Liquidation Can Be Recalled Using Inherent Powers Where Debt Is Settled: NCLT Hyderabad

The Hyderabad Bench of the National Company Law Tribunal (NCLT) on 6 March, held that even though the Insolvency and Bankruptcy Code (IBC), 2016, does not expressly provide for withdrawal of liquidation proceedings, the Tribunal can exercise its inherent powers in appropriate cases to secure the ends of justice.

The Bench comprising Judicial Member Rajeev Bhardwaj and Technical Member Sanjay Puri recalled the liquidation process against Ravi Cranes & Movers Ltd., preventing the liquidation from proceeding further. They held:

“In these peculiar facts, where the raison d'être for initiation of CIRP against the Corporate Debtor in its capacity as a guarantor no longer subsists, continuation of liquidation proceedings against the Corporate Debtor would neither advance the object of value maximisation nor further the overarching objectives of the Code, and may, in fact, result in an inequitable outcome.”

The corporate insolvency resolution process against Ravi Cranes & Movers Ltd. had been admitted on 26 September 2022. Subsequently, as the resolution plan received during CIRP was found unviable, the Committee of Creditors resolved to liquidate the company, and the liquidation order was passed on 27 September 2024.

Maximus ARC Limited, which had become the sole financial creditor after debt assignments by Union Bank of India and Indian Overseas Bank, filed the application before the Tribunal. It argued that Ravi Cranes & Movers Ltd. was merely a corporate guarantor for RCM Infrastructure Ltd., the principal borrower. After the debts were assigned, a comprehensive settlement was reached with the promoters and creditors of the principal borrower.

Pursuant to the settlement, the CIRP of RCM Infrastructure Ltd. was withdrawn under Section 12A of the IBC on 17 November 2025, and bankruptcy proceedings against personal guarantors were also withdrawn. The settlement specifically contemplated withdrawal of liquidation proceedings against the corporate guarantor.

The Tribunal observed that once the underlying debt stood fully settled, the basis for continuing liquidation ceased to exist. Noting that the IBC provides no mechanism akin to Section 12A for recalling liquidation, the Bench held that exercising inherent jurisdiction was necessary, as continuation would neither advance value maximisation nor serve the objectives of the Code and could result in an inequitable outcome.

Accordingly, the NCLT directed that the liquidation process against Ravi Cranes & Movers Ltd. shall not proceed further.