CIRP Deadline Triggers Liquidation: NCLT Delhi Orders Wind-Up of Hero Electric Vehicles After CoC Deadlock on Resolution Plan
CIRP Deadline Triggers Liquidation: NCLT Delhi Orders Wind-Up of Hero Electric Vehicles After CoC Deadlock on Resolution Plan
Introduction
The National Company Law Tribunal (NCLT Delhi) has ordered the liquidation of Hero Electric Vehicles Pvt. Ltd. after the corporate insolvency resolution process (CIRP) concluded without approval of any resolution plan. A Bench comprising Judicial Member Bachu Venkat Balaram Das and Technical Member Reena Sinha Puri held that once the CIRP period expires without approval of a resolution plan, liquidation must follow under Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 (IBC).
Factual Background
The insolvency proceedings against Hero Electric Vehicles Pvt. Ltd. were initiated on December 20, 2024 upon a petition filed by Metro Tyres Limited as an operational creditor under the IBC. Following admission of the petition, a Committee of Creditors (CoC) was constituted comprising Bank of Baroda, Kotak Mahindra Bank, IDFC First Bank, Karnation Fund acting through Mitcon Credentia Trusteeship Services Ltd., South Indian Bank, and unsecured creditor SLK Software Pvt. Ltd. During the CIRP, multiple expressions of interest were invited and two resolution plans were eventually received for consideration by the CoC.
Procedural Background
The resolution plans received during the CIRP were evaluated and were found to be feasible and viable. However, neither of the plans secured the statutory minimum approval of 66% voting share of the CoC as required under the IBC. The highest-voted resolution plan received only 47.66% support from creditors. Even after re-voting conducted in accordance with insolvency regulations, the creditors remained divided, with roughly half favouring approval of a resolution plan and the remainder supporting liquidation. With the CIRP period expiring on February 13, 2026 without any resolution plan being approved, the matter was placed before the NCLT for appropriate orders under the IBC.
Issues
1. Whether liquidation must be ordered when the CIRP period expires without approval of a resolution plan.
2. Whether a separate resolution of the Committee of Creditors approving liquidation by 66% voting share is necessary in such circumstances.
Contentions of the Parties
During the resolution process, the Committee of Creditors evaluated the resolution plans but failed to achieve the statutory threshold of approval required under the IBC.
The division within the CoC resulted in a deadlock, with some creditors supporting approval of a plan while others preferred liquidation. As a consequence, no resolution plan was approved within the prescribed CIRP timeline.
Reasoning and Analysis
The Tribunal observed that the Insolvency and Bankruptcy Code mandates a time-bound resolution process. Where the CIRP period expires without approval of a resolution plan, the statutory framework requires the adjudicating authority to order liquidation. Addressing the issue of whether a separate resolution by the CoC approving liquidation was necessary, the Bench clarified that such a resolution is not a pre-condition when the CIRP period has already expired without approval of a plan.
The Tribunal observed “It is well settled that a separate resolution of the CoC approving liquidation by 66% voting share is not a pre-condition for ordering liquidation under Section 33(1)(a) once the CIRP period has so expired.” The Bench further noted that continuation of the CIRP despite the absence of an approved resolution plan would defeat the objective of the IBC, which seeks timely resolution of insolvency. It concluded that prolonging the process would only perpetuate the deadlock among creditors without serving any useful purpose.
Decision
The NCLT Delhi ordered liquidation of Hero Electric Vehicles Pvt. Ltd. under Section 33(1)(a) of the IBC. The Tribunal relieved the resolution professional of his duties and appointed insolvency professional Lekhraj Bajaj as the liquidator to carry out the liquidation process in accordance with law.
In this case the appellant was represented by Advocates Vishal Hirwat and Abhishek Devgan.
