Supreme Court of India has provided key clarifications on insolvency law, notably in Rakesh Bhanot vs. M/s. Gurdas Agro Private Limited, where it ruled that the interim moratorium under Section 96 of the Insolvency and Bankruptcy Code (IBC) does not apply to criminal proceedings for cheque dishonour under Section 138 of the Negotiable Instruments Act, 1881. The Court emphasized that such proceedings are penal actions, not debt recovery, and that a personal guarantor’s statutory liability remains. In another case, Kalyani Transco vs. Bhushan Power and Steel Limited, the court rejected a resolution plan, holding that the National Company Law Appellate Tribunal (NCLAT) lacks judicial review powers over actions by the Enforcement Directorate under the PMLA and directed the initiation of liquidation proceedings. The court also clarified that secured creditors cannot claim priority over assets attached under the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (MPID Act) prior to the commencement of a moratorium. Additionally, the NCLAT affirmed that the Adjudicating Authority (AA) cannot interfere with a company’s decision to replace its liquidator in a voluntary liquidation.
Insolvency and Bankruptcy News
Insolvency and Bankruptcy Board of India
The Quarterly Newsletter of the Insolvency and Bankruptcy Board of India
April-June, 2025 |Vol.35
Orders
F.1 Supreme Court
Rakesh Bhanot Vs. M/s. Gurdas Agro Private Limited [Criminal Appeal No. 1607 of 2025]
The appellant who was the director/ personal guarantor to CD had issued a few cheques for discharge of liabilities of their legally enforceable liability. As the said cheques were dishonoured for insufficient funds, proceedings under section 138 of the Negotiable Instruments Act, 1881 (NI Act) before the Judicial First Class Magistrate Court were initiated by an operational creditor against the personal guarantor to the CD. Thereafter, the personal guarantor to CD had filed an application before AA under section 94 of IBC. However, the application filed by the personal guarantor to CD before the Judicial First Class Magistrate Court seeking stay on the section 138 NI Act proceedings in view of the interim moratorium under section 94 of IBC, was dismissed. Appeal filed against the said order before the Punjab & Haryana HC was also dismissed. On further appeal, the issue for consideration before SC was whether proceedings under section 138 of NI Act, for cheque dishonour, should be stayed with the filing of application under section 94 of IBC and consequent application of interim moratorium under section 96 of the IBC. SC observed that the moratorium under sections 96 and 101 of the Code is intended to protect debtors from civil debt recovery actions, not criminal prosecutions. It distinguished between moratorium under section 14 of the Code, which protects only the CD and that does not extend to shielding individuals from criminal liability under section 138/141 of the NI Act, whereas interim moratorium contemplated under section 96 is to be derived from the object of the act, which is not to stall the proceedings unrelated to the recovery of the debt. The protection is not available against penal actions, the object of which is to not recover any debt. SC observed that the object of moratorium is not to stall criminal proceedings or any other proceedings which are unrelated to the recovery of the debt. SC emphasised that the term “any legal action or proceedings” does not mean “every legal action or proceedings” and must be interpreted to mean only proceedings concerning recovery of debt. Section 138 proceedings aim to uphold the integrity of commercial transactions by holding individuals accountable for cheque dishonour, a criminal act, and are not merely debt recovery actions. SC, while dismissing the appeal, observed that the statutory liability against the directors under section 138 of the N.I. Act, is personal and hence, continues to bind natural persons, irrespective of any moratorium applicable to the CD. The acceptance of the resolution plan under section 31 of IBC or its implementation thereof will have no effect on the prosecution under section 138 of the NI Act, 1881.
