NCLAT Gives Direction of KS Oil’s Liquidation, Slams NCLT For lapse of 981 Days
The National Company Law Appellate Tribunal (NCLAT) has directed the initiation of the liquidation process of leading integrated edible oil company KS Oils Ltd.
The NCLAT bench headed by Acting Chairperson Justice BL Bhat allowed the appeal filed by the Resolution Professional (RP) saying the “fitness of the situation” allows initiation of liquidation of the corporate debtor KS Oils.
The Appellate Tribunal stated that it was very unfortunate that even after the lapse of 981 days and repeated compliance by the Resolution Professional to initiate the liquidation process; the NCLT had not considered it.
The litigation background of the case is that the Tribunal, Indore bench had dismissed the application filed by the Resolution Professional of the debt-ridden company to initiate liquidation against KS Oils after it could not attract a buyer.
It was challenged by RP Kuldeep Verma before the NCLAT. According to the Resolution Professionals, the NCLT after 31 hearings over its application to initiate liquidation from 11 May 2018 to 1 January 2021, dismissed it despite the lapse of the mandatory 270 days for completing insolvency.
On 21 July 2017, the insolvency resolution process was initiated before the Tribunal over the plea filed by SREI. SREI itself had submitted a resolution plan but it was rejected.
On 16 April 2018, after the lapse of 270 days without a resolution plan approved by the Committee of Creditors (CoC), an application was filed to consider the passing of orders for liquidation.
One of the CoC members i.e. the State Bank of India, on behalf of the joint lenders’ forum that held 76.53 percent, had moved to the Appellate Tribunal wherein it directed the lenders to consider revised plans within two weeks and directed the Tribunal to pass appropriate orders.
After the said orders of the Appellate Tribunal, the NCLT heard the matter 12 times and finally dismissed it on 1 January 2021.
The NCLAT allowed the plea and observed that the Insolvency & Bankruptcy Code, 2016 (IBC/Code) came into force with the basic objective of resolution promptly. It added that the Tribunal is causing undue delay and it is defeating the very purpose of the Code.
The Appellate Tribunal stated, “Section 12 of the Code has already laid down 330 days on the outer side, although it is a directory in nature. This also suggests that the need for giving multiple opportunities to the sole Resolution Applicant is not warranted to defeat the very purpose of the Act.”
It added that year 2020 has faced global pandemic Covid-19 and this might have led to delay on behalf of the Tribunal however it “may not have allowed repeated reference of Resolution Applicant for the consideration of the CoC when the CoC was repeatedly rejecting their variants of proposals.”
The NCLAT said, “It is unfortunate to observe that even after the lapse of 981 days and repeated compliance by the RP of the direction of the Adjudicating Authority; the Adjudicating Authority has not yet considered initiation of Liquidation as per Section 33 / Chapter –III of the ‘Code’.
The Appellate Tribunal concluded that “It is abundantly clear that the Object of the Code (IBC), IBBI Regulations, this Appellate Tribunal Judgments, Apex Court Judgments all this suggests that time is the essence of the Code. The Adjudicating Authority naturally, is to keep this factor in mind; liquidation sale can be in the format of anyone.”
The Appellate Tribunal stated that the NCLT has failed to implement the order of the Appellate Tribunal dated 18 November 2019 and it is defeating the object of the Code.
It held “The appeal is allowed and the impugned order dated 1 January 2021, passed by the NCLT is set aside, and at the same time, the order for initiation of liquidation of the corporate debtor KS Oils Ltd is also allowed.”