CoC Rejection of Lone Resolution Plan Pushes Corporate Debtor into Liquidation: NCLT Orders Liquidation u/s 33 IBC [Read Order]
The NCLT Chandigarh Bench ordered liquidation of the corporate debtor after the Committee of Creditors rejected the sole resolution plan submitted during CIRP.
The National Company Law Tribunal (NCLT) Chandigarh Bench has ordered liquidation of the corporate debtor under Section 33(2) of the Insolvency and Bankruptcy Code, 2016, after the Committee of Creditors (CoC) rejected the only resolution plan received during the Corporate Insolvency Resolution Process (CIRP).
The CIRP against the corporate debtor Aabha Industries Limited had commenced pursuant to a Section 7 application filed by Punjab National Bank. Initially, an Interim Resolution Professional (IRP) was appointed who later constituted the CoC comprising Punjab National Bank and Union Bank of India.
During the CIRP the RP appointed registered valuers and transaction auditors and invited Expressions of Interest (EOIs) through publication of Form-G in newspapers. Several prospective resolution applicants expressed interest, and timelines for submission of EOIs and resolution plans were extended to maximize the value of the corporate debtor.
Subsequently, one resolution plan submitted by Greyline Knitwears was placed before the CoC for consideration. However, during the 9th CoC meeting, the members declined to approve the plan with the requisite voting share. Thereafter, in the 10th CoC meeting held on September 18, 2023, the CoC resolved to liquidate the corporate debtor, noting that the CIRP period was nearing completion and no viable resolution plan had been approved.
The CoC also approved an estimated liquidation cost of Rs.10.35 lakh and recommended the appointment of Rajesh Mehru as liquidator. It was further resolved that possibilities of compromise or arrangement under the liquidation regulations may continue to be explored while the liquidation application remained pending before the Tribunal.
The RP submitted before the Tribunal that despite repeated opportunities and extensions, no successful resolution could be achieved within the statutory CIRP timeline. Accordingly, liquidation under Section 33 of the IBC became inevitable.
The Tribunal observed that Form-G had been published twice and only one resolution plan was received which ultimately failed to secure approval from the CoC. The bench held that the requirements prescribed under Section 33 of the Code stood duly satisfied.
The bench comprising Khetrabasi Biswal and Kaushalendra Kumar Singh allowed the application and directed immediate liquidation of the corporate debtor and appointed Rajesh Mehru as the liquidator to carry out the process in accordance with Chapter III of the IBC and the Liquidation Process Regulations.
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