NCLAT Delhi Upholds Liquidation Of M/S Ajanta Offset And Packaging Limited

The NCLT initiated the CIRP proceedings in 2020 against the Corporate Debtor. Post which EOI were called, but both the plans submitted were found to be not feasible and viable by the CoC.

The adjudicating authority then issued notice on unanimously passed resolution for liquidation of the Corporate Debtor by the CoC.

Interestingly, Suspended Directors of the Corporate Debtor appeared before the Adjudicating Authority on 06.09.2021 and submitted that they were interested in submitting Resolution Plan for revival of the Corporate Debtor. The adjudicating authority passed an order allowing the I.A. filed by the Appellant in this regard and directed the Resolution Professional to call for a lenders meeting for taking appropriate decision. The RP was also directed to deliberate on whether more Resolution Applicants could be invited.

CoC in its 6th meeting held on 20.10.2021, deliberated and decided to consider the Resolution Plan submitted by the appellants.

However, the application for seeking approval of Resolution Plan filed by the RP was heard and rejected by the NCLT.

NCLT held that the Appellants’ Resolution Plan was not in compliance with the Code and CIRP Regulations. After coming to the said conclusion, the approval of Resolution Plan was set aside and order of liquidation was passed. The reasons for the same being:

1. 1.The date when application for submitting EOI was issued, the Appellants were not eligible and registration of the Corporate Debtor could not operate retrospectively to make them eligible.
2. 2.CoC without inviting other Resolution Applicants, considered the RP submitted by the promoters.

Proceedings before NCLAT:

The appellant challenged the NCLT order and contended that Resolution plan submitted by appellant was directed by the AA to be considered and approved. The appellant argued that, because of the registration of the Corporate Debtor as MSME on 30.08.2021 by virtue of Section 240A, the Appellant had become eligible to submit a Resolution plan.

The National Company Law Appellate Tribunal, New Delhi held that:

1. NCLT order rejecting the Suspended Board of Directors Resolution plan was valid.

2. NCLT order directing liquidation of the Corporate Debtor will come into force after giving one last opportunity to revive the Corporate Debtor.

3. The Resolution Professional can proceed from the stage of issuance of Form G and complete the entire process within 90 days. However, the Suspended Board of Directors were also given an opportunity to submit a Resolution Plan in a last-ditch attempt to revive the corporate debtor, keeping liquidation as the last resort.

The present Judgement will act as a precedent for who is eligible to be exempt from clauses (c) and (h) of Section 29A being registered as an MSME and how the MSME certification cannot be applied retrospectively.

Counsel For Appellants: Ms. Aditi Sharma and Mr. Karan Valecha, Advocates.

Counsel For Respondent: Mr. Vaibhav Gaggar, Mr. Dhruv Mwehta, Mr. Mrityunjay M., Mr. Shashwat Anand and Mr. Dev Karn, Advocates for R-1. Ms. Richa Sandilya and Ms. Nita Sharma, Advocates for R-2 to 5. Mr. Abhishek Parmar, Advocate for RP.

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