Case Note & Summary
The appeal was filed by Lakhminder Dayal Singh, a suspended director of Sapphire Land Development Private Limited, against an order of liquidation passed by the National Company Law Tribunal (NCLT). The Corporate Debtor was part of the Housing Development and Infrastructure Limited group and had undergone Corporate Insolvency Resolution Process (CIRP) initiated on 30.04.2021. The Committee of Creditors (CoC) comprised two members, with Suraksha Asset Reconstruction Limited holding a majority share. The Appellant contended that the CoC's failure to publish Form G under Regulation 36A of the CIRP Regulations prevented any resolution plans from being submitted, arguing that liquidation should be a last resort. The NCLT had ordered liquidation on the grounds that the Corporate Debtor had ceased operations and no resolution plan was forthcoming. The Appellant argued that substantial assets had been discovered, which could support a viable resolution process. The Respondent, Suraksha Asset Reconstruction Limited, maintained that the Corporate Debtor was not a going concern and that the Adjudicating Authority was bound to order liquidation due to the expiry of the CIRP period without any resolution plan. The Appellant also raised issues regarding the lack of notice and hearing for the suspended management in the liquidation proceedings. The NCLAT found that the Adjudicating Authority had erred in its interpretation of the relevant provisions and that the suspended management should have been given an opportunity to be heard. Ultimately, the NCLAT upheld the liquidation order but noted the procedural deficiencies in the process.
Headnote
A) Insolvency Law - Liquidation - Order of Liquidation - Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 - The Adjudicating Authority ordered liquidation of the Corporate Debtor based on the expiry of the CIRP period without any resolution plan being received, despite the existence of substantial assets. Held that the absence of a resolution plan was due to the failure to publish Form G and not a reflection of the Corporate Debtor's viability (Paras 10-11). B) Insolvency Law - Publication of Form G - Regulation 36A(1) of the CIRP Regulations - The Appellant contended that the Resolution Professional had a mandatory duty to publish Form G to invite resolution applicants, which was not done, leading to the conclusion that liquidation was premature. Held that the Adjudicating Authority misconstrued the relationship between Section 25(2)(h) and Regulation 36A(1) (Paras 12-13). C) Insolvency Law - Natural Justice - Right to be Heard - The Appellant argued that the suspended management was not heard in the liquidation proceedings, violating principles of natural justice. Held that the suspended directors should have been given an opportunity to participate in the proceedings (Paras 24-25).
Issue of Consideration
Whether the Adjudicating Authority erred in ordering liquidation without publishing Form G and considering the pending application under Section 65 of the Code.
Final Decision
The NCLAT upheld the liquidation order but noted procedural deficiencies, particularly regarding the failure to publish Form G and the lack of opportunity for the suspended management to be heard.
Law Points
- Insolvency and Bankruptcy Code
- 2016
- Section 33(1)(a)
- Section 25(2)(h)
- Regulation 36A(1)
- Corporate Insolvency Resolution Process (CIRP)
- Liquidation
- Financial Creditor Rights
