2026 Supreme(Online)(NCLT) 3032
NATIONAL COMPANY LAW TRIBUNAL
Vidyasagar Parchuri – Appellant
Versus
Madasa Kumar – Respondent
IA (IBC) (Liq.) 01/2026
Advocates:
For the Appellants/Petitioners: Paras Mitha
For the Respondents: Madasa Kumar, G.P. Yash Vardhan
Under Section 33(1)(a) of the IBC, liquidation is mandatory upon the failure to approve a resolution plan within the prescribed 330-day CIRP period, and a separate 66% vote by the CoC is not required for such liquidation.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 12, 29A, 33(1)(a), 60(5) and 240A - IBBI (CIRP) Regulations, 2016 - Regulations 39B, 39C, 39D, and 39BA - Companies Act, 2013 - Section 230 - Jurisdiction of Adjudicating Authority - Locus standi of suspended director to challenge liquidation proceedings - The court held that an erstwhile promoter or director cannot be non-suited on the ground of locus standi when the resolution process directly affects their rights, following the principle in Kalyani Transco v. Bhushan Power & Steel Ltd. (Para 42).
(B) Insolvency and Bankruptcy Code, 2016 - Section 33(1)(a) - Mandatory liquidation upon failure to approve a resolution plan within the prescribed CIRP period - Once no resolution plan is approved within the prescribed period, the Adjudicating Authority is obligated to initiate liquidation and cannot sit in appeal over the commercial wisdom of the Committee of Creditors. (Paras 49, 50)
(C) Insolvency and Bankruptcy Code, 2016 - Section 240A and Section 29A - Exemption for MSMEs - Section 240A exempts only clauses (c) and (h) of Section 29A for MSMEs; it does not extend to clause (b) relating to wilful defaulters. (Para 52)
(D) Insolvency and Bankruptcy Code, 2016 - Commercial wisdom of Committee of Creditors - Primacy of commercial decision - The NCLT cannot substitute its view in place of the commercial decision taken by the requisite majority of the CoC. (Para 59) (E) IBBI (CIRP) Regulations, 2016 - Regulation 39BA - Examination of compromise or arrangement - The regulation requires only examination of the possibility of a compromise or arrangement; it does not mandate that such an arrangement be recommended in all cases. (Para 24)
Facts of the case:
The applicant, a suspended director of the corporate debtor (MSME), filed an application seeking rejection of a liquidation application. The CIRP was admitted and subsequently re-started. The applicant's resolution plan was rejected due to ineligibility under Section 29A (wilful defaulter classification). The CoC rejected all resolution plans and resolved to initiate liquidation. The applicant alleged non-compliance with Regulations 39B to 39D, particularly Regulation 39BA, and argued the liquidation lacked the requisite 66% voting share. The CIRP period of 330 days had expired.
Findings of Court:
The court found the liquidation application was validly filed under Section 33(1)(a) as no resolution plan was approved within the prescribed timeline. The CoC had duly considered the applicant's OTS proposals and the requirements under Regulation 39BA, resolving not to recommend any compromise due to the applicant's ineligibility. The court refused to interfere with the commercial wisdom of the CoC. The MSME status did not override the applicant's ineligibility under Section 29A(b) for wilful default. The writ petitions challenging the wilful defaulter status were dismissed and no stay was granted in pending appeals.
Issues: 1. Whether the applicant (suspended director) had locus standi to challenge the liquidation application. 2. Whether the liquidation of the corporate debtor was valid in the absence of a specific 66% vote for liquidation under Section 33(2) or whether it was mandated under Section 33(1)(a) upon expiry of the CIRP period. 3. Whether the CoC failed to comply with the mandatory requirements under Regulations 39B to 39D, particularly Regulation 39BA, regarding examination of a compromise or arrangement. 4. Whether the applicant, being an MSME, was entitled to an exemption from Section 29A ineligibility.
