TaxTMI 
TaxTMI 
2026 (9) TMI 2007
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....ising out of Impugned Order dated 31.07.2026 passed by the National Company Law Tribunal, Mumbai Bench, Court-V, ("Adjudicating Authority") in I.A. (LIQ.) No. 87 of 2024 in C.P. (IB) No. 987/MB/2020] Suraksha Asset Reconstruction Limited, who is the Financial Creditor/Member of the Committee of Creditors, is the Respondent No.1 herein. Unity Small Finance Bank Limited, who is the Member of the Committee of Creditors (CoC) is the Respondent No.2 herein. Mr. Manish Shah, who is the Liquidator of Sapphire Land Development Private Limited, is the Respondent No.3 herein. Mr. Snehal Kamdar, who is the Erstwhile Resolution Professional of Sapphire Land Development Private Limited, is the Respondent No.4 herein. 2. The Appellant submitted that the Corporate Debtor, namely Sapphire Land Development Private Limited, is a company forming part of the erstwhile Housing Development and Infrastructure Limited ("HDIL") group and that the Appellant is a suspended director of the Corporate Debtor. The Appellant stated that by order dated 30.04.2021, the Adjudicating Authority admitted the petition filed by Respondent No.1 under Section 7 of the Code, being C.P. (IB) No. 987/MB/2020, a....
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....uding a twelve-acre land parcel in Kerala, approximately thirty-nine shops in Dream Mall, a yacht sold by Punjab and Maharashtra Co-operative Bank Limited whose panchnama and sale proceeds were yet to be received, and a Range Rover lying in the custody of the Enforcement Directorate/Economic Offences Wing. 7. The Appellant contended that the discovery of such substantial assets demonstrated that the Corporate Debtor possessed valuable assets capable of forming the basis of a viable resolution process. The Appellant submitted that, despite the existence of these assets, the resolution process was never meaningfully opened to the market and no prospective resolution applicant was given an opportunity to submit a resolution plan. 8. The Appellant stated that in the 9th CoC meeting held on 30.11.2023, Respondent No.4 proposed publication of Form G in view of a prospective resolution applicant and Respondent No.2 supported the proposal, whereas Respondent No.1 continued to seek liquidation. The Appellant submitted that the CoC itself resolved that publication of Form G should be put to vote and, if no prospective resolution applicant came forward within thirty days of publication,....
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....possesses a twelve-acre land parcel, approximately thirty-nine shops, a yacht and a Range Rover. The Appellant submitted that the aforesaid assets constitute the very foundation upon which a resolution plan could be formulated and that directing liquidation without inviting even a single prospective resolution applicant amounts to treating the last resort as the first option. 12. The Appellant contended that the Adjudicating Authority fundamentally misconstrued Section 25(2)(h) of the Code and Regulation 36A of the CIRP Regulations. The Appellant submitted that Regulation 36A(1), as applicable to the present CIRP, imposed a mandatory duty upon the Resolution Professional to publish Form G inviting expressions of interest from interested and eligible prospective resolution applicants. The use of the expression "shall" demonstrated that publication was mandatory and could not be made dependent upon the discretion or veto of a particular CoC member. 13. The Appellant submitted that Section 25(2)(h) of the Code merely requires CoC approval in relation to the eligibility criteria to be laid down by the Resolution Professional. It does not make CoC approval a condition precedent to....
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.... CIRP period cannot legitimately constitute a ground for liquidation where such expiry itself resulted from the failure of the Resolution Professional and the obstruction caused by Respondent No.1. The Appellant stated that no resolution plan could possibly have been received when no invitation was ever issued. Therefore, treating non-receipt of resolution plans as a reason for liquidation, when the machinery for receiving such plans was never activated, amounts to reasoning in a circle. 19. The Appellant stated that the Adjudicating Authority also failed to consider exclusion or extension of the CIRP period. The Appellant contended that periods lost due to the conduct of the Resolution Professional or circumstances beyond the control of stakeholders may warrant exclusion. The Appellant further submitted that timelines under the Code cannot be applied mechanically were doing so would defeat the ultimate objective of resolution. 20. The Appellant submitted that the finding that the Corporate Debtor was not a going concern was perverse and unsupported by the record. The Appellant stated that the Adjudicating Authority relied substantially upon the assertion of Respondent No.1 t....
