NCLAT Upholds Liquidation of Vrundavan Ceramic Pvt. Ltd., Cautions Against Delays In IBC Resolution

The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) on 20 May dismissed two connected appeals filed by Lorenzo Vitrified Tiles Pvt. Ltd. (Successful Resolution Applicant) and Arvind Gaudana (Resolution Professional of Vrundavan Ceramic Pvt. Ltd.) and upheld an Order of the Ahmedabad National Company Law Tribunal (NCLT) directing liquidation of the corporate debtor.

Judicial Member Justice Mohd Faiz Alam Khan and Technical Member Ajai Das Mehrotra held that the Insolvency and Bankruptcy Code, 2016 requires strict timelines and that stakeholders cannot delay resolution in a manner that reduces the value of the corporate debtor's assets. The Bench observed:

“The timely action and the speed by which the resolution process of the CD must travel has been enshrined in various provisions of the Code and Regulations made thereunder as well as in catena of judgments passed by the Hon'ble Supreme Court and this Appellate Tribunal.”

Vrundavan Ceramic Pvt. Ltd. was admitted into the Corporate Insolvency Resolution Process (CIRP) on 21 January 2020 on an application filed by State Bank of India (SBI), its sole financial creditor, under Section 7 of the Insolvency and Bankruptcy Code, 2016. Arvind Gaudana was appointed as Resolution Professional.

The CIRP underwent multiple extensions due to COVID-19 disruptions. The statutory timeline of 330 days, including exclusions and extensions, expired on 11 May 2021 and was extended up to 10 August 2021.

In August 2021, the Committee of Creditors (CoC), comprising only SBI, approved the resolution plan submitted by Lorenzo Vitrified Tiles with 100% voting share, and the Resolution Professional filed an application before the NCLT seeking approval of the plan. In November 2023, the NCLT remanded the matter to the CoC for reconsideration in view of the Supreme Court's decision in Rainbow Paper.

The first CoC meeting after remand was convened on 4 December 2023, after the stipulated timeline of 30 November 2023, and SBI sought additional time to examine the plan. Further meetings were held in January 2024, and the CoC reaffirmed the resolution plan on 25 January 2024. The Resolution Professional again moved the application for approval of the resolution plan, which the NCLT rejected, leading to the present appeals.

Lorenzo Vitrified Tiles contended that it had acted diligently throughout and that the initial approval application was filed within time, but remained pending for nearly two years before the adjudicating authority due to procedural issues and registry defects. It further argued that the delay was not attributable to the applicant.

The Resolution Professional submitted that the resolution plan had been approved by the CoC with 100% voting share and should not have been rejected on technical grounds. It also contended that statutory timelines under the IBC are directory and not mandatory, and that liquidation should be avoided where a viable resolution plan exists.

SBI opposed the appeals and supported the NCLT order, submitting that once the CIRP period had expired, liquidation was the only permissible course. It also questioned the maintainability of the appeal filed by the Resolution Professional.

The NCLAT held that the IBC mandates completion of CIRP within 330 days, including the time taken in legal proceedings, and that timelines cannot be ignored. The Bench observed:

“…the second proviso attached with Section 12 also provides that the Insolvency Process shall mandatorily be completed within a period of 330 days from the Insolvency commencement date including any extension of the period of Corporate Insolvency Resolution Process granted under this Section and the time taken in legal proceedings in relation to the Resolution Process.”

The Tribunal noted that after the remand order dated 8 November 2023, the resolution plan approval application was ultimately placed before the Adjudicating Authority on 5 July 2024, after remaining in registry defects.

It also recorded that although the CoC had already reaffirmed the resolution plan in January 2024, there was a delay of more than eight months from the remand timeline due to the matter remaining in defects at the registry and not being promptly cured. Further, that the first meeting after remand was convened beyond the stipulated deadline.

The Bench observed that stakeholders cannot “sleep over” resolution plans and allow value erosion of the corporate debtor's assets, reiterating that timely resolution is central to the scheme of the IBC. It further observed that the Bankruptcy Law Reforms Committee, 2015 emphasised that speed is critical to insolvency resolution and that delays defeat the objective of value maximisation.

Accordingly, the NCLAT upheld the NCLT's order and dismissed both appeals.

For Appellants: Advocates Arjun Sheth, Shubhanshu Tiwaru and Somya Jain

For Resppndents: Advocates Harshit Khare, Prafful Saini, Ayuj Agrawal, for SBI