NCLT Ahmedabad Orders Liquidation of Rainbow Papers After Failed Implementation Of Resolution Plan

The Ahmedabad Bench of the National Company Law Tribunal (NCLT) on 7 October ordered the liquidation of Rainbow Papers Limited after finding that the failure to implement the approved resolution plan had left the company in prolonged uncertainty.

A Bench of Judicial Member Chitra Hankare and Technical Member Dr. V. G. Venkata Chalapathy passed the order on an application seeking liquidation and appointment of Vikash Jain as liquidator.

Rainbow Papers was admitted into the Corporate Insolvency Resolution Process (CIRP) on 12 September 2017 pursuant to an application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Tribunal approved a resolution plan dated 26 May 2018, subsequently amended through an addendum, on 27 February 2019.

Following approval, control of the company was handed over to Kushal Limited, and the erstwhile Resolution Professional relinquished management. However, disputes arose over implementation of the resolution plan.

The National Company Law Appellate Tribunal initially upheld the approval order, but the Supreme Court subsequently set aside the NCLAT's order and the approved resolution plan. The Supreme Court dismissed a review petition filed by financial creditor Indian Overseas Bank on 31 October 2023.

The applicant submitted that the CIRP had remained in abeyance from February 2019 until the filing of the present application. It contended that the Committee of Creditors (CoC) had not sought an extension of the CIRP, which commenced on 12 September 2017, and that the process had effectively terminated upon approval of the resolution plan. However, the plan was never implemented following its rejection by the Supreme Court.

Further, it submitted that the corporate debtor's debts and security interests had been assigned between September 2023 and March 2024. Following orders passed by the Tribunal in June 2026, the creditors convened meetings to determine the future course of action, and the applicant was substituted in place of Indian Overseas Bank.

Financial creditors holding 89.95% of the voting share resolved to liquidate the corporate debtor and recommended Vikash Jain's appointment as liquidator. The successful resolution applicant also expressed no objection to the commencement of liquidation proceedings. The State Tax Department submitted that its dues would remain subject to the outcome of a pending curative petition.

The Bench identified two key considerations: the company's affairs had been handed over to the successful resolution applicant, which no longer had any representative to oversee its assets and pending litigation; and the CoC members had assigned their debts in favour of the applicant.

It also noted that certain members of the suspended management had filed separate applications under personal insolvency proceedings. In view of these circumstances, the Tribunal held that the application deserved to be allowed and a liquidator appointed on a priority basis.

Accordingly, the NCLT directed the immediate commencement of liquidation proceedings against Rainbow Papers Limited and appointed Vikash Jain as liquidator.