TaxTMI 
TaxTMI 
2026 (2) TMI 1433
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....LT and NCLAT. ii) To give direction treating the process of liquidation as complete and relieve the applicant from the current assignment. iii) To direct the landlord Mr. Ravinder Reddy to refund the rent deposit which he is postponing for more than a month. Background 2. At the outset, we found that the material placed on record by the Applicant suffered from certain anomalies, discrepancies, and lack of clarity, which impeded effective adjudication of the present Application. 3. In order to facilitate proper and comprehensive consideration of the issues involved, the Liquidator was directed vide Order dated 27.05.2025 to place the following information on record: " (i) A comprehensive list of receivables, including retention money, security deposits, and pending contractual payments, along with beneficiary details. (ii) Details of all pending and disposed of litigations concerning the CD. (iii) List the status of the 89 projects, referred to in the e-auction notice and specific agreements, transferred to the Successful Bidder. (iv) A full statement of accounts from the commencement of liquidation to date, with itemise....
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....tain whether the liquidation process had been conducted strictly in accordance with law and whether the Liquidator could be discharged from his duties. 10. The Compliance Affidavit dated 25.06.2025 filed by the Liquidator, upon scrutiny, does not satisfactorily address the concerns identified. The disclosures made are partial, summary in nature and, in certain respects, internally inconsistent. Consequently, each head of compliance is examined hereunder: A. A comprehensive list of receivables, including retention money, security deposits, and pending contractual payments, along with beneficiary details. 11. Submissions of the Liquidator: The submissions of the Liquidator may be summarised as follows: (i) List of Receivables (a) The Liquidator submits that no proper handover report was prepared by the IRP/RP at the commencement or conclusion of CIRP. According to him, the books of accounts were manipulated to artificially reflect losses with an intent to approach erstwhile Board for Industrial and Financial Reconstruction (BIFR), and several transactions were either fictitious or unrecorded. (b) It is alleged that the Bank Guarantees (BGs) aggr....
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....ojects belong to Respondent No. 2. (b) The Liquidator is liable to transfer Rs. 5,57,85,755/- (retention money reflected at page 23 of the Compliance Affidavit), which forms part of the assets transferred under the sale. 14. Observations (a) The primary obligation of the Liquidator under Section 35 of the Code is to take custody and control of all assets and actionable claims of the Corporate Debtor and to maintain accurate and transparent records of the liquidation estate. This obligation is independent of any deficiencies or irregularities attributable to the erstwhile management or the IRP/RP. (b) The e-auction notice dated 18.02.2020 proposed sale of 89 ongoing works along with associated credentials and arbitration receivables. However, the Panchanama dated 30.09.2021 records delivery of additional items, including office furniture, which do not clearly correspond with the auction notice. Further, complete schedules of transferred credentials and arbitration receivables have not been placed on record. The correlation between the e-auction notice, the Sale Certificate and the handover documentation remain unclear. (c) The Applicant has not....
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....on between the e-auction notice, the Sale Certificate and the Panchanama evidencing handover. Such ambiguity has resulted in competing claims and uncertainty regarding entitlement. (g) The position relating to BGs remains insufficiently clarified. References have been made to the alleged misuse of BG facilities, invocation of BGs involving substantial amounts, exclusion of certain BGs from the going concern sale, and pendency of litigations in relation thereto. However, no consolidated or structured statement has been placed on record classifying all BGs under the following heads: ● invoked and crystallised; ● subsisting; ● stayed by judicial orders; ● discharged; or ● pending adjudication. The absence of such classification is material. Exposure under Bank Guarantees directly impacts both the asset profile and the contingent liability position of the liquidation estate. Invocation of a BG may result in crystallised liability affecting recoveries, whereas wrongful invocation may give rise to enforceable recovery claims in favour of the Corporate Debtor. Without a complete classification and....
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....requirement of disclosure contemplated under Regulation 45. (b) A perusal of the nature of pending IAs reveals that the disputes are not confined merely to the amount lying in the No Lien Account. Rather, most of the pending proceedings relate to: ● withholding of security deposits and retention monies; ● termination of contracts; ● claims for work executed; ● statutory dues; ● third-party liabilities; ● release of withheld amounts; and ● alleged misuse or invocation of Bank Guarantees. (c) These disputes directly concern either realization of receivables or determination of liabilities. They are not collateral proceedings but go to the root of the liquidation estate. The outcome of such matters would materially affect: ● the quantum of assets available for distribution; ● the crystallization of liabilities; and ● the final closure of accounts. (d) Under Section 35(1)(k) of the Code, the Liquidator is obligated to prosecute and defend such proceedings in the interest of the liquidation estate. So long as sub....
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....e Respondent No. 2: (a) Respondent No. 2 submits that though the e-auction notice refers to 89 ongoing projects, only selective contracts were actually transferred. (b) It is contended that the Liquidator has failed to disclose a specific and authenticated list of projects sold and receivables arising from terminated contracts. This lack of clarity, according to Respondent No. 2, is prejudicial to both the Successful Bidder and the creditors. 21. Observations (a) Where a Corporate Debtor is sold as a going concern under Regulation 32(e) read with Regulation 32A of the Liquidation Regulations, the precise identification of assets, contracts and actionable claims forming part of the sale is of critical importance. (b) Under Section 35(1)(f) of the Code, the Liquidator is empowered to sell the assets of the Corporate Debtor. However, such sale must be transparent, identifiable and capable of verification. Assets not expressly included in the sale continue to vest in the liquidation estate. (c) Accordingly, this Authority, by its order dated 27.05.2025, specifically directed the Liquidator to furnish not only the list of the 89 projects r....
