SCC's Role In Liquidation Only Consultative, Liquidator Has Final Say: NCLT Bengaluru

The National Company Law Tribunal (NCLT) at Bengaluru has directed the liquidator of an infra company to accept a one-time settlement (OTS) offer of Rs 2 crore to break a prolonged deadlock in the liquidation process, holding that the Stakeholders' Consultation Committee (SCC) is only consultative in nature and the ultimate decision-making authority rests with the liquidator.

A coram of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada passed the order.

Bhuvana Infra Projects Private Limited was admitted into the corporate insolvency resolution process on January 17, 2018, and was later ordered to be liquidated on December 10, 2019, with Vijay Pitamber Lulla appointed as liquidator. While certain assets were realised, dues of Rs 10.80 crore remained outstanding from Prisha Properties India Private Limited, now known as Orchid Elite Developers Private Limited (OEDPL).

The liquidator received two proposals to realise the receivables. The first was a one-time settlement offer of Rs 2 crore from OEDPL. The second was a proposal to assign the receivables as Not Readily Realisable Assets (NRRA) to Markrise Consultants Private Limited. Both proposals were placed before the SCC.

However, despite multiple meetings and e-voting, the SCC failed to take any decision, with a majority of stakeholders abstaining. This resulted in a stalemate and delay in completion of the liquidation process.

Despite earlier directions of the Tribunal and repeated efforts by the liquidator, no consensus emerged. The liquidator therefore approached the Tribunal seeking directions permitting him to act on either of the proposals to conclude the liquidation.

The Tribunal examined Regulation 31A(10) of the IBBI (Liquidation Process) Regulations, 2016 and the Supreme Court's ruling in R.K. Industries (Unit-II) LLP v. H.R. Commercials Private Limited, observing:

“Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016 provides that the SCC is only consultative in nature, and the ultimate decision-making authority rests with the Liquidator.”

Noting that both proposals were valid and subsisting, the Tribunal further observed:

“This Tribunal, in exercise of powers under Section 60(5) of the IBC, can issue necessary directions to ensure effective completion of liquidation and maximization of value of assets.”

The tribunal also noted that the SCC had remained passive and failed to take any decision, resulting in a prolonged stalemate, with liquidation costs continuing to mount without any realisation.

Accordingly, it directed the liquidator to accept the OTS proposal of Rs 2 crore submitted by OEDPL as full and final settlement of the outstanding dues of Rs 10.80 crore.

It further clarified that in the event of failure of the settlement within the stipulated period, the liquidator would be at liberty to assign the receivables as NRRA to Markrise Consultants Private Limited in accordance with its proposal.

For Applicant: Advocate Raina Birla