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....tself through circular lending to Fortune Integrated Assets Services Limited and was undertaken contrary to the RBI Master Circular dated 01.09.2016. The Appellant contended that, if these allegations are ultimately established, Respondent No.1 would not qualify as a financial creditor, the admission order dated 30.04.2021 would be without jurisdiction and the subsequent proceedings, including the Impugned Order, would consequently be rendered unsustainable. The Appellant stated that fraud vitiates judicial proceedings. The Appellant contended that where a specific and documented allegation of fraudulent initiation of CIRP remains pending, the Adjudicating Authority ought to decide the same before ordering liquidation, since liquidation and sale of assets could render the challenge academic and make restoration of the status quo practically impossible. 24. The Appellant submitted that the Impugned Order was also passed in breach of the principles of natural justice because the suspended management was neither impleaded nor heard in the liquidation proceedings. The Appellant stated that the proceedings in I.A. (LIQ.) No.87 of 2024 involved the Resolution Professional and the two ....
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....nsolvency professionals shared by the IBBI. The Appellant contended that no finding under Section 34(4) of the Code was recorded and no direction under Section 34(5) of the Code was issued, thereby bypassing the statutory procedure. 27. The Appellant stated that the Adjudicating Authority failed to consider any course short of liquidation. The Appellant submitted that several alternatives were available, including directing immediate publication of Form G, excluding the period lost due to deadlock and inaction, reviving the CIRP for a limited period, directing appointment of registered valuers, replacing the Resolution Professional and, alternatively, ensuring that any liquidation process explored compromise or arrangement under Section 230 of the Companies Act, 2013 and sale of the Corporate Debtor as a going concern. 28. The Appellant contended that none of these alternatives was considered, and that the Adjudicating Authority proceeded directly from the existence of deadlock and lapse of time to liquidation. Such an approach, according to the Appellant, amounted to non-application of mind, particularly because the CoC itself had earlier resolved that liquidation would be c....
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....ving consciously remained outside the liquidation proceedings despite having knowledge thereof, cannot subsequently contend that he was denied an opportunity of hearing. 34. The Respondent No. 1 submitted that the CIRP commenced on 30.04.2021 and the statutory period of 180 days expired on 06.11.2021, without any application for extension or exclusion of time and without receipt of any resolution plan under Section 30(6) of the Code. The Respondent No. 1 stated that, on the admitted facts, the mandatory conditions stipulated under Section 33(1)(a) of the Code stood satisfied and, consequently, the Adjudicating Authority was bound to order liquidation without any discretion to adopt an alternative course. The Respondent No. 1 further submitted that the requirement of approval by not less than 66% of the voting share of the CoC is applicable only in cases falling under Section 33(2) of the Code and has no application where liquidation ensues upon the expiry of the resolution process period under Section 33(1)(a) of the Code. It was further stated that the contention regarding mandatory publication of Form G, irrespective of CoC approval, had already been raised by Respondent No. 2....
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....idation of the Corporate Debtor was both legally and factually justified, particularly as it was not willing to incur further costs in pursuing an unviable resolution process. 37. Concluding arguments, the Respondent No.1 requested this Appellate Tribunal to dismiss the present Appeal. Findings 38. As a background of the appeal, it is noted that the Adjudicating Authority allowed the application filed under Section 33(1)(a) of the Code by the erstwhile Resolution Professional (Respondent No. 4) and ordered that Sapphire Land Development Private Limited/Corporate Debtor a company forming part of the erstwhile Housing Development and Infrastructure Limited group ('HDIL') to be liquidated, appointing Respondent No. 3 as Liquidator. The Appellant is a suspended director and assails the Impugned Order on several counts including that Form G under Regulation 36A(1) of the CIRP Regulations was never published; that the Adjudicating Authority misconstrued the relationship between Section 25(2)(h) of the Code and Regulation 36A(1); that liquidation was ordered while an application under Section 65 of the Code remained pending; and that the order was passed without notice to, or hea....
