Order for liquidation by AA not invalid due to Corporate Debtor's OTS under consideration: NCLAT

Order for liquidation by AA not invalid due to Corporate Debtor's OTS under consideration: NCLAT

The bench comprised of Justice Ashok Bhushan (Chairperson), Justice M. Satyanarayana Murthy (Judicial Member) and Mr. Barun Mitra (Technical Member).

The Principal Bench of the National Company Law Appellate Tribunal ("NCLAT"), has held that merely because the Corporate Debtor's One Time Settlement (OTS) was under consideration, does not invalidate an order passed by the Adjudicating Authority (AA) for liquidation of the Corporate Debtor.

Lender Bank filed a petition under section 7 of Insolvency and Bankruptcy Act, 2016 ("IBC") in order to initiate Corporate Insolvency Resolution Process ("CIRP") against Vardhman Rice Mills Pvt. Ltd. ("Corporate Debtor"), which was hereinafter admitted by the Adjudicating Authority.

Since no resolution plan was approved, Mr. Tarun Batra being the Resolution Professional of the Corporate Debtor, had filed an application under Section 33 of the IBC before the Adjudicating Authority, seeking directions for liquidation of the Corporate Debtor. The Adjudicating Authority vide an order dated 20.06.2022 had ordered liquidation of the Corporate Debtor. Mr. Ram Bhaj Jain ("Appellant"), the Suspended Director of the Corporate Debtor, filed an appeal before NCLAT challenging the order of liquidation.

The bench observed that:

"The CoC in its commercial wisdom having refused to approve the plan submitted by the Appellant that decision is not open for any judicial review. In facts of the present case, the fact that OTS of the Appellant is under consideration also does not render the order of liquidation invalid in any manner."

The Bench held that the OTS proposal being under consideration does not render the order of liquidation invalid in any manner and accordingly, the appeal was dismissed.