Kalyani Transco Vs. Bhushan Power and Steel Limited. & Ors. [Civil Appeal No. 1808 of 2020]
During the pendency of the application filed for approval of resolution plan filed by JSW Steel Ltd (SRA) for Bhushan Power and Steel Ltd (CD) before AA, criminal proceedings against the suspended management of the CD were initiated by the Enforcement Directorate (ED) under the PMLA on 25.04.2019.On 05.09.2019, AA approved the resolution plan submitted by SRA with certain conditions. Post approval of the resolution plan, ED passed a provisional attachment order (PAO) on 10.10.2019 by attaching assets of the CD under the provisions of PMLA. Besides the CoC challenging PAO, SRA also challenged the PAO of the ED and certain conditions imposed by AA in the approved resolution plan before the NCLAT. On 17.02.2020, the NCLAT, while staying the said orders, upheld the resolution plan and dismissed appeals filed by the OCs and ex-promoters of the CD. On appeal, the issues before the SC were as follows: (1) Whether OCs and Ex-Promoters are entitled to file appeals against the NCLAT order under section 62 of the Code and the SRA against the AA order, approving the resolution plan, before the NCLAT? (2) Whether the eligibility of SRA under section 29A of the Code and the compliance certificate under Schedule – I was adequately verified by the RP? (3) Whether NCLAT had any powers of judicial review over the decision taken of ED under the PMLA? (4) Whether the RP filed the application for approval of the plan within the timeline prescribed under section 12 of IBC? (5) Did the plan comply with mandatory requirements, of section 30(2) of IBC and ensured priority payment to OCs, and feasibility, viability, of the plan (6) Can the SRA justify the significant delay (over 2 years) in implementing the plan by citing pending litigation and then claim fait accompli after making delayed payments? SC while rejecting the resolution plan of the SRA, held as follows: (1) Since CIRP is a collective proceeding (in rem) and OCs and ex-promoters are necessary stakeholders in the CIRP of the CD whose appeals have been dismissed by the NCLAT, they are “persons aggrieved” for the purpose of section 62 and their appeals are maintainable before the SC. Moreover, SRA wasn’t ‘aggrieved’ by the approval itself, and none of the grounds under section 61(3) of the Code (e.g., contravention of law, material irregularity by RP, etc) were available to challenge conditions of the resolution plan which were unfavorable to SRA (2) RP has merely reproduced the clauses of the resolution plan and did not submit the Compliance Certificate under Form – H of the Schedule I of the CIRP Regulations, 2016. Moreover, the RP has failed to determine the eligibility of the SRA as required under section 29A of the Code since the document submitted by the RP nowhere stated about eligibility of SRA (3) PMLA being a public law, neither the AA nor the NCLAT is vested with the powers of judicial review over the decision taken by the Government or Statutory Authority in relation to a matter which is in the realm of public law. Thus, the proceedings initiated by the ED cannot be brought within the fold of the phrase “arising out of or in relation to the insolvency resolution” under section 60(5)(c) of the Code. (4) RP utterly disregarded the timeline to complete the CIRP under section 12 on the false pretext of an appeal filed by the PRA which was pending for adjudication before the NCLAT, albeit the NCLAT had permitted the RP to proceed with approval of plan. Moreover, the RP failed to explain the delay of four months in placing the plan before the AA for approval, after the CoC had approved the plan (5) Plan violated regulation 38 of the CIRP Regulations, 2016 by not prioritizing OC payments over FCs and did not ensure compliance of the plan before submitting it to CoC as required under section 30(2) of the Code. (6) SRA has instituted vexatious and frivolous litigations before the AA and NCLAT, which led to delay in the implementation of the resolution plan under the garb of pendency of appeal before the Courts. Further, the SC castigated the CoC for making a volte-face by accepting Rs. 19,350 crores from the SRA at a very belated stage, when they initially implicated the SRA for demonstrating ill-intent and malafides to mislead and misuse the process of Court in order to delay the implementation of the plan. In terms of sub-section (1) of section 33, and in exercise of the jurisdiction conferred under Article 142 of the Constitution of India, the AA was directed to initiate the liquidation proceedings of CD.
SRA filed an SLP seeking leave of SC to file a review petition before the expiry of limitation against SC’s judgment in Civil Appeal No. 1808 of 2020. SC has ordered a status quo on the liquidation of the CD to avoid future legal complications.
