Once Dissolution Application Is Filed After Liquidation, Adjudicating Authority Has No Discretion :NCLAT Delhi

Background Facts

The Allahabad Bank had sanctioned a term loan facility of Rs. 3 Crores and a working capital limit of Rs. 12 Crores to the M/s Shashi Oils & Fats Pvt. Ltd. ("Corporate Debtor"). On 23.06.2011 the account of the Corporate Debtor was declared as a Non Performing Asset (NPA) over payment defaults. Allahabad Bank had assigned all its title interest & benefits in respect of the debts of the Corporate Debtor to ARSEC India Ltd., through a deed of assignment at a price of Rs. 5.75 Crore.

In 2017 the ARSEC India Ltd. had filed a petition under Section 7 of IBC seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor. The NCLT Bench ("Adjudicating Authority") had initiated CIRP vide an order 20.013.2018.

After no Resolution Plan was approved, an order for liquidation of the Corporate Debtor was passed by the Adjudicating Authority on 21.01.2020. The Liquidator had conducted auction of the assets of the Corporate Debtor and had subsequently filed I.A. No. 143 of 2021 before the Adjudicating Authority, seeking dissolution of the Corporate Debtor and vide an order dated 15.07.2021 the Corporate Debtor stood dissolved. The Ex-promoters of the Corporate Debtor ("Appellants") filed an appeal before the NCLAT challenging the order of dissolution dated 15.07.2021. The prime contention of the Appellants was that IA No. 143 of 2021 was never served to them and the dissolution order was passed ex-parte. Further, the assets of Corporate Debtor were sold on much less than the market price as the valuation was not properly done and the Appellants had challenged such sale.

Relevant Law

Section 54 of IBC

"54. Dissolution of corporate debtor –

(1) where the assets of the corporate debtor have been completely liquidated, the liquidator shall make an application to the Adjudicating Authority for the dissolution of such corporate debtor. (2) The Adjudicating Authority shall on application filed by the liquidator under sub-section (1) order that the corporate debtor shall be dissolved from the date of that order and the corporate debtor shall be dissolved accordingly.
(3) A copy of an order under sub-section (2) shall within seven days from the date of such order, be forwarded to the authority with which the corporate debtor is registered".

Decision Of The NCLAT

The Bench opined that in view of Section 54 of the IBC, once after the completion of liquidation an application is filed by the liquidator of a Corporate Debtor for its dissolution to the Adjudicating Authority, who has no option but to pass an order of dissolution. The Adjudicating Authority has simply complied with the provisions under Section 54(2) of the IBC.

"The equity though not applicable under IBC, even remotely same cannot come into play at this juncture. The role of this Appellate Tribunal is also restricted within the four walls of the 'Code' & passing of order under Section 54 of the Code brings the Corporate Debtor to a closed chapter."

The Bench dismissed the appeal.

Case Title: Sudhir Kumar Goel & Ors. v M/s Shashi Oils and Fats Pvt. Ltd. & Ors., Company Appeal (AT) (Ins) No. 676 of 2021

Counsel For Appellant: Mr. Amish Tandon, Advocate.

Counsel For Respondents: Mr. Milan Singh Negi, Mr. Nikhil Kumar Jha, Advocates for R1. Mr. Abhishek Anand, Adovate for R2.

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