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....ation, however the Respondent No. 1 opposed it and sought liquidation instead. The CoC resolved that publication be put to vote and that liquidation would be considered only if no applicant came forward within thirty days of such publication. That resolution could not be passed due to own internal disagreement between both members of the CoC. At the 10th, 11th and 12th CoC meetings, held respectively on 14.12.2023, 02.01.2024 and 01.04.2024, the same division recurred with the Respondent No. 1 against publication but the Respondent No. 2 in favour, on each occasion. At no stage no one approached the Adjudicating Authority under Section 60(5) of the Code for directions. The Respondent No. 4 thereafter filed I.A. (LIQ.) No. 87 of 2024, seeking liquidation of the Corporate Debtor, his own appointment as Liquidator, and ratification by the CoC of CIRP costs and fees of approximately Rs. 25,03,196/-. By order dated 24.10.2024, the Adjudicating Authority directed impleadment of the members of the CoC. The suspended management, including the Appellant, was not separately impleaded. 43. The Appellant, as suspended director, addressed e-mails dated 08.02.2025 and 13.02.2025 to Respondent....
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....ppoint either Respondent No. 4 or the insolvency professional proposed by Respondent No. 1 as Liquidator, and instead appointed Respondent No. 3 from the panel maintained by while leaving the question of CIRP costs open. 46. It is the case of the Appellant that liquidation is a measure of last resort and that no plan was ever solicited because Form G was never published. The Appellant further submitted that Regulation 36A(1) of the CIRP Regulations casts an unqualified duty to publish Form G and that Section 25(2)(h) of the Code conditions only the eligibility criteria not the antecedent duty to invite. The Appellant pleaded that the Adjudicating Authority erred in referring to Regulation 36A as amended with effect from 26.05.2025, four years after the CIRP and further the. liquidation cannot be founded on an expiry of time substantially attributable to the resolution professional's own default and to CoC deadlock. The Appellant also argued that the finding that the Corporate Debtor is not a going concern rests on the unverified assertion. The Appellant tried to impress us that liquidation ought not to have been ordered while I.A. No. 2161 of 2026 under Section 65 of the Cod....
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....al upon prior approval of the CoC of the criteria for eligible applicants or otherwise. Issue no 2 Whether an order of liquidation under Section 33(1)(a) of the Code, once the CIRP period has expired without a resolution plan under Section 30(6), leaves ample discretion to the Adjudicating Authority to decline liquidation on the ground that the expiry is attributable to the conduct of stakeholders within the process. Issue no 3 Whether the finding that the Corporate Debtor is not a going concern is sustainable on the material before the Adjudicating Authority. Issue no 4 Whether the pendency of the application under Section 65 of the Code barred the Adjudicating Authority from proceeding to pass an order under Section 33. Issue no 5 Whether the non-impleadment of the suspended board vitiates the Impugned Order, having regard to the nature of the proceeding and the conduct of the Appellant. Issue no 6 Whether the Impugned Order discloses failure to consider alternatives short of liquidation. 50. Issue no 1 Whether on the basis of Regulation 36A(1) of the CIRP Regulations read with Section 25(2)(h) of the Code, the resolution profession....
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....n of interest "36A. Invitation for expression of interest. - (1) The resolution professional shall publish brief particulars of the invitation for expression of interest in Form G of the Schedule at the earliest, not later than sixtieth day from the insolvency commencement date, from interested and eligible prospective resolution applicants to submit resolution plans.(1A) The resolution professional may, with the approval of the committee, invite expression of interest for submission of resolution plans for the corporate debtor as a whole, or for sale of one or more of assets of the corporate debtor, or for both." (Emphasis supplied) 52. From above, we note that Section 25(2)(h) of the Code requires the resolution professional to "invite prospective resolution applicants, who fulfil such criteria as may be laid down by him with the approval of committee of creditors... to submit a resolution plan or plans." Regulation 36A (1) of the CIRP Regulations, requires the resolution professional to "publish brief particulars of the invitation for expression of interest in Form G... from interested and eligible prospective resolution applicants to submit resolution plans." The....
