On January 16, 2019, the Hon’ble National Company Law Appellate Tribunal passed a judgment in the matter of Ashok B. Jiwrajka, Director of Alok Infrastructure Ltd. v. Axis Bank Ltd. (Company Appeal (AT)(Insolvency) No. 683 of 2018).
Whether initiation of Corporate Insolvency Resolution Process (‘CIRP’) against Holding Company will preclude initiation of CIRP against Subsidiary Company?
Facts in brief
CIRP had been initiated against Alok Industries Ltd. (Holding Company). Subsequently, upon a separate application filed by a financial creditor against Alok Infrastructure Ltd. (Subsidiary of Alok Industries Ltd.), the said Alok Infrastructure Ltd. was admitted into CIRP by an order dated October 24, 2018, passed by the Ld. NCLT, Mumbai Bench.
The Appellant, being a Director of the said Subsidiary Company, i.e. Alok Infrastructure Ltd., filed an appeal against the said order of the Mumbai NCLT. It was contended by Ld. Senior Advocate appearing on behalf of the Appellant that the CIRP against the Subsidiary Company should not continue till the CIRP is decided under Section 31 of the Insolvency and Bankruptcy Code, 2016, for the Holding Company.
It was further submitted on behalf of the Appellant that Resolution Plan had been submitted before the NCLT, Mumbai for the Holding Company as far back as July 2018. However, no decision had yet been taken on the same by the NCLT.
The Hon’ble NCLAT held that the Appellant’s submission cannot be accepted as a separate CIRP had been initiated against the Corporate Debtor, i.e. the Subsidiary Company in this case, and the same was entirely separate from CIRP initiated against Alok Industries Ltd., i.e. the Holding Company. Further, the Hon’ble NCLAT directed the Ld. NCLT to arrive at a decision upon the approved CIRP for the Holding Company within preferably three weeks. However, the Hon’ble NCLAT clarified that, “we make it clear that we have not stayed the Corporate Insolvency Resolution Process initiated against ‘Alok Infrastructure Ltd.’, and the Resolution Professional, the Committee of Creditors and the Adjudicating Authority will continue with the same in accordance with law within the time specified in the law”. The Appeal was thereby dismissed by the Hon’ble NCLAT.
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