Inadequate Public Notice Vitiates CIRP: NCLT Hyderabad Orders Fresh Announcement in Vibha Agro Tech Case - 2025-03-10

Laws, Courts & Judgments.

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NCLT Hyderabad Bench Orders Fresh Public Announcement in Vibha Agro Tech CIRP, Citing Flawed Notice

Hyderabad, February 21, 2025 – The National Company Law Tribunal (NCLT) Hyderabad Bench - I has halted the Corporate Insolvency Resolution Process (CIRP) of M/s. Vibha Agro Tech Limited, directing a fresh public announcement due to deficiencies in the initial notice issued by the Interim Resolution Professional (IRP). The order, pronounced by a bench comprising Hon’ble Member (Judicial) Dr. Venkata Ramakrishna Badarinath Nandula and Hon’ble Member (Technical) Sh. Charan Singh, came in response to applications filed by farmers' organizations and seed suppliers who claimed they were unaware of the CIRP due to inadequate public notice.

Background of the Case

The CIRP against Vibha Agro Tech Limited, a company involved in the supply and production of hybrid seeds, was initiated by State Bank of India (SBI) under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016. The initial public announcement, as required under Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Debtors) Regulations, 2016, was published in Hyderabad editions of the Economic Times (English) and Nava Telangana (Telugu) newspapers.

Aggrieved by the alleged lack of proper notice, several applicants, primarily seed organizers and farmers represented by All India Kisan Sabha, approached the NCLT. They argued that Vibha Agro Tech conducts material business operations across multiple states including Gujarat, Maharashtra, Andhra Pradesh, Telangana, and Tamil Nadu, and the public announcement should have been wider to reach all stakeholders.

Arguments Presented

Applicants' Counsel contended that the IRP failed to comply with Regulation 6 of the CIRP Regulations by not publishing the public announcement in locations where Vibha Agro Tech conducts material business. They highlighted that the company has extensive business operations in seed production and procurement across various states, involving numerous farmers and organizers. The limited publication in Hyderabad newspapers, they argued, deprived many operational creditors, especially farmers, of the opportunity to file their claims. They cited the low number of claims received initially as evidence of inadequate reach.

Respondent's Counsel (Resolution Professional & SBI) countered that Regulation 6(2)(b)(i) mandates publication in other locations only if, in the IRP's opinion, the Corporate Debtor conducts material business operations there. They argued that the regulation is directory, not mandatory, and that the initial publication in Hyderabad was sufficient. They further claimed that some applicants were commercial entities and should have been aware of the CIRP, and that claims from aggregators in other states were already considered. They also referenced a prior NCLAT judgment, Akshar Plastchem Investment Pvt Ltd vs Shri Bijay Murmuria , emphasizing that publication is not required in every location where the Corporate Debtor receives goods.

NCLT's Analysis and Findings

The Tribunal acknowledged the locus standi of Applicant Nos. 2 to 8, the seed organizers, based on their contractual agreements and delivery challans with Vibha Agro Tech. However, it rejected the locus standi of Applicant No. 1, the farmer organization, due to lack of direct contractual relationship.

On the crucial issue of public announcement, the NCLT observed:

> "On perusal of Regulation 6 (supra), we find that IRP is also required to publish the notice at other location where in the opinion of the interim resolution professional, the corporate debtor conducts material business operations. The registered office of the Corporate Debtor is located at Somajiguda, Hyderabad – 500082. Accordingly, on 14.06.2023, the IRP of Corporate Debtor issued the public announcement in compliance of Regulation 6 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The said Public Announcement was issued in Economic Times – English Language (Hyderabad Edition) and Nava Telangana – Telugu Language (Hyderabad Edition) calling for submission of claims."

However, the bench disagreed with the IRP's opinion that publication only in Hyderabad was sufficient. It emphasized the importance of the Corporate Debtor's factories and processing plants as key business locations:

> "…factories/processing plants of the Corporate Debtor which form the core/central business units for any corporation/company cannot be compared with the suppliers. Therefore, we are not persuaded to accept that the opinion/decision of IRP to publish notice only at Hyderabad where registered office of the Corporate Debtor is situated as 'just and equitable'."

Furthermore, the NCLT examined the circulation of the Hyderabad newspapers used for publication and found them to be categorized as "Small" circulation. Citing the Supreme Court’s judgment in Special Deputy Collector, Land Acquisition CMDA vs J. Sivaprakasam and Ors. , the Tribunal underscored the importance of "reasonably wide circulation" to ensure adequate notice to affected parties.

Decision and Implications

Based on these findings, the NCLT concluded that the initial public announcement was deficient and vitiated the subsequent CIRP process. The Tribunal ordered:

1. Fresh Public Announcement: The Resolution Professional is directed to issue a fresh public announcement in Form-A in newspapers with wide circulation at the registered office, principal office, and factories/processing plants of Vibha Agro Tech, within three days.
2. Re-initiated CIRP: The CIRP process is to be re-conducted expeditiously, within a maximum period of 180 days from the fresh announcement.
3. Resolution Plan Infructuous: The Resolution Plan approved by the Committee of Creditors (CoC) is deemed infructuous.
4. Refund to Resolution Applicant: The Resolution Professional is directed to return deposits made by M/s. Vasavi Realty Private Limited, the previously proposed resolution applicant.
5. Consideration of Ex-Management Concerns: The Resolution Professional and CoC are directed to consider concerns raised by the former management of Vibha Agro Tech in other pending applications.
6. Cost Imposed: A cost of Rs. 25,000/- was imposed on Applicant No. 4 for misleading the tribunal regarding notice, despite having filed a claim earlier.

The order highlights the critical importance of proper and widespread public announcements in CIRP proceedings to ensure fair opportunity for all stakeholders, particularly operational creditors, to participate and file their claims, thereby upholding the principles of natural justice and maximizing value in the insolvency resolution process. ```