National Spot Exchange Limited Vs. Union of India & Ors. [Writ Petition (Civil) No. 995 of 2019]
National Spot Exchange Limited (“NSEL/Decree Holder”) is an electronic commodity trading platform where trading happened in paired contracts, with investors, buying a spot contract and selling a futures for the same commodity, through brokers by following settlement methodology of pay-in obligations to exchange. The NSEL had launched contracts for buying and selling of commodities with different settlement periods, wherein the delivery of the commodity and payment of price (i.e., settlement of transaction) was to be affected by the buying and the selling member as the case may be. Thereafter, the funds “pay – in” obligation would be intimated to the NSEL members whose clients purchased the commodities, and the funds “pay – out” obligation would be intimated to the NSEL members whose clients sold the commodities. Based on the intimation from the exchange, the clients would have to fulfil their respective obligations through the NSEL members, through whom they have traded on the NSEL. In 2013, the NSEL encountered a crisis when 13,000 traders alleged that 24 trading members had defrauded them of an aggregate amount of 5,600 crore by fabricating documents and falsifying records pertaining to warehouse receipts and contracts, which were not backed by any underlying physical commodities. When the investors sought delivery of commodities corresponding to their investments, the borrowers failed to supply the same, as the actual stock of goods available in the warehouses was significantly deficient. Consequently, the ED attached several assets of a few corporates under the PMLA while the Government of Maharashtra acted upon an F.I.R filed against the 24 defaulters and attached properties of the trading members, directors and sister concerns of NSEL under the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (MPID Act). On a petition filed by NSEL, SC, vide order dated 04.05.2022, constituted a High-Powered Committee (S.C. Committee) to execute decrees/awards passed by different Courts across the country and consolidate proceedings for hearing before it. During the course of the proceedings, the following issues came up for consideration before the S.C. Committee (1) Do secured creditors have priority over assets attached under PMLA and MPID Act by virtue of SARFAESI Act, 2002 and RDB Act, 1993? (2) Are properties of judgment debtors and garnishees attached under the MPID Act available for decree execution despite the commencement of moratorium under section 14 of the Code? The S.C. Committee held that since the attached properties are in nature of proceeds of crime under the PMLA Act and the MPID Act, the secured creditors cannot claim priority over the assets of the judgment debtors. Moreover, the S.C. Committee held that properties which were attached under section 4 of the MPID Act prior to imposition of the moratorium of the judgement debtor or Garnishee (PG) under section 14 or section 96 of the Code, such properties were not liable to be made part of insolvency resolution process of the CD or PG, and could be available to the S.C. Committee for recovery of money. However, as regards the properties which were sought to be attached after the commencement of moratorium, which were not yet attached under section 4 of the MPID Act, the S.C. Committee concluded that the decree holder would be entitled to pursue its claim as a FC in accordance with the Code. The SC upheld the orders of the S.C. Committee on the ground that the secured creditors have no priority over assets attached under the MPID Act, since the assets of NSEL do not qualify as “debt” under section 26E of the SARFAESI Act. Moreover, the properties attached under MPID Act before the moratorium imposed under the Code vests with the competent authority established under the MPID Act. SC concluded that, irrespective of the enactment of the SARFAESI Act and the RDB Act in the Central List (List-I) of the Indian Constitution and having been enacted by Parliament, they could not be permitted to override the MPID Act, since it is validly enacted under the State List (List – II) and shall amount to denuding the State of its legislative power to enact and enforce legislation under Article 246 of the Constitution. In addition to it, SC concluded that the overriding effect of section 238 of the Code shall not apply, since there is no repugnancy between the Code and the MPID Act as required under Article 254 of the Constitution. SC, while upholding the decision of the S.C. Committee, held that properties of the judgment debtors and garnishees attached under the provisions of the MPID Act, would be available for the execution of the decrees against the judgment debtors by the S.C. Committee, despite the provision of moratorium under section 14 of the Code.
Perfect Infraengineers Limited Vs. Technology Development Board [SLP (C) No(s). 13015 of 2025]
Issue for consideration before Hon’ble Supreme Court was whether admission order passed by AA against a CD can be directly challenged before it under Article 136 of the Constitution, which provides discretionary power to SC to grant special leave to appeal against any judgment, decree, determination, sentence, or order of any court or tribunal in India. SC while dismissing the appeal filed by the CD held that the grievances regarding the admission of a section 7 petition should be addressed through an appeal to the NCLAT, not through a special leave petition under Article 136 of the Constitution as the bar of limitation cannot be obviated or circumvented by taking recourse of proceedings under Article 136 of the Constitution when a statutory appeal is available.
