The NCLAT New Delhi, ruled that dissolution under Section 54 of the IBC can only occur after complete liquidation of the Corporate Debtor (CD). The appeal by the Resolution Professional (RP) of Infrabuild Pvt. Ltd. contested the NCLT's order, which rejected an IA seeking the CD's dissolution.
The case stemmed from an application by AVB Global Ventures Pvt. Ltd. for dues of ₹2,38,95,357, which the NCLT admitted appointing the Interim Resolution Professional (IRP).
During the fifth CoC meeting on the RP reported that the CIRP's permitted period would conclude on May 6, 2024, with no Expressions of Interest (EoI) received. The CoC decided against initiating liquidation and instead sought the CD's dissolution. However, the Adjudicating Authority rejected this application, citing that Section 54 can only be invoked after liquidation of the CD's assets, referencing Regulation 14 of the IBBI (Liquidation Process) Regulations, 2016.
The appellant argued that the CoC's refusal to bear liquidation costs warranted the approval of direct dissolution. Despite two publications of Form G without any EoI, the CoC unanimously chose not to pursue liquidation. The appellant cited the NCLAT's decision in Shyson Thomas vs. Mr. Madhugiri Venkatarayappa Sudarshan (2020), stating that if the CoC is unwilling to incur liquidation costs and the CD has no assets, proceeding with liquidation would unduly burden the CoC.
The tribunal upheld that dissolution requires complete liquidation, which had not been initiated in this case. It suggested that the RP could have requested the Registrar of Companies to strike off the company’s name, as it was not conducting business and had no assets. Thus, with the CIRP concluded and no liquidation ordered, the tribunal found, no further action was necessary from the RP, effectively closing the CIRP proceedings and dismissing the appeal.
Nilesh Sharma Resolution Professional - Today Homes and Infrastructure Pvt. Ltd. Vs. Mordhwaj Singh & Ors
Company Appeal (AT) (Insolvency) No. 331 of 2024
Comments