Shakti Bhog Snacks CIRP: NCLT says IBC cannot be used to sidestep legitimate process of law

The National Company Law Tribunal (NCLT), New Delhi Bench, has dismissed an application for the dissolution of Shakti Bhog Snacks Limited (the Corporate Debtor) under Section 54 of the Insolvency and Bankruptcy Code, 2016 (IBC). The application was filed by Umesh Gupta, the Resolution Professional (RP) for Shakti Bhog Snacks Limited.

The tribunal in its order dated 30 June 2025 said that allowing dissolution of Shakti Bhog Snacks despite pendency of case in PMLA court would amount to judicial overreach and would impair Enforcement Directorate’s ability to complete the trial and recover proceeds of crime. The NCLT further said that insolvency resolution process cannot be used as a mechanism to frustrate or sidestep the legitimate process of law.

Background of the case

The Corporate Insolvency Resolution Process (CIRP) against Shakti Bhog Snacks Limited commenced on January 3, 2023, following an application by the Operational Creditor, Goyal Tea Agencies Private Limited. Umesh Gupta was appointed as the Interim Resolution Professional, whose appointment was later confirmed by the Committee of Creditors (CoC).

A public announcement for inviting claims was made, but only one claim was received from the Financial Creditor, State Bank of India, for ₹14,62,18,010. No claims were submitted by any operational creditors, employees, or workmen. Consequently, the CoC was constituted with State Bank of India as its sole member, holding a 100% voting share.

The RP encountered a significant lack of cooperation from the Corporate Debtor’s suspended directors, who failed to provide necessary documents and information despite repeated requests and a filed application under Section 19(2) of the IBC. Upon visiting the registered office, the RP discovered it was sealed by the Enforcement Directorate (ED) and was not operational. No physical assets or records of the Corporate Debtor could be obtained. Furthermore, the last available financial statements were from FY 2015-16, and the Corporate Debtor’s land and building were already sold by the State Bank of India under the SARFAESI Act around December 2019.

Given the absence of assets, operations, and the unfeasibility of liquidation due to existing CIRP costs and a lack of recoverable value, the CoC unanimously recommended the dissolution of the Corporate Debtor instead of liquidation. The RP was thus authorized to file the Section 54 application for dissolution, citing judicial precedents where direct dissolution was allowed in similar circumstances.

Enforcement Directorate’s opposition

The Enforcement Directorate (ED) strongly opposed the dissolution of Shakti Bhog due to ongoing proceedings under the Prevention of Money Laundering Act, 2002 (PMLA) against its parent company, Shakti Bhog Foods Limited (SBFL), and its group entities including Shakti Bhog Snacks Limited (SBSL).

The ED alleged that SBSL was involved in money laundering activities, having been used by SBFL to rotate loan funds against bogus invoices. It claimed that SBSL acquired and possessed proceeds of crime totaling ₹97.87 crores from six group entities and transferred ₹127.81 crores to these entities between FY 2007-08 and 2014-15 . The ED asserted that SBSL knowingly participated in the acquisition, possession, and concealment of these proceeds of crime, projecting them as untainted revenue, and thereby committed a money laundering offense under Section 3 of PMLA.

Notably, SBSL has been arrayed as an accused in the 5th Supplementary Prosecution Complaint dated September 20, 2024, before the Special Court, PMLA, which has taken cognizance and issued summons. Additionally, a bank account of SBSL with ICICI Bank was provisionally attached by the ED on August 25, 2021, an attachment confirmed on May 26, 2022.

The ED argued that the NCLT lacks jurisdiction to interfere with PMLA proceedings, citing Section 41 of the PMLA and various Supreme Court and NCLAT judgments. It stressed that PMLA is a special legislation with primacy over the IBC in money laundering matters, and IBC proceedings cannot be used as a shield against enforcement actions under PMLA.

Resolution Professional’s counter-arguments to ED

In response to the ED’s submissions, the RP highlighted that the Corporate Debtor (SBSL) was impleaded as an accused in the 5th Supplementary Prosecution Complaint only on September 20, 2024, which was more than 19 months after the CIRP commenced on January 3, 2023. The RP also pointed out that the reference to the Corporate Debtor in the said complaint was limited to specific pages (20-21), and crucially, none of the provisionally attached properties listed in the complaint pertained to the Corporate Debtor. The RP further noted that while it was alleged that SBSL routed ₹97.87 Crores from its parent company’s loan funds, no properties of the Corporate Debtor were involved in the PMLA attachment.

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