Pranav B Prem

The National Company Law Tribunal, Kolkata Bench, comprising Justice Bidisha Banerjee (Judicial Member) and Cmde. Siddharth Mishra (Technical Member), has held that a liquidator cannot be penalized for events outside his control and permitted the exclusion of time spent in complying with judicial directions and stakeholder processes during the liquidation of the corporate debtor, Sasa Musa Sugar Works Private Limited.

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Background

The liquidation of the corporate debtor commenced on February 20, 2025, under Section 34(1) of the Insolvency and Bankruptcy Code, 2016, and Mr. Manish Jain was appointed as the liquidator. Upon taking charge, he secured the corporate debtor’s assets and proposed a sale of the company as a going concern to maximise value. In the second meeting of the Stakeholders’ Consultation Committee (SCC) held on March 29, 2025, it was resolved to attempt a sale with a reserve price of ₹125 crore, inclusive of fixed deposits of ₹9.5 crore. An e-auction conducted on May 3, 2025, failed due to lack of bids.

In the meantime, by order dated May 1, 2025, the NCLAT permitted the suspended directors to place a scheme of compromise and arrangement under Section 230 of the Companies Act, 2013, before the liquidator. In compliance, the proposed scheme was placed before the fourth SCC meeting on May 26, 2025, and the promoters were directed to submit a revised version. The revised scheme dated June 3, 2025, was considered in the fifth SCC meeting on June 9, 2025, and was rejected on the grounds of absence of credible investor details, lack of funding sources, and an impractically long repayment schedule of 36 months, which was not in the interest of creditors.

Thereafter, the liquidator sought permission from the Tribunal through I.A. (IB) No. 993/KB/2025 to conduct three additional e-auctions for a going-concern sale. The Tribunal, by order dated June 24, 2025, granted permission, and in the sixth SCC meeting held on June 30, 2025, the liquidator was authorised to issue further sale notices. Subsequently, in the seventh SCC meeting held on July 28, 2025, the Committee unanimously resolved that the period between May 1, 2025, and June 30, 2025, which was spent in judicial compliance and stakeholder deliberations, should be excluded from the liquidation period since it was beyond the control of the liquidator.

Findings of the Adjudicating Authority

The Tribunal noted that the 61-day period from May 1, 2025, to June 30, 2025, was entirely consumed in judicial proceedings, consideration of the Section 230 scheme, and approval processes of the SCC. The Bench observed that the liquidator was not at liberty to publish fresh auction notices until necessary permissions were obtained from both the Tribunal and the SCC.

Referring to Regulation 47 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, the Tribunal held that the prescribed timeline is directory and not mandatory. It emphasized that the time spent in judicial proceedings or directions of stakeholder bodies should be excluded to prevent penalizing the liquidator for delays caused by procedural compliance or circumstances beyond his control.

The Bench also examined Regulation 33, read with Schedule I, governing the mode of sale of assets during liquidation, and observed that while the regulation requires strict adherence to auction procedures, it also permits deviations or extensions when approved by the SCC and the Tribunal. The order recorded: “Regulation 47 of the Liquidation Regulations prescribes a model timeline, which is directory. The Hon’ble NCLAT and this Adjudicating Authority have consistently held that time spent due to judicial orders, appellate proceedings, or directions of stakeholder bodies merits exclusion to ensure that the liquidator is not penalized for events outside his control.”  The Bench found merit in the liquidator’s plea, holding that the combined reading of Regulations 47 and 33, along with Schedule I, justified the exclusion of the 61-day period.

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Accordingly, the Tribunal allowed the application filed by the liquidator and excluded the period from May 1, 2025, to June 30, 2025, from the liquidation period. The NCLT clarified that the exclusion would not prejudice any stakeholder and would safeguard the liquidation process by preventing any adverse inference against the liquidator for events beyond his control. The application, I.A. (IB) No. 1322/KB/2025 in Company Petition (IB) No. 157/KB/2021, was disposed of on September 4, 2025.

Appearance

For Liquidator: Ms. Shreya Choudhary, Adv.

Liquidator in person: Mr. Manish Jain

For EPFO: Ms. Rashmi Bothra, Adv. Ms. Anjali Kedia, Adv.

Cause Title: Central Bank of India v. Sasa Musa Sugar Works Pvt. Ltd.

Case No: I.A. (IB) No. 1322/KB/2025 In Company Petition (IB) No. 157/KB/2021

Coram: Justice Bidisha Banerjee (Member-Judicial). Cmde Siddharth Mishra (Member-Technical)