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....d does not demonstrate full compliance with the said direction. (j) The contention that the assets and contracts transferred were sufficiently specified in the Tender Document and Panchanama cannot be accepted in the absence of the relevant extracts or authenticated documents evidencing such transfer. Judicial scrutiny cannot proceed on presumptions or references to undisclosed documents. (k) The Liquidator's own submission that only two Bank Guarantees were subsisting as on 07.03.2020, allegedly indicating transfer of only two live works, is inconsistent with the reference to 89 ongoing projects in the e-auction notice. This inconsistency has not been satisfactorily explained. (l) In view of the incomplete and non-specific disclosure, this Authority is unable to conclusively determine: ● the exact scope of the 89 projects referred to in the e-auction notice; ● the precise contracts transferred to Respondent No. 2; ● the projects and receivables remaining in the liquidation estate; and ● the present status of unresolved or terminated contracts. E. Full statement of accounts from the commenceme....
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....cannot be treated as compliance with express judicial directions. (e) The absence of detailed and verifiable accounts prevents this Authority from determining: ● whether all assets have been realised; ● whether the distribution has strictly followed Section 53 of the Code; ● whether liquidation costs and fees have been correctly accounted for; and ● whether any surplus or balance remains in the liquidation estate. (f) Compliance with statutory accounting requirements is not a procedural formality but a substantive safeguard intended to protect stakeholders' interests. Non-production of complete accounts, despite repeated directions, amounts to material non-compliance with both the Code and the orders of this Authority. F. A Distribution Schedule and the detailed breakdown of the fee claimed and received 24. Submissions by the Liquidator: (a) The Liquidator submits that the distribution schedule in respect of Financial Creditors has been annexed as Annexure-7 @ pg.46 of the Compliance Affidavit. It is further stated that remuneration was drawn strictly in accordance with the applicable eligi....
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....eparately; d) adjustment, if any, of interim remuneration already drawn; and e) correlation between the distribution schedule and liquidation cost. (d) Mere circulation of fee statements through email or placement of figures before the SCC does not constitute statutory compliance unless the computation is demonstrably aligned with the prescribed regulatory framework and transparently supported by financial records. (e) The Liquidator, being an officer of this Authority, is under a heightened duty of transparency and accountability. Liquidation costs rank in priority under Section 53(1)(a) of the Code and are paid in precedence to all other claims. Any ambiguity in computation of such costs directly affects stakeholder recoveries and therefore warrants strict scrutiny. (f) Until a fully reconciled computation, duly supported by statutory documentation, is placed on record, the distribution schedule and the fee drawn cannot be treated as conclusively compliant with the requirements of the Code and the Regulations. G. A Compliance Report on all Statutory Filings with RoC, Income Tax, and GST Authorities from FY 2013-2014 onwards 26. S....
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....2020, even if unaudited, containing details of receipts, payments and transactions. Similar directions were reiterated subsequently. Despite these categorical directions, the Liquidator has failed to place even complete unaudited financial statements on record. (d) Merely attributing lapses to the erstwhile management or the Resolution Professional cannot justify continued non-compliance, particularly when the Liquidator has remained in control of the Corporate Debtor for a considerable duration. The statutory scheme does not permit shifting of responsibility once liquidation commences. Once liquidation commences, compliance obligations vest squarely in the Liquidator. (e) The Liquidator has further contended that liquidation was completed four years ago and that records relating to continuation of operations and contract agreements were handed over to the purchaser. However, the Panchanama prepared at the time of handing over possession does not substantiate that complete statutory records and compliant books of account were finalised and transferred in accordance with law. (f) The material on record indicates that complete and reconciled books of accoun....
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....applicable laws. 30. In the present case, despite specific judicial directions dated 27.10.2020 and subsequent reiterations, audited financial statements or complete unaudited financial statements containing full particulars of receipts, payments and transactions have not been placed on record. The material produced remains fragmented, summary in nature and internally inconsistent. Such noncompliance cannot be treated as procedural irregularity; it strikes at the root of transparency and accountability which form the bedrock of the liquidation framework. The following material deficiencies are evident: (i) Although a numerical list of pending and disposed litigations has been furnished, several disputes of substantive consequence remain unresolved. These include claims relating to contractual payments, retention money, security deposits, termination of contracts, third party liabilities, and matters concerning invocation, encashment or Bank Guarantees. These proceedings directly impact the quantification of the liquidation estate and the crystallisation of liabilities. (ii) The statement of receipts and payments filed by the Liquidator is summary in nature a....
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....iduciary process conducted under judicial supervision. The Liquidator acts as an officer of this Authority and is expected to maintain the highest standards of diligence, neutrality and financial transparency. In the absence of complete accounts, reconciled distributions, and statutory compliance, this Authority cannot record satisfaction that the liquidation process has been lawfully concluded. (ix) Consequently, this Authority is not satisfied that the requirements of the Code and the Liquidation Regulations have been fulfilled so as to warrant discharge of the Liquidator or to treat the liquidation process as complete. 31. Final Order (i) The prayer seeking a declaration that the liquidation process stands completed and for discharge of the Applicant as Liquidator is hereby rejected at this stage. (ii) The Liquidator is directed to place the following information before the SCC within a period of two (2) weeks from the date of this Order: ● A comprehensive project-wise and litigation-wise Status Report, including all matters relating to invocation, encashment, subsistence or adjudication of Bank Guarantees; ● Complete A....