Commercial wisdom in insolvency upheld as liquidation follows when no resolution plan is received within the maximum CIRP period.

The NCLT held that a challenge to the Committee of Creditors' liquidation resolution could not succeed where the CoC, acting with 100% voting share, had validly exercised its commercial wisdom after repeated extensions and the record showed no substantiated lack of knowledge or misrepresentation. The plea of ignorance of insolvency procedure was treated as an afterthought and could not invalidate the resolution. As no resolution plan had been received within the maximum CIRP period, section 33 of the Insolvency and Bankruptcy Code operated and liquidation of the corporate debtor had to be ordered, with the moratorium ceasing on liquidation and the resolution professional appointed as liquidator.

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Issues: (i) Whether the challenge to the Committee of Creditors' resolution for liquidation, on the plea that the Committee lacked knowledge of the procedure and acted under misrepresentation, could be sustained; and (ii) whether liquidation of the corporate debtor was liable to be ordered under section 33 of the Insolvency and Bankruptcy Code, 2016.

Issue (i): Whether the challenge to the Committee of Creditors' resolution for liquidation, on the plea that the Committee lacked knowledge of the procedure and acted under misrepresentation, could be sustained.

Analysis: The Committee of Creditors had taken a commercial decision to approve liquidation with 100% voting share after repeated extensions had been granted for submission of a resolution plan. The record did not support any pleaded lack of knowledge of the insolvency procedure, and the objection was treated as an afterthought. The decision-making of the Committee of Creditors falls within its commercial wisdom, and the plea of ignorance of law could not invalidate the resolution.

Conclusion: The challenge was rejected and the application was dismissed in limine.

Issue (ii): Whether liquidation of the corporate debtor was liable to be ordered under section 33 of the Insolvency and Bankruptcy Code, 2016.

Analysis: No resolution plan had been received within the maximum period of the corporate insolvency resolution process despite extensions and opportunities given to prospective applicants. In that situation, the statutory consequence under section 33 became operative, and the Tribunal was required to order liquidation and appoint a liquidator. The moratorium was also required to cease upon the liquidation order.

Conclusion: Liquidation was ordered and the resolution professional was appointed as liquidator.

Final Conclusion: The Tribunal upheld the Committee of Creditors' liquidation decision and directed liquidation of the corporate debtor, while rejecting the objection raised against that decision.

Ratio Decidendi: Once no resolution plan is received within the maximum CIRP period, and the Committee of Creditors validly resolves for liquidation in exercise of its commercial wisdom, liquidation under section 33 follows as a statutory consequence.

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