First liquidation order under the Insolvency Code passed by the NCLT

After admitting the first resolution plan, the Hyderabad Bench of the NCLT has, in the same week, orally pronounced the first liquidation order under the Insolvency and Bankruptcy Code, 2016..VNR Infrastructures Ltd., the corporate debtor, had filed for initiation of insolvency resolution process in December 2016, under section 10 of the Code, after its proceedings at the BIFR stood abated due to notification of provisions of the Code. The BIFR had also concluded that VNR was a sick company..In February, the NCLT passed an order admitting the application and appointed an interim resolution professional (IRP)..Interestingly, the Promoter of the Company is Vakati Narayana Reddy, an MLC (Member of Legislative Council from A.P.), who was suspended from TDP in May 2017, following a cheating and loan default case registered against him and his company by the CBI..The Committee of Creditors (CoC), which is constituted under section 18 of the Code, was unable to arrive at a resolution plan to revive the corporate debtor whose net worth has been completely eroded. While the IRP sought to extend the moratorium period by 90 days by invoking section 12 of the Code, the CoC unanimously rejected for any such extension..IFCI Ltd, the secured (financial) creditor, which has cumulative exposure of over 25% of VNR’s debt, was also simultaneously proceeding against the corporate guarantors under provisions of the SARFAESI Act, 2002. While VNR opposed these proceedings in view of the moratorium declared under the Code by virtue of filing a stay application, it was contended by IFCI, however, that any protection under the Code extends to the property of the corporate debtor only and not to the properties of personal or corporate guarantors (Read section 14)..In view of the liquidation order passed by the NCLT, stay application filed by VNR opposing the SARFAESI action against corporate guarantors now stand infructuous..Following the IRP’s report for liquidation of the Company, the Bench reserved the matter for (final) orders, with a clear intention of liquidating the debtor company..Senior Advocate R. Raghunandan Rao appeared for IFCI Ltd., briefed by Kochhar & Co., Hyderabad (represented by Shabbeer Ahmed and P.V. Aruna Kumari) while VNR was represented by the Counsel, Rajesh Bohra.