Winding-Up Proceedings Cannot Override Revival Under IBC: NCLT Admits SBI’s ₹178 Cr Insolvency Plea [Read Order]

The National Company Law Tribunal (NCLT) Kolkata Bench has admitted a Section 7 insolvency application filed by State Bank of India (SBI) against Martina Bio Genics Private Limited and held that pending winding-up proceedings cannot override the objective of corporate revival under the Insolvency and Bankruptcy Code, 2016 (IBC).

SBI submitted that Martina Bio Genics had availed various credit facilities which were reviewed, renewed and enhanced over time, with the last sanction granted on February 4, 2014. The corporate debtor allegedly failed to comply with the repayment obligations which resulted in classification of the account as a Non-Performing Asset (NPA). The bank also issued notices under Sections 13(2) and 13(4) of the SARFAESI Act after the borrower defaulted on its repayment commitments.

However, prior to the insolvency proceedings, winding-up petitions had been filed against the company before the Calcutta High Court under the Companies Act, 1956. The High Court had passed winding-up orders and appointed the Official Liquidator.

However, subsequent proceedings revealed that the Official Liquidator remained only in symbolic possession of the company’s assets and had not undertaken any effective steps for sale or realisation of assets.

Arguing for admission of the petition, SBI argued that the principal objective of the IBC is revival and continuation of the corporate debtor rather than liquidation. It further submitted that winding-up proceedings may be transferred and treated as insolvency proceedings where no irreversible liquidation steps have been taken.

The Tribunal accepted the contention and observed that the Official Liquidator’s status report clearly indicated that no sale of assets had occurred because the liquidator was only in symbolic possession. Consequently, no irreversible stage of liquidation had been reached.

Accordingly, the Bench comprising Labh Singh, Member (Judicial), and Rekha Kantilal Shah, Member (Technical) admitted the Section 7 application and declared moratorium under Section 14 of the IBC, appointed Jitendra Lohia as the Interim Resolution Professional (IRP). NCLT also directed the Official Liquidator to hand over all records, assets and properties of the corporate debtor to the IRP for conducting the CIRP in accordance with law.

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