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....n under sub-section (6) of section 30; or (b) rejects the resolution plan under section 31 for the non-compliance of the requirements specified therein, it shall - (i) pass an order requiring the corporate debtor to be liquidated ...(2) Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors approved by not less than sixty-six per cent of the voting share, to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order..." (Emphasis Supplied) 56. We are of the considered view that Section 33(2) governs a CoC's affirmative decision to liquidate at any time before confirmation of a resolution plan and it does not purport to be the exclusive route by which a resolution process may fail to proceed, nor does it guarantee that resolution will occur merely because 66% has not been mustered against it. The Code nowhere provides that publication of Form G, or approval of eligibility criteria under Section 25(2)(h), requires anything less than the ordinary decision-making process of the ....
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....bsolute, unyielding wall in truly exceptional cases. But the exception the Hon'ble Supreme Court recognised was in given circumstances, addressed to delay occasioned by litigation and similar circumstances genuinely beyond the control of the resolution process and not a general license for the Adjudicating Authority, or this Appellate Tribunal, to treat ordinary institutional friction within a CIRP, such as CoC disagreement or a resolution professional's want of diligence, as grounds for indefinitely suspending the operation of Section 33(1)(a). To hold otherwise would be to convert the exception recognised in Essar Steel (supra) into a general rule that the very default the Code's timelines are designed to guard against delay, drift, and irresolution is itself a reason to excuse further delay. We do not think that can be the law. On the facts before us, the CIRP period expired in November 2021 i.e. more than five years passed without a resolution plan and no application of any kind was made, by any stakeholder, to prevent the consequence. Thus, we are of considered view that Section 33(1)(a) was, in these circumstances, rightly invoked by the Adjudicating Authority. ....
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....es while having ceased, for all practical purposes, to carry on any business at all; indeed, that is a common and unremarkable feature of long-running CIRPs where the corporate debtor's underlying business collapsed well before, or shortly after, the commencement of the insolvency process, leaving behind an asset shell to be administered rather than an operating enterprise to be rescued. The assets recorded at paragraphs 9 and 24 of the Impugned Order i.e., a land parcel, mall shops, a yacht sold by a creditor bank, and a vehicle in the custody of enforcement agencies are if anything, more consistent with the residue of a defunct enterprise than with a functioning business. Nothing in the record before the Adjudicating Authority, or before us, suggests that the Corporate Debtor had employees on its rolls, was generating income, or was otherwise trading, at any point after the CIRP commenced. The Appellant, who as suspended director would have been best placed to place such material before the Adjudicating Authority had it existed, placed none. We accordingly find no perversity in the Adjudicating Authority's conclusion on this point. 64. We would add that the Appellan....
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....osed of. The Adjudicating Authority has jurisdiction to inquire into allegations of fraudulent or collusive initiation of a CIRP, and that such allegations, where timely and properly raised, may bear on the continuation of the very process founded upon them. But we do not read either authority as holding that the mere pendency of any Section 65 application, however belatedly filed, operates automatically to suspend the Adjudicating Authority's power to otherwise conclude proceedings that are independently ripe for disposal under Section 33(1)(a). To hold that it does would be to place in the hands of any suspended director a ready means of indefinitely forestalling an adverse liquidation order: file a Section 65 application on the eve of the hearing, and the process grinds to a halt regardless of the application's timing, its merits, or the diligence with which it was pursued. We do not think the Code, contemplate so open-ended a result. Thus, we are not inclined to accept contentions of the Appellant on this issue. 68. Issue no 5 Whether the non-impleadment of the suspended board vitiates the Impugned Order, having regard to the nature of the proceeding and the conduct ....
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...., on this specific record, that the combination of the Appellant's own prolonged non-engagement, the largely objective character of the Section 33(1)(a) inquiry, and the full appellate hearing now afforded, takes this case outside the ordinary rule that a breach of audi alteram partem vitiates the proceeding irrespective of demonstrated prejudice. We would reach a different conclusion on facts disclosing a suspended board that had sought, without success, to engage with the CIRP from an early stage, or an Adjudicating Authority that had relied on matters peculiarly within such a board's knowledge without affording it any opportunity to respond; those are not the facts before us. Thus, we are not in position to accept the pleadings of the Appellant on this ground. 72. Issue no 6 Whether the Impugned Order discloses failure to consider alternatives short of liquidation. 73. We do not accept the submission of the Appellant that this is a case where liquidation was ordered as a first, rather than a last, resort. It has been brought to our notice during the hearing that the CoC considered publication of Form G on four separate occasions across more than five months, from N....