Introduction
The National Company Law Tribunal, Chennai (‘NCLT’), in Vinod Radhakrishnan Nair v. Employees Provident Fund Organisation[i], decided on an application filed by Vinod Radhakrishnan (‘Applicant’) for the distribution of unsold assets among stakeholders, including preferential, undervalued, fraudulent, and extortionate (‘PUFE’) transactions proceedings falling under the category of ‘not readily realisable assets’ (‘NRRA’).
Facts
The Employee Provident Fund Organization, the Corporate Debtor (‘CD’), was admitted to the corporate insolvency resolution process (‘CIRP’), and the Applicant was appointed as the CD's interim resolution professional (‘IRP’).
The CD was ordered liquidation, and the Applicant was appointed as the liquidator. Subsequently, the Applicant invited claims, formed a stakeholders committee and carried out other functions as per the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.
The Applicant received claims amounting to Rs 1.80 crores, towards which the realised amounts were distributed proportionately. After realising all the assets, the only remaining asset left to realise amounts in the liquidation process was through the application against PUFE transactions.
The NCLT categorised the amounts to be recovered from PUFE transactions as NRRA, after which the stakeholders consultation committee (‘SCC’) permitted assignment through public e-auction of the NRRA.
The Applicant published public notice twice for the assignment of NRRA through auction, which remained unsold.
The Applicant filed this application to distribute NRRA among the stakeholders because there were no bids for auctions, and further delay would result in a delay in liquidation proceedings.
Held
The NCLT approved the liquidator's application to distribute the unsold NRRA after considering the resolution passed in the subsequent SCC meeting to realise NRRA.
Our Analysis
The above order highlights the procedural importance of the realisation of assets in a liquidation process. The liquidator's application for the realisation of an asset for distribution among the stakeholders requires permission from the adjudicating authority (‘AA’) when the asset cannot be sold, assigned, or transferred. Further, the order underlines the power of the AA, which is required to take into consideration the resolutions passed by the different committees as well as the interest of the stakeholders and the shareholders in the liquidation process, having the ultimate power to allow the realisation of an asset but only after the asset is not sold, assigned or transferred owing to its characteristics or circumstances.
End Note
[i] [2024] 165 taxmann.com 347 (NCLT- Chennai).
Authored by Maarij Ahmad, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.
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