NCLAT orders liquidation of KS Oils as NCLT ‘ignores’ creditors’ repeated petitions
In a scathing commentary on the failure of the National Company Law Tribunal (NCLT) to perform its role, the National Company Law Appellate Tribunal (NCLAT) had to order initiation of liquidation of KS Oils, which had been under the insolvency resolution process for over 1,000 days.
The appellate tribunal was peeved at the fact that despite it having specifically asked the NCLT in one of its previous order on 18 November 2018 to liquidate the corporate debtor, the Ahmedabad bench of the NCLT kept on dragging the case in one or other pretext. Therefore, it noted that since it was a settled law that whatever power vests in the Adjudicating Authority was always available to Appellate Authority, it had to order the liquidation of KS Oils instead of waiting for the NCLT to do so.
“The Appellate Tribunal has to perforce consider the relief sought by the appellant–Resolution Professional — approved by the CoC for setting aside the impugned order and initiation of Liquidation Process. The Adjudicating Authority has failed to implement the order of the Appellate Tribunal dated 18 November 2019,” said the order.
The insolvency application against KS Oils was filed by SREI Infrastructure Finance Limited and the same was admitted by NCLT on 21 July 2017. SREI, whic is also a financial creditor, submitted a Resolution Plan dated 9 April 2018 as resolution applicant. But the same was rejected by the Committee of Creditors (CoC) with 71.34% on 13 April 2018. SREI Infrastructure Finance submitted multiple revised plans between June 2018 and September 2019, but all of them were also rejected by the CoC. After giving multiple opportunities to the sole resolution applicant, the CoC in September 2019 decided to go for liquidation.
Later State Bank of India (SBI), one of the CoC members moved NCLAT on the ground that the Adjudicating Authority has not adhered to the timelines of CIRP and has not passed liquidation order even after completion of maximum period allowed under CIRP requiring Adjudicating Authority under Part-III of the Code for initiation of Liquidation.
The NCLAT had in its order on 18 November 2018 said that the CoC was allowed to consider the ‘revised plan’, if any, filed or is to be filed within a week. The CoC was given two weeks’ time from the date of this order or receipt of the ‘revised plan’ and in case the ‘proposed resolution plan’ is not filed within a week, the Adjudicating Authority was asked to pass an order for liquidation.
However, despite the NCLAT order the adjudication authority had not ordered liquidation of KS Oils.
In its recent order, the NCLAT stressed on the fact that time is the essence of the Code, and that the adjudicating authority has to keep this factor in mind.
Also Read: No TDS on sale of assets under liquidation process