F.2 National Company Law Appellate Tribunal
Go Airlines (India) Private, (CD), a low-cost airline, filed a petition for CIRP under section 10 of the Code, which was approved by the AA. A resolution plan filed by Busy Bee Airways Private Limited (PRA) was rejected by the CoC since it did not meet the eligibility criteria to submit a resolution plan for the CD. Meanwhile, the aircraft lessors approached Delhi HC seeking deregistration of the aircrafts lying with the CD and permission to export them, which was
approved by the HC. As no viable resolution plans for the CD were available, AA ordered liquidation of CD based on the approval of CoC. In an appeal filed by the PRA, the issues before the NCLAT were as follows: (1) Was the CoC’s decision to liquidate Go Airlines under section 33(2) IBC valid? (2) Can the CoC authorize the liquidator to sell the CD’s assets on a standalone basis, in a slump sale, or in parcels without prioritizing a going concern sale? (3) Is there an opportunity for a compromise or arrangement under section 230 of the Companies Act, 2013, during liquidation? The NCLAT while disposing the appeal, upheld the liquidation of the CD as the powers given to the CoC to take decision for liquidation is very wide, which can be exercised immediately after constitution of the CoC in consonance with section 33 (2) of the Code. It observed that the CoC is vested with the authority to direct the liquidator to sell the CD’s assets on a standalone basis, in a slump sale, or in parcels without prioritizing a going concern sale. NCLAT further observed no infirmity in the order of liquidation of, since the CoC had explored the option of sale of the CD as a going concern under regulation 32(e) of Liquidation Regulation and sale of the business of the CD as a going concern under regulation 39 of the CIRP Regulations, 2016, before directing the CD into liquidation. Lastly it held that the PRA has the liberty to seek compromise or arrangement under section 230 of the Companies Act, 2013 or regulation 2B of the Liquidation Regulations within the period of 90 days from order of liquidation.
Suumaya Group (third party) had approached Max Publicity & Communication Private Limited (CD) to coordinate between Veda (third party) and vendors for supply of essential commodities to Veda. Veda supplied those essential commodities to the Government of India as an initiative under their Corporate Social Responsibility (CSR). The CD issued a letter of intent and purchase order to Enviro Home Solutions Private Ltd (vendor and OC) for supplying raw materials to the CD, who in turn will deliver it to Veda. The CD had paid a partial amount to the OC for the amount due. Later, the CD alleged fraud by the OC by fabricating the lorry receipts and while reversing the payments pending, filed a criminal complaint against the OC before the Commissioner of Police, Gurgaon. Consequently, the OC filed a section 9 petition under the Code to initiate CIRP against the CD. The AA, vide order dated 21.01.2025, found no proof of delivery by the OC to the CD and dismissed the petition filed by the OC. AA observed that a fraud as being committed by the CD and directed the Income Tax Department, EOW and SFIO to conduct investigation into the entire transactions relating to CSR obligations of Veda. On appeal filed by the CD, the issues before the NCLAT were as follows (1) whether AA had the jurisdiction to direct statutory authorities for investigation while dismissing the insolvency petition. (2) whether the CD’s actions warranted investigation for alleged fraud in CSR transactions with Veda and Suumaya. The NCLAT observed that the AA, while exercising jurisdiction under section 9 of the IBC also exercised its jurisdiction under the Companies Act, 2013. It noted that the AA, in exercise of powers under section 213 of the Companies Act, 2013, can direct for investigation provided that a reasonable opportunity is afforded to the parties concerned. NCLAT while disposing the appeal held that the reference under section 212 to carry out any investigation of a company’s affairs by SFIO can be made only in accordance with the statutory provisions of Section 212 of the Companies Act and the AA, while exercising jurisdiction under the IBC it cannot issue any direction to SFIO for carrying out investigation.
M/s. Surana Metacast (India) Private Private (CD) availed credit facilities from State Bank of India (FC), which were secured by a personal guarantee of Mrs. Asha Basantilal Surana (PG). As the CD’s loan was declared as NPA, the FC served a demand notice under section 13(2) of the SARFAESI Act, 2002, on the CD and on the PG. Subsequently, FC secured an order under section 14 of the SARFAESI Act and issued a sale notice to take physical possession of secured assets of the CD under the provisions of the SARFAESI Act. Meanwhile, CIRP was initiated by the FC against the CD. Thereafter, the PG filed an application under section 94(1) of the IBC for initiating personal insolvency, which the AA rejected on the ground that it was premature as no specific notice was issued to invoke the guarantee. In appeal filed by the PG, the issue before the NCLAT was whether the notice issued by the FC to PG under section 13(2) notice provided sufficient cause for the PG to file an application for personal insolvency under section 94(1) of the Code. The NCLAT, while allowing the appeal, observed that Clause 7 of the Guarantee Agreement requires that the Guarantors shall forthwith on demand made by the Bank, deposit such sum or security as the Bank may specify for the due fulfilment of their obligations. The said clause does not require any particular mode and manner of the demand notice. As such demand notice issued against the PG demanding them to discharge its liabilities, the guarantee stands invoked. NCLAT held that its judgment dated 05.01.2023 in Amanjyot Singh Vs. Navneet Kumar Jain RP (Company Appeal (AT) (Insolvency) No.961 of 2022) cannot be read to mean that this tribunal had held that the personal guarantee could never be invoked by notice under section 13(2). The decision in Amanjyot was with reference to the specific facts of that case. It further held that for finding out as to whether a notice under section 13(2) invoked the personal guarantee to discharge PG’s liabilities or not, the letters and words of the notice have to be looked into.
