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2026 Supreme(Online)(NCLT) 362
NATIONAL COMPANY LAW TRIBUNAL
KHETRABASI BISWAL, Judicial Member, SHISHIR AGARWAL, Technical Member
DHARMENDRA KUMAR BHASIN Liquidator, Rainbow Denim Limited( in Liquidation) – Appellant
Versus
BOMBAY STOCK EXCHANGE – Respondent
CP(IB) No. 23/Chd/Pb/2019|IA NO. 2570/2024
For the Liquidator:Mr. Arora Vishwas Kumar, Advocate
For the Respondents:Ms. Niharika Goel, Advocate
NCLT under Section 60(5) IBC may order extinguishment of entire existing shareholding and issuance of fresh shares to successful bidder in going concern liquidation sale of listed company to effectuate ownership transfer.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 60(5), Section 53 - IBBI (Liquidation Process) Regulations, 2016 - Regulations 32(e), 32A, 31, 12, 41 - Going concern sale in liquidation - Application by Liquidator for extinguishment of entire existing shareholding of listed corporate debtor and issuance of fresh equity shares to successful bidder - Tribunal has jurisdiction under Section 60(5) to issue directions for extinguishment and fresh issuance as necessary to effectuate concluded sale, notwithstanding objections on securities law compliance - Existing shareholders receive no value under Section 53 waterfall and their shares stand extinguished economically and legally - Directions issued to Registrar of Companies and stock exchange to record new shareholding post compliance, without technical objections. (Paras 6-12)
(B) Securities Contracts (Regulation) Rules, 1957 - Rule 19A - Minimum public shareholding norms - Not applicable to going concern liquidation sales under Regulation 32A - No exemption granted by Tribunal from post-allotment listing compliances - Corporate debtor to approach regulators separately after share capital restructuring. (Para 10)
(C) Companies Act, 2013 - Sections 61-66 - Procedural filings for share capital alteration - Mandatory post-order compliance by reconstituted board, to be effected by Registrar of Companies upon receipt. (Para 11)
Facts of the case:
Corporate debtor ordered into liquidation - Public announcement issued, no shareholder claims received - After failed auctions, successful bidder (consortium) acquired corporate debtor as going concern for reserve price via Swiss Challenge Auction under Regulation 32A - Full consideration paid, sale certificate issued stipulating extinguishment of all existing shares (promoter 72.38%, public 27.62%) and issuance of fresh shares - Liquidator sought directions for implementation - Stock exchange objected on jurisdiction and securities law grounds - Registrar emphasized statutory filings - Successful bidder sought partial extinguishment to retain 5% public shareholding.
Findings of Court:
Entire existing share capital extinguished; fresh equity shares issued to successful bidders per sale certificate - Registrar to process filings; stock exchange and regulators to consider revised structure observing order's findings to complete transfer - Compliance time: one month.
Issues: Whether Tribunal under Section 60(5) IBC can order extinguishment of listed corporate debtor's entire share capital and fresh issuance in going concern liquidation sale; interplay with securities laws and minimum public shareholding norms.
Ratio Decidendi: Tribunal's residuary jurisdiction under Section 60(5) extends to directions necessary for ownership transfer in going concern sale - Extinguishment and fresh issuance indispensable as no alternative mechanism exists; arises directly from liquidation process - Securities law objections misplaced as order limited to effectuating sale, not granting listing exemptions.
Result: Application allowed with directions.
| Table of Content |
|---|
| 1. liquidation process and failed auctions leading to successful going-concern sale (Para 1) |
| 2. bse/roc oppose reliefs citing securities law compliance (Para 3 , 4 , 5) |
| 3. nclt jurisdiction under section 60(5) for share capital extinguishment (Para 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13) |
ORDER
The present Interlocutory Application is filed by Applicant/Liquidator of Rainbow Denim Ltd. namely, Dharmendra Kumar Bhasin under sub-section (5) of section 60 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘Code’) r/w regulations 32(e) and 32A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations 2016 (hereinafter referred to as the ‘Liquidation Regulations’) for, inter-alia, seeking for extinguishment/cancellation of the entire existing shareholding of the Corporate Debtor, followed by issuance of fresh equity shares to the Successful Bidder and its nominees with consequential directions to Bombay Stock Exchange (hereinafter referred to as the ‘BSE’) and Registrar of Companies (hereinafter referred to as the ‘RoC’) to record the new shareholding, etc.
1. Brief facts of the case as stated in the Application are as follows:-
1. The Corporate Debtor namely Rainbow Denim Ltd. was ordered to be liquidated, vide, Order dated 12.04.2022 passed in CA 356/2020 and the Applicant was appointed as Liquidator. Accordingly, the Applicant issued statutory Public Announcement in Form-B under regulation 12 of the Liquidation Regulations, which was duly published in The Tribune (English), Punjabi Tribune (Punjabi), Dainik Tribune (Hindi) for Chandigarh/Haryana/Punjab editions, and in Financial Express (Mumbai) and Navshakti (Marathi) editions for Mumbai with last date for submission of claims was fixed as 12.05.2022. The Applicant declares that no shareholder of the Corporate Debtor lodged any claim at any stage, either during the CIRP or during the liquidation process. He also issued a separate public notice dated 18.04.2022 inviting proposals for a Scheme of Compromise or Arrangement under Section 230 of the Companies Act, 2013. However, no Expression of Interest (EOI) was received in response to the said notice. Thereafter, the Liquidator prepared the List of Stakeholders under regulation 31 of the Liquidation Regulations based on all claims received from creditors and workers/employees. The said List of Stakeholders was duly filed before this Tribunal along with the Preliminary Report, vide, IA 803/2022 and also uploaded on the website of the Corporate Debtor as well as the Insolvency and Bankruptcy Board of India (hereinafter referred to as the ‘IBBI’) portal.
2. As fresh valuation has to be undertaken during the liquidation process, the Liquidator appointed two registered valuers each for three different classes of assets, namely, (a) Land & Building, (b) Plant & Machinery, and (c) Securities & Financial Assets. Both valuers independently filed fair and liquidated value reports. The fair value was assessed at 58.29 crore (Valuer 1) and 58.25 crore (Valuer 2), and the liquidation value ₹ ₹ was assessed at 49.63 crore (Valuer 1) and 50.21 crore (Valuer 2). Stakeholders Consultation Committee (SCC) was duly constituted within sixty days from the date of commencement of the liquidation. In its first meeting held on 20.06.2022, the SCC advised that the Corporate Debtor should be attempted to be sold as a going concern. Acting upon such advice, the Liquidator issued the 1st Auction Notice dated 23.06.2022 for sale of the Corporate Debtor as a going concern. However, no bids were received and the auction failed. Thereafter a second Auction Notice dated 26.07.2022 was issued with a reduced reserve price. However, the second auction too failed to attract bidders.
3. In the meantime, SCC in its second meeting dated 10.10.2022 noted that an unforeseen hindrance had arisen due to obstruction in the access road leading to the Corporate Debtor’s factory premises allegedly created by Rama Industries Li
