NCLAT Upholds Liquidation of Vrundavan Ceramic, Rejects Resolution Plan After Months of Unexplained Delay
The Principal Bench dismissed appeals by the resolution applicant and erstwhile RP, finding that delays of many months in refiling the plan approval application left liquidation as the only option.
The National Company Law Appellate Tribunal's Principal Bench at New Delhi has dismissed two connected appeals challenging the liquidation of Vrundavan Ceramic Private Limited, a corporate debtor admitted into the Corporate Insolvency Resolution Process in January 2020. The NCLT Ahmedabad had rejected a resolution plan approved by the Committee of Creditors and ordered liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016. The appellants — resolution applicant Lorenzo Vitrified Tiles Private Limited and the erstwhile Resolution Professional Shri Arvind Gaudana — argued that the delay in refiling the plan approval application was not attributable to them. The Appellate Tribunal disagreed, finding that the CoC and the RP had allowed months to pass without adequate action after a clear deadline set by the Adjudicating Authority, and that the adverse observations recorded against the RP were grounded in the facts on record.
The CIRP History and the Remand That Triggered the Dispute
Vrundavan Ceramic was admitted into CIRP on 21 January 2020 on an application filed by State Bank of India under Section 7 of the Code. SBI was the sole financial creditor and constituted the entire CoC. Shri Arvind Gaudana was appointed Resolution Professional at the first CoC meeting on 20 February 2020.
The CIRP ran through multiple extensions and exclusions, partly on account of the Covid-19 pandemic. Three resolution applicants eventually submitted plans. After negotiations across several CoC meetings, the plan submitted by Lorenzo Vitrified Tiles was approved by the CoC with 100% voting share on 3 August 2021. The RP filed IA No. 638 of 2021 before the NCLT Ahmedabad for approval of the plan.
That application remained pending before the Adjudicating Authority for over two years. On 8 November 2023, the NCLT remanded the matter back to the CoC for reconsideration in light of the Supreme Court's judgment in State Tax Officer v. Rainbow Paper Ltd., directing that the revised plan be refiled by 30 November 2023.
The CoC's first meeting after the remand order was convened on 4 December 2023 — four days after the deadline had already expired. SBI asked Lorenzo Vitrified to revise its offer. The resolution applicant declined by letter dated 5 January 2024. The CoC then reaffirmed the original plan in its 21st meeting on 25 January 2024. The RP filed a fresh plan approval application on 4 March 2024, which was held up at the Registry level due to objections. The application eventually came before the Adjudicating Authority as IA No. 33 of 2024, filed on 3 July 2024. The NCLT rejected it and ordered liquidation by the impugned order dated 27 September 2024.
What Each Side Argued Before the Appellate Tribunal
Lorenzo Vitrified, in Company Appeal (AT) (Ins) No. 1950 of 2024, contended that the Adjudicating Authority had rejected the plan on hyper-technical grounds of delay and that no fault could be attributed to the resolution applicant. It argued that the original plan approval application had been filed within the time limit and had remained pending before the NCLT for about two years through no fault of the appellant. The subsequent delay in refiling was caused by the CoC's own deliberations and by Registry-level objections. Reliance was placed on Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors., (2020) 8 SCC 531, Swiss Ribbons Pvt. Ltd. v. Union of India, AIR 2019 SC 739, and State Bank of India & Ors. v. Consortium of Murari Lal Jalan, (2025) 4 SCC 354, among others. It was also submitted that SBI, having approved the plan as the sole CoC member, was precluded from supporting the liquidation order before the Appellate Tribunal.
The erstwhile RP, in Company Appeal (AT) (Ins) No. 1952 of 2024, challenged the adverse observations recorded against him. He submitted that the plan had been approved by 100% of the CoC and that the rejection was solely on technical grounds. He argued that the deadline of 30 November 2023 in the remand order was directory, not mandatory, and that timelines not contained in the IBC itself are not mandatory, relying on Surendra Trading Company v. Juggilal Kamlapat Jute Mills Co. Ltd. & Ors., (2017) 16 SCC 143. He also submitted that the appeal had been filed pursuant to a resolution passed by the CoC in its 21st meeting and that he had locus to file it.
