NCLAT Dismisses Appeal Against Liquidation Order, Citing Lapse of CIRP Period
NCLAT Dismisses Appeal Against Liquidation Order, Citing Lapse of CIRP Period
Introduction
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has dismissed an appeal against a liquidation order, holding that a suspended director cannot halt liquidation by submitting a third-party settlement offer after the expiry of the Corporate Insolvency Resolution Process (CIRP) period.
Factual Background
The appellant, a suspended director, contended that it had received a higher offer from an investor to settle the debt and had filed an application seeking direction to consider its offer. However, the National Company Law Tribunal (NCLT) kept the application pending and directed liquidation of the corporate debtor.
Procedural Background
The NCLT passed a liquidation order after noting that the 330-day CIRP period had lapsed and no resolution plan was received. The appellant challenged this order before the NCLAT, relying on previous judgments that considered higher offers and settlement proposals.
Issues
The main issue before the NCLAT was whether the NCLT erred in passing the liquidation order despite the appellant's offer to settle the debt. The NCLAT had to determine whether the appellant's offer was valid and whether the NCLT's decision to liquidate the corporate debtor was justified.
Contentions of the Parties
Appellant: The appellant argued that its offer to settle the debt should be considered, citing previous judgments that accepted higher offers and settlement proposals. The appellant relied on the judgment in Gayatri Polyrub Pvt. Ltd. vs. Anil Kohli and Another, where the NCLAT considered a higher offer and stopped the liquidation process.
Respondent: The respondent argued that the CIRP period had lapsed, and no resolution plan was received. The CoC had decided to liquidate the corporate debtor, and the appellant's offer was not a resolution plan but rather a third-party settlement offer.
Reasoning and Analysis
The bench of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member-Technical) observed that the CIRP period had indeed lapsed, and no resolution plan was received. The CoC had decided to liquidate the corporate debtor, and the appellant's offer was not a resolution plan but rather a third-party settlement offer made after the CoC's decision. The tribunal distinguished the present case from previous judgments, noting that in those cases, the resolution plans were filed within the CIRP period or the settlement proposals were made before the CoC's decision to liquidate.
Implications
The judgment highlights the importance of timely filing of resolution plans and settlement proposals in insolvency proceedings. The NCLAT's decision underscores that the CIRP period is a critical timeframe for resolving insolvency cases, and parties must act within this period to avoid liquidation.
Relief Sought
The appellant sought to set aside the liquidation order and have its offer considered. However, the NCLAT dismissed the appeal, citing lack of merit.
In this case the appellant was represented by Mr. Arik Banerjee and Mr. Pujon Chatterjee, Advocates. Meanwhile the respondent was represented by Mr. Tanish Ganeriwalla, Mr. Aishvary Vikram, Advocates for R-1 along with Mr. Aman Agarwal, Advocate for R-2.
