NCLAT held that the Insolvency and Bankruptcy Code's objective is to corporate debtor revival as a priority over liquidation.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra & Indevar Pandey (Technical Members) was hearing an appeal and set aside the liquidation order for Corporate Debtor, emphasizing the Insolvency and Bankruptcy Code's (IBC) objective of corporate debtor revival as a priority over liquidation, given the appellant's substantial efforts and financial contributions towards settling debts.
The Appellate Authority establishes that under the Insolvency and Bankruptcy Code (IBC), the primary objective is the revival and continuation of the corporate debtor. Liquidation is considered as a last resort. The appellant, as a promoter of an MSME, sought to revive the corporate debtor by proposing to pay the entire outstanding debt to the financial creditor. Despite delays in payments, the appellant demonstrated bona fide efforts to fulfil obligations. The Appellate Tribunal emphasized the importance of maximizing asset value and promoting entrepreneurship. Thus, the court granted opportunities for the appellant to pay outstanding dues, prioritizing the revival of the corporate debtor over liquidation.
In the case of Gaurav Dattatray Kulkarni vs. Vidya Sahakari Bank Ltd. and Others, the National Company Law Appellate Tribunal (NCLAT) addressed the insolvency proceedings of Supertharrm Engineers Pvt. Ltd. The corporate debtor was admitted into the Corporate Insolvency Resolution Process (CIRP) on 07.06.2022 due to a debt of approximately Rs. 4.92 crores owed to Vidya Sahakari Bank Ltd. During the CIRP, Gaurav Dattatray Kulkarni, the appellant and promoter of the corporate debtor, submitted a resolution plan which was ultimately rejected by the Committee of Creditors (CoC). Following this, the appellant sought to offer a settlement.
The National Company Law Tribunal (NCLT) had given the appellant multiple opportunities to comply with resolution requirements, including depositing earnest money and submitting revised plans. Despite these opportunities, the appellant failed to meet the conditions satisfactorily. Consequently, on 07.08.2023, the NCLT allowed the resolution professional’s application for liquidation of Supertharrm Engineers Pvt. Ltd. and rejected the appellant’s subsequent request to deposit Rs. 75 lakhs.
However, post-liquidation order, the appellant made payments totalling Rs. 2.50 crores, demonstrating efforts to settle the debts. As the promoter of an MSME, he sought another chance to revive the company. Vidya Sahakari Bank Ltd., however, argued that the appellant had not met the necessary conditions and timelines, justifying the liquidation order.
The NCLAT, after reviewing the case, acknowledged the appellant’s significant efforts and financial contributions towards settling the debts and reviving the corporate debtor. Importantly, the NCLAT emphasized that liquidation should be a last resort and that the primary objective of the Insolvency and Bankruptcy Code (IBC) is the revival and continuation of the corporate debtor. Considering the substantial payments made and the appellant's commitment to settle the outstanding dues, the NCLAT decided to set aside the liquidation order.
This decision underscored the principle that the revival of the corporate debtor should be prioritized whenever feasible. Therefore, the NCLAT provided the appellant another opportunity to comply with the resolution plan requirements, thereby allowing the appeal and giving the appellant a chance to resolve the insolvency issues and potentially revive the company.
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