NCLT Bengaluru: SCC’s Role in Liquidation Is Only Consultative, Liquidator Has Final Authority
NCLT Bengaluru: SCC’s Role in Liquidation Is Only Consultative, Liquidator Has Final Authority
Introduction
The National Company Law Tribunal, Bengaluru Bench, held that the Stakeholders’ Consultation Committee (SCC) under the liquidation framework is only consultative in nature and cannot stall the liquidation process. To break a prolonged deadlock, the Tribunal directed the liquidator to accept a one-time settlement (OTS) offer of ₹2 crore.
Factual Background
Bhuvana Infra Projects Private Limited was admitted into CIRP on 17 January 2018 and subsequently ordered into liquidation on 10 December 2019. Mr. Vijay Pitamber Lulla was appointed as the liquidator. During liquidation, while certain assets were realized, receivables amounting to ₹10.80 crore remained outstanding from Prisha Properties India Private Limited, now known as Orchid Elite Developers Private Limited (OEDPL). To monetize these receivables, the liquidator received two proposals: first, an OTS offer of ₹2 crore from OEDPL; and second, a proposal from Markrise Consultants Private Limited to take assignment of the receivables as Not Readily Realisable Assets (NRRA).
Procedural Background
Both proposals were placed before the SCC for consideration. However, despite several meetings and e-voting exercises, the SCC failed to reach any decision, as most stakeholders abstained from voting. This prolonged stalemate delayed the completion of liquidation and increased liquidation costs. Faced with the deadlock, the liquidator approached the NCLT under Section 60(5) of the IBC seeking directions to proceed with either proposal so that the liquidation could be concluded.
Issues
1. Whether the Stakeholders’ Consultation Committee can block or indefinitely delay liquidation decisions by abstaining from taking a decision.
2. Whether the liquidator retains the final authority to decide on monetization of receivables despite SCC inaction.
3. Whether the Tribunal can direct acceptance of an OTS offer to maximize value and conclude liquidation.
Contentions of Parties
The liquidator submitted that both the OTS and NRRA assignment proposals were valid and commercially viable, but the SCC’s repeated abstentions had created a deadlock that was frustrating the liquidation process. It was argued that continued delay was increasing costs and defeating value maximization. The liquidator therefore sought judicial directions enabling him to proceed with one of the proposals. No contrary stakeholder consensus emerged before the SCC, as the majority remained passive throughout the process.
Reasoning and Analysis
The coram of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada examined Regulation 31A(10) of the IBBI (Liquidation Process) Regulations, 2016 and reiterated that the SCC’s role is only advisory and consultative. Relying on the Supreme Court’s decision in R.K. Industries (Unit-II) LLP v. H.R. Commercials Private Limited, the Bench held that the liquidator is the ultimate decision-making authority in liquidation matters and is not bound by SCC inaction. The Tribunal emphasized that the purpose of liquidation is timely realization and value maximization, which cannot be frustrated by stakeholder passivity. Exercising powers under Section 60(5), the Bench held that it could issue necessary directions to ensure effective completion of liquidation. Considering that the OTS proposal offered immediate realization and both proposals remained valid, the Tribunal found acceptance of the ₹2 crore settlement to be the most pragmatic course.
Decision
The NCLT directed the liquidator to accept the ₹2 crore OTS proposal submitted by OEDPL as full and final settlement of the outstanding receivables of ₹10.80 crore. It further clarified that if the settlement failed within the stipulated period, the liquidator would be at liberty to assign the receivables as NRRA to Markrise Consultants Private Limited in accordance with its proposal.
In this case the applicant was represented by Advocate Raina Birla.