Lotus 300 Apartment Owners’ Association Vs. IndusInd Bank Limited & Ors. [CA(AT) (Ins.) No. 1471 of 2022]
AA passed admission orders against Hacienda Projects Private Limited, a developer of the real estate project, under section 7 on an application filed by IndusInd Bank (FC). The said admission order was challenged by the Lotus 300 Apartment Owners’ Association (Association), representing all 330 flats buyers in the project inter alia on the ground that the project is near completion. Issues for consideration before NCLAT was whether the AA’s order admitting CD to CIRP could be set aside, allowing the association to complete the project while keeping the CIRP in abeyance. NCLAT observed that during the CIRP stage, the RP has to perform his role in accordance with provisions of the Code and Regulations made thereunder. In terms of provisions of the Code and Regulations thereunder, the CoC shall constitute primarily of all the homebuyers as a class who are stated to be predominant with 98% voting in the composition of CoC, with a FC having remaining voting share. It is for CoC to decide the future course of action and RP is supposed to act under the advice and directions to the CoC. Considering the fact that 99% of the project has been completed, the NCLAT directed that the remaining work shall be completed by the CoC through RP.
Wakai Hospitality Private Limited Vs. Palak Desai & Anr. [CA (AT) (Ins) No. 524 of 2024]
The appeal was filed by a licensee occupying a commercial property owned by the CD undergoing insolvency under the Code. The licensee challenged the order of AA which had directed it to vacate the premises and pay outstanding license fees to the CD. The appellant brought to the notice of AA that it had entered in to Leave and License Agreement (LLA) with the former management of CD prior to the insolvency commencement date, on the condition of adjusting significant renovation costs against future license fees. The RP of the CD, upon noticing the non-payment of licensee, had terminated the LLA and sought possession of the property. The issues before the NCLAT were (i) whether the AA has jurisdiction to adjudicate upon eviction and recovery of rent, which is typically a matter for civil courts; and (ii) whether an RP has the authority to terminate a contract during the moratorium period under section 14 of the IBC. NCLAT, while dismissing the appeal, held that the AA possesses the necessary jurisdiction to decide on matters pertaining to the assets of the CD. It ruled that an asset owned by the CD, even if in possession of a third party, must be handed over to the RP to ensure maximization of its value. On the second issue, the NCLAT clarified that the moratorium under section 14 is a protective shield for the CD against third-party actions and cannot be used as a sword by a defaulting third party to continue its breach of contract. The RP has a duty to protect the CD’s assets, which includes terminating agreements that are detrimental to the insolvency estate.
Vinod Singh Vs. Chandra Prakash Jain & Ors. [CA (AT) (Ins) Nos. 800 & 801 of 2025]
The shareholders of the corporate person (CP) passed a resolution to replace the existing liquidator with a new one in a voluntary liquidation process. The outgoing liquidator challenged this decision through an IA before the AA who had directed the parties to maintain “status quo” regarding the position of the liquidator, effectively halting the replacement. Subsequently, the AA passed another order de-reserving its final order on the matter. The Director of CP challenged both these orders before the NCLAT. The issue before the NCLAT was whether the AA has the jurisdiction to interfere with the commercial decision of a corporate person to replace its liquidator during a voluntary liquidation process under section 59 of the IBC, and consequently, whether its order to maintain “status quo” was legally tenable. The NCLAT, while allowing the appeal, held that the process for replacement of a liquidator in a voluntary liquidation of a solvent company is governed by a regime entirely different from a liquidation following a CIRP. It clarified that the power to appoint and replace a liquidator “wherever required” rests exclusively with the corporate person by way of passing a resolution, and no approval from the AA is necessary and there is no need for the Director and Shareholder of the CD to communicate any reason for removal of a liquidator. The NCLAT ruled that the AA’s statusquo order was a “transgression of jurisdiction” and was passed in violation of the statutory framework of the IBC. The NCLAT vacated the statusquo order and directed the outgoing liquidator to hand over all records as required by the regulations to the new liquidator for proceeding with the process.