SBI, as Respondent No. 1, supported the impugned order. It submitted that the RP had never communicated the remand order and its deadline to the CoC in time, that the first CoC meeting was convened only after the deadline had passed, and that the CIRP period had already expired. SBI argued that the RP lacked locus to file an appeal as an aggrieved person under Section 61 of the Code, relying on Regen Powertech Pvt. Ltd. v. Giriraj Enterprises, Civil Appeal Nos. 5985-6001 of 2023. It further submitted that the CoC retained the commercial wisdom to opt for liquidation before a plan is confirmed by the Adjudicating Authority.
An intervener, Intec Capital Ltd., had its claim admitted as an unsecured financial creditor after earlier proceedings before the Appellate Tribunal. It submitted that it had dissented on the revised distribution agenda at the 21st CoC meeting and that a related appeal, CA (AT) (Ins) No. 771 of 2023, remained pending.
The Legal Framework: Sections 12 and 33 of the Code
The Appellate Tribunal set out the text of Section 12 and Section 33 of the Insolvency and Bankruptcy Code, 2016 as the central provisions for its analysis. Section 12 prescribes a 180-day period for completion of CIRP, extendable by up to 90 days on a 66% CoC vote, with a mandatory outer limit of 330 days from the insolvency commencement date including extensions and time taken in legal proceedings. Section 33(1)(a) requires the Adjudicating Authority to pass a liquidation order where it does not receive a resolution plan before the expiry of the maximum period permitted under Section 12.
The Tribunal drew on the Supreme Court's analysis in Essar Steel to the effect that the word “mandatorily” in the 330-day provision had been struck down as manifestly arbitrary, but that 330 days remains the ordinary outer limit. Extension beyond that limit is available only in exceptional cases where the delay is attributable to the tardy process of adjudication rather than to the parties. The Tribunal also noted the Supreme Court's caution in Murari Lal Jalan that the power to extend time under Rule 15 of the NCLT and NCLAT Rules must not be exercised mechanically and that multiple extensions can undermine the economic feasibility of a resolution plan.
How the Tribunal Reasoned
The Appellate Tribunal found that the delay in the present case was not of the kind that could attract the exceptional relief contemplated in Essar Steel. The Adjudicating Authority had set a clear deadline of 30 November 2023 for refiling the plan approval application. The RP did not convene the first CoC meeting until 4 December 2023, after that deadline had already passed. Even after the CoC reaffirmed the original plan on 25 January 2024, the plan approval application was not placed before the Adjudicating Authority for many months. The Tribunal noted that while the RP claimed to have filed an application on 4 March 2024, there was no material on record to establish this, and the defects raised by the Registry were admittedly not cleared for months. The plan approval application came before the NCLT only seven to eight months after the remand order of 8 November 2023.
The Tribunal observed that one of the primary considerations behind the IBC's emphasis on speedy resolution is to minimise the devaluation of the corporate debtor's assets, and that further delay in arriving at a decision would only reduce asset value. It also noted that SBI, holding the majority voting share in the CoC, was supporting the impugned liquidation order before the Appellate Tribunal.
On the adverse observations against the RP, the Tribunal held that they were based on the facts of the case and could not be said to have been made without material or basis. The RP's appeal on that ground was therefore also rejected.
On the question of SBI being precluded from supporting liquidation after having approved the plan, the Tribunal did not accept that argument as a ground to interfere, given the overall delay and the expired CIRP period.
Order
Both Company Appeal (AT) (Ins) No. 1950 of 2024 filed by Lorenzo Vitrified Tiles Private Limited and Company Appeal (AT) (Ins) No. 1952 of 2024 filed by the erstwhile Resolution Professional Shri Arvind Gaudana were dismissed as being without merit. No order as to costs was made. All pending interlocutory applications were closed.