NCLT has directed liquidation after no resolution applicants emerged and company assets were valued at nil. The sole financial creditor approved the move, clearing the path for winding up.
Liquidation Ordered After Failed CIRP Due to Nil Asset Value
The National Company Law Tribunal (NCLT) has ordered the liquidation of a corporate debtor following the failure of the Corporate Insolvency Resolution Process (CIRP). The tribunal observed that no resolution applicants filed expressions of interest during the timeline under Section 28 of the IBC, and the Resolution Professional reported that the company’s assets were valued at nil after due assessment.
With no viable resolution plan and no indication of recoverable assets, the Committee of Creditors—comprising a sole financial creditor—unanimously approved the recommendation for liquidation. The tribunal emphasized that prolonging the CIRP in such circumstances would contravene the time-bound nature of the IBC framework, as upheld in Swiss Ribbons v. Union of India. The order triggers the appointment of a Liquidator under Section 33.
This outcome highlights the importance of early and accurate asset due diligence by Resolution Professionals. Firms with non-operational or non-existent asset bases may be fast-tracked to liquidation, particularly when creditor consensus exists. Legal practitioners should advise clients on exit strategies during CIRP, especially when asset valuation trends toward zero.
Citations
- Insolvency and Bankruptcy Code, 2016
- Swiss Ribbons v. Union of India