NCLT Delhi Dissolves Company Despite ₹100.20 Crore GST Demand, Preserves Proceedings Against Directors

The National Company Law Tribunal (NCLT) at Delhi has recently ordered the dissolution of Neemsar Vyapaar Private Limited after finding no impediment to doing so, even though a GST demand of ₹100. 20 crore had been raised against the company during the liquidation process.

A bench of Judicial Member Bachu Venkat Balaram Das and Technical Member Ravindra Chaturvedi observed that there was no impediment to dissolution, clarifying that proceedings could continue against persons concerned with the company.

"In view of the above facts and circumstances, there is no impediment to the Corporate Debtor being dissolved, this Adjudicating Authority finds that it would be just and proper to order the dissolution of the Corporate Debtor."

The tribunal was considering an application filed by liquidator Mohan Lal Jain seeking dissolution of the company after completion of the liquidation process.

While examining the application, the bench sought detailed clarifications regarding a GST show cause notice issued to the corporate debtor. It also sought an explanation regarding a subsequent GST demand of ₹100.20 crore raised against the company.

Neemsar Vyapaar Private Limited entered insolvency proceedings in December 2022 on a plea by operational creditor Montage Enterprises Private Limited. The company was later ordered into liquidation.

One of the liquidator's first steps was to try and sell the company as a going concern through an e-auction. No bidder came forward.

The Stakeholders' Consultation Committee thereafter resolved to sell the assets of the corporate debtor as a single lot. In the second e-auction conducted in October 2023, High Growth Credit Services Limited emerged as the successful bidder for the company's trade receivables and computers. The assets were sold for ₹20.02 lakh.

The liquidator informed the Tribunal that the company's GST registration had been surrendered and cancelled on May 2, 2022, before the commencement of the insolvency proceedings. He also informed the Tribunal that replies had been filed before the GST authorities in response to the show cause notice and the subsequent demand order.

According to the liquidator, the assets of the corporate debtor had already been liquidated. The sale proceeds had also been distributed in accordance with the Insolvency and Bankruptcy Code. An application seeking dissolution had already been filed before the Tribunal.

After examining the material placed on record, the Tribunal accepted the liquidator's explanation regarding the GST proceedings.

The bench observed, "The explanation given by the Applicant/Liquidator is satisfactory and cannot be said that the Liquidator has committed any procedural lapse in not intimating the GST Department."

The tribunal also accepted the liquidator's explanations regarding claims, receivables, and valuation issues.

It further noted that the transaction audit had not identified any preferential, undervalued, fraudulent, or extortionate transactions requiring further proceedings.

Having examined the material on record, the Tribunal concluded that the affairs of the corporate debtor had been completely wound up and its assets fully liquidated.

The bench observed, "Upon hearing the Applicant and on perusal of the documents annexed to the application, it appears that the affairs of the Corporate Debtor have been completely wound up and its assets have been completely liquidated."

The tribunal further noted that no objections had been filed by any statutory authority or any other party in relation to the dissolution application.

It accordingly ordered the dissolution of the company. At the same time, it clarified that the dissolution order would not discharge directors, shareholders, or other persons concerned with the corporate debtor from liabilities arising under applicable law.

The bench observed: "It is clarified that this Order of Dissolution shall not be construed as discharging the directors, shareholders, or any other persons concerned with the Corporate Debtor from any liability, obligation, or responsibility arising under any applicable law for the time being in force."

The tribunal further observed: "Notwithstanding the dissolution of the Company, any statutory authority, including but not limited to the Income Tax Department, GST Authorities, ESIC, PF, ROC, or any other regulatory or governmental authority, shall remain at liberty to initiate, continue, or pursue any proceedings or remedies available under the applicable laws. Such proceedings or remedies may be pursued against the directors, shareholders, or any other persons concerned, in accordance with law."

For Liquidator: Senior Advocate Arjit Prasad, Advocate Saloni Singh, Anuj Maheswari