2026 (3) TMI 1594 - AT - IBC

Related-party objection in insolvency failed where prior resignations and shareholder records did not show defect in liquidation

A challenge to liquidation and dissolution failed where the alleged related-party objection was not supported by the record. The tribunal noted that M.S. ... Corporate Insolvency Resolution Process - Related party disqualification - Challenged the liquidation and consequential dissolution on the ground that the operational creditor was a related party through the shareholding - Cessation of Directorship. Related party disqualification - challenge to liquidation proceedings - HELD THAT:- The Appellate Tribunal held that the material relied on by the appellant did not establish any infirmity in the liquidation process. It noted the finding that M.S. Balaji had resigned from the corporate debtor and thereafter from the operational creditor well before admission of the section 9 proceedings, and therefore was not holding any directorship at the time of the insolvency or liquidation process. The Tribunal further observed that the appellant's own pleading before the Adjudicating Authority was that the 27% shareholding in the corporate debtor was held by Kasa, while M.S. Balaji was only referred to as its director. In that view, the MGT-7 form did not advance the appellant's case, and no basis was made out to treat the entire process as vitiated. [Paras 12, 13] No error was found in the rejection of the application seeking to set aside the liquidation process, and the consequential order of dissolution was not interfered with. Final Conclusion: The Appellate Tribunal dismissed both appeals, holding that the appellant failed to establish that the insolvency, liquidation, or dissolution stood vitiated on the alleged related party ground. Issues: (i) Whether the liquidation and dissolution process was liable to be set aside on the ground that the operational creditor was allegedly a related party and that the corporate debtor's process stood vitiated by the shareholding and directorship of M.S. Balaji.Analysis: The challenge rested on the assertion that Kasa Anlagen India Private Limited or M.S. Balaji held controlling shareholding and thereby rendered the insolvency process defective. The record, however, showed that the adjudicating authority had found that M.S. Balaji had resigned from the corporate debtor on 17.11.2018 and from the operational creditor on 01.04.2019, both well before admission of the insolvency application on 06.04.2022. The material placed by the appellant did not establish that the operational creditor was shown as a shareholder in the relevant annual returns, and the pleading regarding 27% shareholding was found to relate to Kasa rather than to M.S. Balaji personally. No factual or legal error was demonstrated to warrant interference with the liquidation or dissolution orders.Conclusion: The objection to the liquidation and dissolution process failed, and the appeals were liable to be dismissed.