NCLT Delhi Rejects Cine Corp Filmdom's Resolution Plan For Stargaze Entertainment, Orders Liquidation

The bench of Judicial Member Ashok Kumar Bhardwaj and Technical Member Atul Chaturvedi observed,

“We also fail to appreciate that how without taking control of the assets of the CD, the RP could take steps under Regulation 36A of IBBI (CIRP) Regulations, 2016. It is also not understood that how the RP could prepare the Information Memorandum (IM) in terms of the provisions of Section 29 of IBC, 2016, when he was unable to take control of entire assets of the CD, as per Section 18 and 25(2)(a) of the Code. The entire process has been conducted in extremely opaque and absurd manner.”

The Corporate Insolvency Resolution Process (CIRP) was initiated on 13 May 2024 by J.C. Flowers Asset Reconstruction Pvt. Ltd. against Stargaze Entertainment for default of over Rs 70 crore.

Subsequently, the debt was assigned to CFM Asset Reconstruction Pvt. Ltd., which became the sole financial creditor and sole member of the Committee of Creditors (CoC). Claims from operational creditors, including statutory authorities and suppliers, were admitted, totalling over Rs 103 crore.

During CIRP, valuation reports pegged the fair value of the Corporate Debtor at Rs 123.62 lakh and liquidation value at Rs 82.33 lakh. However, several assets, including a Rs 50 crore deposit with the holding company, were not factored into the valuation.

The RP also filed multiple applications seeking possession of assets, but later withdrew them. Cine Corp Filmdom Pvt. Ltd. initially submitted a resolution plan offering Rs 50 lakh, with Rs 49.5 lakh earmarked for the financial creditor and nominal amounts for operational creditors.

This plan was rejected by the Tribunal on 8 July 2026, noting that while the SRA stood to benefit by nearly Rs 3 crore from pending asset recoveries, creditors were offered only Rs 50 lakh. A revised plan was submitted later, marginally increasing the value to Rs 50.25 lakh. Despite these changes, the Tribunal found the plan inadequate and inconsistent with statutory requirements.

The Bench noted that the RP failed to take control of significant assets, including the Rs 50 crore deposit with the holding company, undermining the Information Memorandum and valuation process. It was also noted that applications seeking possession of assets were withdrawn, yet the RP proceeded with plan approval.

The Tribunal observed that the CIRP was conducted in an extremely opaque and absurd manner, with no clarity on control of assets. It stressed that commercial wisdom of the CoC must be exercised judiciously and in line with the objectives of the Code, not merely on the principle of “something is better than nothing.”

It held that commercial wisdom represents the CoC's practical and informed business judgment concerning the economic viability and feasibility of a resolution plan, and must be understood in both its micro and macro dimensions.

The bench observed that a decision that merely seeks to secure some recovery for the financial creditor, while leaving only “peanuts” for other creditors, cannot automatically be characterised as an exercise of commercial wisdom.

Holding that the foundation of the CIRP was vitiated, the Tribunal rejected the revised resolution plan and ordered liquidation of Stargaze Entertainment Pvt. Ltd and appointed Gorang Moudgil as the liquidator

However, it directed that in the liquidation process, distribution of recoveries should first match the amounts earmarked in the resolution plan for the financial creditor, statutory authorities, and operational creditors. Only thereafter should residual amounts be distributed under Section 53 of the Code.

For Appellants: Advocate Kritya Sinha

For Respondents: Advocates Mohit Paul, Rangoli Seth, Rohit