Recently, the National Company Law Tribunal (NCLAT) Mumbai Bench has ruled for the liquidation of Gitanjali Gems, a jewelry retailing company headed by fugitive Mehul Choksi, under Section 33 of the Insolvency and Bankruptcy Code, 2016.

The bench, comprising Kuldip Kumar Kareer as the judicial member and Anil Raj Chellan as the Technical member, stated, “On perusal of records, it is evident that the assets of the Corporate Debtor were under attachment by the Directorate of Enforcement under the provisions of the PMLA, 2002 and considering the bleak chances of insolvency resolution amid the ongoing investigations and attachment of assets, the CoC had resolved in its 06th Meeting held on 05th April, 2019 to liquidate the Corporate Debtor by a majority of 90.16% voting in favour.”

The tribunal further added that, “The CoC with requisite voting as given under Section 33(2) has approved the liquidation of Corporate Debtor in view of bleak chances of receiving any resolution plan for the reasons discussed hereinbefore. This Tribunal has very limited powers of judicial review in such matters of commercial wisdom.”

The Tribunal appointed Santanu T Ray as the liquidator after the RP expressed personal reasons for being unwilling to act in that capacity. The appointment of the new liquidator was in accordance with the provisions outlined in the IBC, 2016, in conjunction with the IBBI (Liquidation Process) Regulation, 2016.

During the tribunal proceedings, the Company's RP, Vijay Kumar Garg, stated that due to alleged fraud committed by the Corporate Debtor and its officers, the company's operations were under investigation by multiple law enforcement agencies, including the CBI and ED.

Garg clarified that upon his appointment, he reached out to various investigating authorities to request access to the company's properties, assets, stocks, and records to proceed with the Corporate Insolvency Resolution Process (CIRP) and fulfill other legal requirements. However, the authorities declined to lift the attachment on the properties.

The insolvency application was filed by ICICI Bank after the company defaulted on payments totaling approximately Rs 608 crore.

Given that Gitanjali Gems was insolvent and its assets were seized or attached by law enforcement, the Committee of Creditors (CoC) decided against extending the CIRP, which was due to expire in April 2019. Consequently, the likelihood of securing a resolution plan was minimal. Therefore, the RP sought liquidation, which was granted by the National Company Law Tribunal (NCLT).

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