NCLT Hyderabad Replaces Liquidator For Failing To Take Enforcement Steps Beyond Emails And Notices

The National Company Law Tribunal (NCLT), Hyderabad Bench, has recently refused to grant a fourth extension to a Liquidator after finding that his efforts to enforce orders against the suspended directors had substantially remained confined to emails and notices.

The bench comprising Judicial Member Rajeev Bhardwaj and Technical Member Sanjay Puri observed, “Issuance of correspondence, by itself, cannot be regarded as execution or enforcement of an order passed by this Adjudicating Authority.”

It held that the Liquidator of Tirumala Hills Asphalat Pvt Ltd was expected to take all lawful and effective steps to secure compliance with orders directing recovery of money and handover of the Corporate Debtor's assets.

The Liquidator had sought a further six-month extension from September 6, 2026. This was the fourth extension sought in the liquidation proceedings, with the Liquidator citing continued non-cooperation by the suspended directors in handing over the Corporate Debtor's documents, records, and assets.

The tribunal found that almost one-and-a-half years had passed since the orders were issued, yet the record did not disclose any effective or substantive step by the Liquidator towards their execution and enforcement, recovery of the amount directed to be paid, or securing custody and control of the Corporate Debtor's assets.

One order, passed on April 9, 2025, required the suspended directors to hand over the Corporate Debtor's assets, including its plant and machinery. Another order, dated April 4, 2025, required them to contribute ₹1,00,80,42,880.92 towards the assets of the Corporate Debtor.

The Liquidator informed the tribunal that the suspended directors were contacted by email on April 10, 2025, followed by another communication on May 24 and a notice on December 11. The suspended directors had also filed an application seeking recall of the April 9 order.

The tribunal noted that the amount directed to be contributed under the April 4 order remained unpaid. It also recorded that a suspended director had attended a meeting of the Stakeholders' Consultation Committee on April 16, 2025.

The bench found that the efforts substantially remained confined to correspondence. “No material has been placed before us to demonstrate that any such substantive step was taken during the period that has elapsed,” it observed.

The tribunal also rejected reliance on the suspended directors' continued non-cooperation as a basis for successive extensions. It observed that such extensions could not be sought when the orders passed to address the non-cooperation had themselves not been effectively pursued.

The pendency of an application seeking recall of an order did not justify inaction either. Unless the operation or implementation of the order had been stayed or otherwise interdicted by a competent forum, the Liquidator was required to proceed in accordance with law. The bench noted that no stay on the operation or execution of the April 4 and April 9 orders had been brought to its notice.

Liquidation, the tribunal observed, contemplates expeditious realisation of the Corporate Debtor's assets and distribution of the proceeds in accordance with law. It cannot be permitted to continue indefinitely through successive extensions on substantially repetitive grounds, particularly where the delay has, at least in substantial measure, resulted from the failure to take timely and effective steps to implement orders already passed.

The bench further observed that the issue was not merely that some assets or amounts remained to be recovered. More significantly, despite specific orders having been passed almost one and a half years earlier, the Liquidator had failed to demonstrate meaningful progress towards their execution and enforcement.

It held that the responsibility for conducting the liquidation within the statutory framework rested with the Liquidator and could not be shifted entirely to the suspended directors by referring to their non-cooperation.

The bench therefore concluded that continuing with the existing Liquidator would not be conducive to the expeditious completion of the liquidation process and directed his replacement.

At the same time, the tribunal noted that certain assets were yet to be taken into custody and substantial amounts remained to be recovered. It therefore extended the liquidation period by a further six months from September 6, 2026, so that the remaining process could be completed under the supervision of a new Liquidator.

Venkat Narsinga Rao Kalvakota was appointed as the new Liquidator. The tribunal directed him to secure custody and control of all the Corporate Debtor's assets, including its plant and machinery; take necessary steps for enforcement and execution of the earlier orders; recover the ₹1,00,80,42,880.92 contribution; and complete the remaining liquidation process expeditiously and, as far as possible, within the extended period.