F.3 National Company Law Tribunal
Owing to the repeated defaults by New Tech Imports Private Limited (CD) in repayment of the outstanding dues, the FC formally declared the account of the CD as Non-Performing Asset (NPA) and sent a statutory recall notice under the section 13(2) of the SARFAESI Act, 2002 to the CD and the Guarantors. During the course of proceedings before DRT, the FC filed a petition against the CD to initiate CIRP under section 7 of the Code. DRT, vide order dated 16.11.2024, held that classification of the CD’s account as NPA was illegal since the date of classification of CD’s account as NPA is inconsistent with FC’s own communication and the FC failed to comply with the RBI guidelines while classifying the account of the CD as NPA. The issues before the AA were as follows (1) whether the classification of the account of the CD as NPA can be considered as ‘default’ for the purpose of proceedings under the Code, (2) whether an order passed by the DRT in setting aside the classification of the account as a NPA, has any bearing on the present insolvency proceedings under the Code. AA, while disposing the application held that while the classification of an account as NPA may be indicative of financial distress, mere classification of an account as NPA does not ipso facto translate as ‘default’ under section 7 of the Code, since the Code mandates that the existence of a financial debt and its non-payment must be independently established by the FC. While examining the overriding effect of the Code over the SARFAESI Act under which the DRT exercises jurisdiction, the AA concluded that an order of the DRT setting aside NPA classification does not negate the existence of financial debt or the occurrence of default. AA, while initiating CIRP of the CD, held that the DRT’s jurisdiction is limited to determining whether the lender followed the correct procedure under SARFAESI, and it does not extend to making findings on default under the Code, which is the sole domain of the AA.
Consortium of Karishma Jain, Jupiter City Developers (I) Limited, and Adwaita Navigations Private Limited, Successful Resolution Applicant of XL Energy Limited Vs. National Stock Exchange of India Limited & Ors [I.A (IBC) No. 1726 of 2024 in C.P (IB) No.16/7/HDB/2023]
AA, vide order dated 27.03.2023, initiated CIRP against XL Energy Limited (CD). The resolution plan, as submitted by the consortium of Ms. Karishma Jain (SRA), provided for relisting of CD’s equity shares, since they were compulsorily delisted from the stock exchanges for a period of ten years due to violations under the SEBI (Delisting of Equity Shares) Regulations, 2009. As proposed and approved by the AA, the SRA requested the NSE, BSE, CDSL, and NSDL to relist the CD’s equity shares. However, the NSE rejected the relisting of CD’s equity shares under regulation 40(1)(b) of SEBI Delisting Regulations, 2021. Moreover, CDSL and NSDL did not activate the CD’s credentials required for implementation of the resolution plan, which hindered the allocation of new shares and updation of the new shareholding structure. The issues before the AA were as follows: – (1) whether the resolution plan binds NSEL to relist CD’s equity shares? (2) whether prior offences of the erstwhile management of the CD are extinguished post-approval of the plan. (3) whether IBC overrides SEBI’s Delisting Regulations? AA held that the approved resolution plan binds all stakeholders, including NSE and BSE, under section 31(1) of the Code and neither can raise any demand, condition, or requirement that is inconsistent with or beyond the scope of the said plan. Moreover, AA upheld its jurisdiction to direct relisting or on matters governed by SEBI Regulations. AA concluded that given the overriding effect of section 238 of the Code, all past dues, offences and liabilities of the CD stand extinguished by virtue of section 32 A of the Code and accordingly, allowed the relisting of CD’s equity shares.
Goyal Tea Agencies Private Limited Vs. Shakti Bhog Snacks Limited. [IA-3695-2023 in CP (IB) No. 1713 of 2019]
An application under section 54 of Code was filed by RP of CD-Shakti Bhog Snacks Limited (CD) seeking dissolution of CD as there was no scope for revival of CD. Apart from office of the CD which was found sealed by the ED and a single bank account with a negligible balance of Rs. 3701.81, there was no other asset. ED, which was made party at later stage, opposed such application for dissolution on the grounds that CD is a group company of Shakti Bhog Foods Limited (SBFL), which was under prosecution for default of Rs. 3,269 crore loan and large-scale money laundering. According to the ED, SBSL had actively assisted SBFL in laundering proceeds of crime by issuing bogus invoices, transferring funds to shell companies, and layering illicit funds to project them as legitimate revenue. Dissolution of CD would terminate the legal existence of SBSL, which would frustrate the ongoing criminal prosecution under PMLA. Considering the nature of proceedings, AA observed that that IBC cannot be used to override the PMLA or frustrate lawful investigations and attachments made under it. AA while dismissing section 54 application observed that “It is not the quantum but the character of the proceedings that is determinative. The IBC cannot be used as a mechanism to frustrate or sidestep the legitimate process of law under the PMLA.”
