Hyderabad Tribunal Orders Liquidation of Kanakadhara Ventures due to Resolution Plan Rejection

The National Company Law Tribunal, Hyderabad Bench, ordered the liquidation of M/s. Kanakadhara Ventures Private Limited following the rejection of the Resolution Plan by the Committee of Creditors. Despite attempts to improve the Resolution Plan, issues with high-value transactions and non-compliance with regulations led to the decision for liquidation. The Tribunal emphasized its duty to initiate liquidation under Section 33(1) of the Insolvency and Bankruptcy Code, upholding the CoC's resolution for liquidation due to the absence of a viable resolution plan. Subsequently, a specific individual was appointed as the Liquidator to oversee the liquidation process in accordance with the Code.

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Issues: Application for liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 for M/s. Kanakadhara Ventures Private Limited.

In this judgment by the National Company Law Tribunal, Hyderabad Bench, the application was filed under Section 33 of the Insolvency and Bankruptcy Code, 2016, seeking directions for the liquidation of the Corporate Debtor, M/s. Kanakadhara Ventures Private Limited. The process began with the admission of the application by the Tribunal on a specified date, appointing an Interim Resolution Professional. The Committee of Creditors (CoC) was constituted as per the provisions of the Code, and subsequent meetings of the CoC were held to discuss the appointment of the Resolution Professional and the submission of Expression of Interest (EOI) by Prospective Resolution Applicants (PRAs). Despite extensions granted for the submission of Resolution Plans, issues arose regarding the terms set by the Resolution Applicant, leading to a decision for a fresh issue of EOI. The CoC deliberated on the improvement of Resolution Plan amounts, with PRAs seeking the release of collateral properties and personal guarantees, which conflicted with CIRP regulations and Banking regulations. Following concerns about high-value transactions not in the normal course of business, a Forensic Audit was initiated, revealing transactions falling under Section 66 of the Code. An application under Section 66(1) was subsequently filed before the Tribunal based on the Forensic Report.

The CoC ultimately voted against the submitted resolutions, indicating the rejection of the Resolution Plan, leading to discussions on liquidation in subsequent meetings. The Resolution Professional expressed consent to act as the Liquidator, but later withdrew this consent upon the appointment of another individual as the liquidator by the Joint lenders forum. The Tribunal, citing a legal precedent, emphasized that it is obligated to initiate the liquidation process under Section 33(1) of the Code without delving into the commercial decisions of the CoC. Despite efforts made during the Corporate Insolvency Resolution Process (CIRP), the absence of a viable resolution plan led the CoC to resolve in favor of liquidation, a decision upheld by the Tribunal. Consequently, the Tribunal ordered the liquidation of the Corporate Debtor in accordance with Chapter-III of the Code, appointing a specific individual as the Liquidator and outlining various directions and procedures to be followed during the liquidation process.

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