Resolution Professional Can File Liquidation Application U/S 33 Of IBC If CIRP Period Expires Without Approved Resolution Plan, Rules NCLAT
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Rakesh Kumar Jain (Judicial Member) and Mr. Naresh Salecha (Technical Member), has ruled that once the Corporate Insolvency Resolution Process (CIRP) period—including any extensions—comes to an end without the approval of a resolution plan, the Resolution Professional (RP) is under an obligation to move an application for the liquidation of the Corporate Debtor (CD). The Tribunal emphasized that mere discussion of liquidation and the Committee of Creditors (CoC)’s request for the nomination of a liquidator is sufficient to satisfy the requirement under Section 33 of the Insolvency and Bankruptcy Code, 2016 (IBC).
Background
The appeal was filed by Subh Laxmi Investment Advisory Pvt. Ltd., an unsuccessful resolution applicant, against the order dated 03.05.2024 of the National Company Law Tribunal (NCLT), Ahmedabad Bench, which allowed the application of the RP under Section 33(2) of the Code and directed the liquidation of M/s Sintex Plastics Technology Ltd. The Tribunal also appointed Mr. Bimal Ashok Desai as the liquidator.
The CIRP had been initiated on 21.02.2023 upon a Section 7 application filed by M/s Asset Reconstruction Company (India) Ltd., with Mr. Kshitiz Chhawchharia appointed as Interim Resolution Professional (IRP).
The RP published the provisional list of prospective resolution applicants (PRAs) on 01.09.2023, which included the Appellant, and on 07.09.2023, shared the final list along with the information memorandum, evaluation matrix, and Request for Resolution Plan (RFRP). However, on 26.03.2024, the RP informed the Appellant that the resolution plan was not approved by the CoC and sought bank details for refund of the Earnest Money Deposit (EMD).
As the CIRP period concluded on 30.03.2024 and no resolution plan had been approved, the RP filed a liquidation application on 12.04.2024, in conformity with Section 33 of the IBC.
Appellant's Contentions
The Appellant challenged the liquidation on the grounds that the CoC misused the insolvency process by treating liquidation as a recovery mechanism rather than exploring the revival of the Corporate Debtor. They argued that the resolution plan submitted was viable, but the sole CoC member—RBL Bank—abstained from voting, thereby intentionally stalling the resolution.
The Appellant further contended that abstaining from voting cannot be equated with exercising commercial wisdom, especially in the absence of any express decision to reject the resolution plans.
Respondent's Submissions
The RP argued that since no resolution plan was approved, an email was sent on 27.03.2024 to the CoC, seeking its consent to file for liquidation and to nominate a liquidator. The CoC gave its consent via email, after which the application was filed. It was further submitted that the provisions of Section 33(1) did not mandate a separate CoC vote for the RP to file for liquidation when the CIRP period had expired without an approved plan.
NCLAT's Observations and Decision
The Appellate Tribunal noted that RBL Bank was the sole CoC member holding 100% voting rights and had abstained from voting on all three submitted resolution plans, including that of the Appellant. It emphasized that under the CIRP Regulations, abstention from voting is a valid expression of the CoC’s commercial wisdom.
Relying on the Supreme Court’s ruling in K. Sashidhar v. Indian Overseas Bank and Others, the NCLAT reiterated that the CoC's commercial wisdom is paramount and cannot be questioned by resolution applicants or the adjudicating authority.
The Tribunal found no merit in the Appellant’s argument that the liquidation application lacked proper CoC approval. It noted that the issue of liquidation was discussed in the 6th CoC meeting and that the RP had, through an email, obtained the CoC's consent for both the liquidation and nomination of a liquidator.
The Tribunal further observed that after the conclusion of the extended CIRP period on 30.03.2024, it became incumbent upon the RP to file a liquidation application. The application filed on 12.04.2024 and the subsequent NCLT order dated 03.05.2024 directing liquidation were found to be in accordance with the IBC framework.
Verdict
Dismissing the appeal, the NCLAT affirmed the NCLT's order and held that the RP acted rightly and within the statutory mandate by filing a liquidation application once the CIRP period had lapsed without the approval of any resolution plan. The CoC's abstention from voting was recognized as a legitimate exercise of commercial wisdom, and its subsequent email consent satisfied the procedural requirements of Section 33 of the IBC.
Appearance
For Appellant: Mr. Pradeep Kumar, Ms. Shipra, Mr. Gaurav Garg, Advocates.
For Respondents: Mr. Sunil Fernandes, Sr. Advocate, Mr. Chitranshul A. Sinha, Ms. Pallavi, Mr. Shivam Shorewala, Ms. Rakshita Bhargava, Ms. Rajshree Chaudhary, Ms. Diksha Dadu, Advocates for R-1.
Mr. Deepayan Mandal, Mr. Naman Varma, Mr. Mridul Bansal, Advocates for R-2. Mr. Apar Gupta, Mr. Naman Kumar, Advocates for R3.
Mr. Navin Pahwa, Sr. Advocate, Mr. Himanshu Satija, Mr. Harsh Saxena, Advocates for R- 4 to 7.
Cause Title: Subh Laxmi Investment Advisory Pvt. Ltd. V. Committee of Creditors of Sintex Plastics Technology Ltd. & Ors.
Case No: Company Appeal (AT) (Ins) No. 1104 of 2024 & I.A. No. 3977 of 2024
Coram: Justice Rakesh Kumar Jain [Member (Judicial)], Mr. Naresh Salecha [Member (Technical)]
[Read/Download order]