Ratio Decidendi: The court ruled that an erstwhile promoter has locus to challenge proceedings that affect their rights. However, under Section 33(1)(a), liquidation is mandatory if no resolution plan is approved within the prescribed 330-day CIRP period; a separate 66% vote for liquidation is not required in such a scenario. The commercial wisdom of the CoC is paramount and not subject to judicial review. MSME status does not exempt a wilful defaulter from ineligibility under Section 29A(b). Regulation 39BA only requires examination of a compromise, not its recommendation. Result : Application dismissed and disposed of.
ORDER
1. The present application is filed by Mr. Vidyasagar Parchuri, Applicant, the suspended director of M/s. Vibha Agro Tech Limited 2, Corporate Debtor under section 60(5) of Insolvency and Bankruptcy Code, Code, 2016 r/w Rule.11 of NCLT Rules, 2016 , against the Respondents, inter alia, seeking for the following relief:
To reject IA (IBC) (Liq.) 01/2026 seeking liquidation of Corporate Debtor and direct the Resolution Professional to reconvene a meeting of the Committee of Creditors to examine the possibility of compromise or arrangement under Section 230 of the Companies Act, 2013 as mandated under Regulation 39BA of the IBBI (CIRP) Regulations, 2016.
Case of the Applicant:
2. It is submitted that upon an application filed by State Bank of India under Section 7 of the IBC, this Tribunal vide Order dated 05.06.2023 admitted the Corporate Debtor into Corporate Insolvency Resolution Process(CIRP) and appointed Shri Ram Ratan Kanoongo as Interim Resolution Professional, and thereafter, vide Order dated 22.12.2023, appointed Mr. Madasa Kumar, Respondent No.1 as Resolution Professional.
3. It is further submitted that, in view of the non-compliance with Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, this Tribunal, vide Order dated 21.02.2025, was direct that the CIRP be re-started from the stage of public announcement as contemplated under Section 15 of the IBC.
4. It is submitted that the liquidation application has been filed despite the fact that the resolution for liquidation was not approved by the requisite 66% voting share of the Committee of Creditors, and further that while considering liquidation the Committee of Creditors failed to comply with the mandatory requirements under Regulations 39B to 39D of the IBBI (CIRP) Regulations, 2016, more particularly Regulation 39BA which mandates examination of the possibility of compromise or arrangement under Section 230 of the Companies Act, 2013.
5. It is submitted that a fresh Form-A was issued on 27.02.2025 fixing the last date for submission of claims as 07.03.2025, and upon collation and verification of claims, the Committee of Creditors was constituted on 22.03.2025. Thereafter, Form G was published on 29.04.2025.
6. It is submitted that a revised Form G was issued on 03.09.2025, pursuant to which the Applicant submitted its EOI on 30.09.2025, which was accepted subject to the outcome of the writ petitions concerning its classification as a wilful defaulter; thereafter, the Applicant submitted its Resolution Plan on 29.10.2025, however, the same was not considered in view of the pendency of the said issue before the Hon’ble High Court.
7. It is further submitted that the writ petitions came to be dismissed on 01.12.2025 on technical grounds, and in the 13th CoC meeting held on the same date, the Applicant was treated as ineligible and its Resolution Plan was not considered.
8. Thereafter, the Applicant addressed a representation dated 20.12.2025 seeking consideration of its plan as a settlement proposal under Section 12A , and the CoC, in its 15th meeting dated 24.12.2025, granted a final opportunity to submit a compromise proposal, pursuant to which the Applicant submitted an OTS proposal dated 01.01.2026 and a revised OTS proposal dated 04.02.2026.
9. It is further submitted that in the 16th CoC meeting dated 06.01.2026, the CoC deliberated on resolution and liquidation and sought extension of CIRP till 11.02.2026.
10. Thereafter, in the Joint Lenders’ Meeting dated 09.02.2026, the Applicant was directed to arrange 10% upfront amount, which itself reflects that the lenders were considering the settlement proposal and that the possibility of settlement was not ruled out; however, upon rejection of the OTS proposal on 25.02.2026 for want of upfront amount, it was nevertheless indicated that a compromise proposal may be submitted with upfront money.
11. It is further submitted that the Applicant has, from the inception of the prese
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