NCLAT Issues Notice On Appeal Against Stargaze Entertainment's Liquidation Order
The National Company Law Appellate Tribunal (NCLAT) at Delhi on Tuesday issued notice to Stargaze Entertainment Pvt. Ltd. a cinema exhibition company, and its Resolution Professional, Ashok Kumar Gulla on appeal filed by the Committee of Creditors (CoC) against the liquidation order.
The matter was heard by the bench of Judicial Member Justice Sharad Kumar Sharma and Technical Members Arun Baroka and Indevar Pandey.
The appeal was prefered against the order of the Delhi bench of the National Company Law Tribunal (NCLT) dated 29 September. By the order, it had ordered liquidation of Stargaze Entertainment after rejecting a resolution plan of Cine Corp Filmdom Pvt. Ltd. The Tribunal held that the Corporate Insolvency Resolution Process (CIRP) was itself vitiated because the Resolution Professional failed to take control of the company's assets.
The Corporate Insolvency Resolution Process (CIRP) was initiated on 13 May 2024 by J.C. Flowers Asset Reconstruction Pvt. Ltd. against Stargaze Entertainment for default of over Rs 70 crore. Subsequently, the debt was assigned to CFM Asset Reconstruction Pvt. Ltd., which became the sole financial creditor and sole member of the CoC.
During CIRP, valuation reports pegged the fair value of the Corporate Debtor at Rs 123.62 lakh and liquidation value at Rs 82.33 lakh. However, several assets, including a Rs 50 crore deposit with the holding company, were not factored into the valuation. The NCLT noted that the RP failed to take control of significant assets, including the Rs 50 crore deposit with the holding company, undermining the Information Memorandum and valuation process.
Before NCLAT, the CoC argued that two valuers were appointed and the valuation report specifically considered the deposit included in the calculation and that no stakeholder is objecting to the valuation cannot be a ground for rejection of the resolution plan.
The CoC objected to the NCLT order of liquidation and said that liquidation has to be the last resort. It pointed out that under the Insolvency and Bankruptcy Code (Amendment) Act, 2026 the CoC can vote to revive a CIRP for up to 120 days to avert mandatory liquidation, provided such option is approved by 66% vote of the CoC.
The bench after hearing the CoC issued notices and listed the matter on the first week of November. The SRA was also present before the bench and supported the CoC by objecting the liquidation order.