NCLAT confirms liquidation and rejects Section 12A withdrawal after liquidation order

The National Company Law Appellate Tribunal (NCLAT), New Delhi, in Gokul Aggarwal Vs Bank of India, has reaffirmed a critical principle under the Insolvency and Bankruptcy Code, 2016 (IBC): once a corporate debtor enters liquidation, withdrawal of proceedings under Section 12A is not legally available. At that stage, settlement can only be pursued through a scheme under Section 230 of the Companies Act, 2013, read with Regulation 2B of the Liquidation Regulations.

The appeal before the NCLAT challenged an order dated 21.02.2024 passed by the National Company Law Tribunal (NCLT), Mumbai, whereby:

  • IA No. 2471 of 2020, filed by the Resolution Professional (RP) of Chamber Constructions Private Limited (the Corporate Debtor), seeking liquidation, was allowed;
  • IA No. 924 of 2021, filed by Bank of India as financial creditor, was also allowed; and
  • IA No. 41 of 2024, seeking to keep the liquidation-related applications in abeyance, was dismissed.

The Appellant, Mr. Gokul Aggarwal, a promoter and member of the suspended board of RNA Corp Pvt. Ltd. (the principal borrower and holding company of the Corporate Debtor), assailed these directions on multiple grounds, including pendency of proceedings before the Supreme Court and an alleged intention to proceed under Section 12A.

Background: Parallel CIRPs and guarantee structure

Corporate debtor and principal borrower relationship

  1. CIRP against Chamber Constructions Private Limited

    • Company Petition (IB) No. 3962/2018 was initiated by Bank of Baroda under Section 7 of the IBC against Chamber Constructions Private Limited.
    • The application was admitted, and the Corporate Insolvency Resolution Process (CIRP) commenced on 16.07.2019.

  2. Role of RNA Corp Pvt. Ltd.

    • RNA Corp Pvt. Ltd. (RNA Corp) was the holding company of the Corporate Debtor.
    • RNA Corp was also the principal borrower in respect of loans for which Chamber Constructions Private Limited had extended a corporate guarantee.

  3. Bank of India’s claim and initiation of CIRP against RNA Corp

    • Bank of India lodged a claim of Rs. 81,58,50,645.75/- in the CIRP of Chamber Constructions Private Limited, based on the corporate guarantee for loans advanced to RNA Corp.
    • The RP (Respondent No. 4) accepted this claim.
    • Separately, Bank of India filed Company Petition (IB) No. 909/2019 under Section 7 against RNA Corp for the very same underlying debt.
    • CIRP against RNA Corp was admitted on 26.11.2019.

  4. Constitution of Committee of Creditors (CoC)

    • The financial creditors of the Corporate Debtor included Respondent Nos. 1, 2 and 3.
    • Their voting shares in the CoC were:
      • Respondent No. 1 – Bank of India: 68.79%
      • Respondent No. 2 – Bank of Baroda: 25.02%
      • Respondent No. 3 – another financial creditor: 6.19%

Earlier litigation by the Appellant

The Appellant, Mr. Aggarwal, being part of the suspended board of RNA Corp, had already pursued several challenges:

  • Filed CA (AT) (Ins.) No. 1504/2019 before NCLAT, challenging admission of CIRP against RNA Corp – dismissed on 07.02.2020.
  • Filed Review Application No. 15/2020 before NCLAT – dismissed on 07.12.2020.
  • Filed Civil Appeal No. 827-828/2021 before the Supreme Court, questioning whether the same financial creditor could maintain simultaneous CIRPs against both principal borrower and corporate guarantor for the same debt.

The key contention before the Supreme Court was that once Bank of India had submitted and had its claim admitted in the CIRP of the guarantor (Chamber Constructions Private Limited), a separate CIRP against RNA Corp for the same dues was not maintainable.

The Supreme Court passed an interim order on 12.04.2021:

“Issue notice. Counter affidavit, if any, be filed in the meanwhile. In the meanwhile, status quo, as it exists today, shall be maintained by the parties. Tag along with C.A. No.878/2019. List on 01.07.2021.”

This status quo order related to the CIRP of RNA Corp, the principal borrower.

Application before NCLT to stall liquidation

Relying on the pendency of the above Supreme Court proceedings, an application, IA No. 41/2024, was moved before the NCLT seeking to hold in abeyance: