NCLT orders liquidation of Venus Garments, rejects promoter’s revival bid

The National Company Law Tribunal (NCLT), Chandigarh Bench, has ordered the liquidation of debt-ridden textile manufacturer Venus Garments (India) Limited (VGIL), bringing an end to the company’s Corporate Insolvency Resolution Process (CIRP) that began in 2022. The ruling, delivered on July 22, 2025, dismissed a last-ditch effort by the company’s promoter to invite fresh bids and revive operations.

The insolvency proceedings against Venus Garments were initiated by State Bank of India (SBI), the largest financial creditor with a 98.08% voting share, who filed a petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) in 2019. The NCLT admitted the case on November 24, 2022. SBI’s admitted claim against VGIL stood at ₹284.59 crore, while Punjab National Bank (PNB) held claims worth ₹5.58 crore, representing a 1.92% voting share. The initial 180-day resolution process, extendable by 90 days, concluded on May 23, 2023.

Anil Kumar Jain, VGIL’s suspended director and promoter, had filed an application (IA No. 1271/2023) requesting the republication of Form G to invite new Expressions of Interest (EOIs) for resolution plans. Jain argued that VGIL remained a “going concern” with the potential to resume production using existing raw materials and customer orders, and pledged to submit a resolution plan backed by an investor. He further contended that the initial Form G, published on January 23, 2023, was inadequately publicized, which he claimed deterred potential investors.

However, the Resolution Professional (RP), Navneet Gupta, and the Committee of Creditors (CoC) opposed Jain’s plea. They highlighted that despite publishing Form G in “The Times of India” and “Rozana Spokesman” and listing four prospective bidders, no resolution plans were submitted by the March 30, 2023, deadline. The CoC, in its May 16, 2023, meeting, unanimously (100%) voted for liquidation, citing VGIL’s non-operational status and dim revival prospects. Meeting minutes also indicated that Jain allegedly contacted a bidder, urging them not to participate to facilitate his own acquisition of VGIL.

The NCLT, comprising Harnam Singh Thakur (Judicial Member) and Shishir Agarwal (Technical Member), rejected the promoter’s request for fresh bids. The tribunal affirmed that the republication of Form G falls under the “commercial wisdom” of the CoC, which courts cannot override. It noted that the initial publication complied with IBC regulations, appearing on the IBBI’s website and in widely circulated newspapers, and that Jain himself failed to submit an EOI during the original window.

The NCLT concluded that liquidation was justified, finding that VGIL had ceased operations and was not a “going concern”. The CoC’s 100% vote for liquidation was deemed non-justiciable under Supreme Court precedents. The tribunal also replaced RP Navneet Gupta as liquidator, in accordance with an IBBI circular recommending new appointees to improve recovery rates, and appointed CA Pramod Kumar Misra as the new liquidator.

Moving forward, Venus Garments assets will be sold under the Liquidation Process Regulations, 2016. The liquidator is tasked with exploring the sale of the company as a going concern, as per CoC directives, or through piecemeal asset sales. The moratorium under Section 14 of the IBC ceases, and a new moratorium under Section 33(5) begins.

This case underscores the IBC’s emphasis on creditor autonomy and timeliness. Despite Venus Garments MSME status, which typically allows promoters to bid, the NCLT upheld the CoC’s decision, prioritizing procedural discipline. The outcome highlights the stark difference in average recovery rates between liquidation (4%) and resolution (32%), underscoring the ongoing challenges in salvaging distressed firms.

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