the IBC and Regulation 14 of the Liquidation Regulations. Further viewed that the scheme of the IBC clearly provides that dissolution is a step subsequent to the Corporate Debtor having been completely liquidated. Since the liquidation proceedings have not been undertaken and resorting to Section 54 could not have been taken as per the scheme of the IBC.
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The Tribunal held that where company is not carrying on any business and there are no assets of the Company, dissolution of the Company under Section 54, is a step, which could have been taken as per the statutory scheme of the IBC. Since the CIRP having come to an end and liquidation has not been ordered, no further steps are required to be taken by the RP and the CIRP proceedings may be treated to be closed, the bench added while dismissing the appeal.
To Read the full text of the Order CLICK HERE
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