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NCLAT Sets Aside Liquidation of Jeppiaar Cements, Restores CIRP for
The Chennai bench of the has set aside the against , restoring the (CIRP) and directing the to explore withdrawal under . The bench, comprising Justice N. Seshasayee (Member Judicial) and Jatindranath Swain (Member Technical), held that where multiple options exist to resolve an insolvency, .
A Tale of Uncertainty and Opportune Settlement
Jeppiaar Cements had acted as a for loans of ₹92.5 crore and ₹48.5 crore availed by from . When the principal borrower defaulted, initiated CIRP under in . The consisted of (96.65% voting share) and (3.35%).
The CIRP timeline was extended due to COVID-19, setting the outer limit at . Meanwhile, in , sanctioned a to the directors and personal guarantors. Despite partial payment of ₹66.75 crore, the full OTS was not completed by the original deadline.
When the CoC Refused to Vote for Liquidation
In , the (RP) placed a liquidation resolution before the CoC. Neither nor voted in favour. The RP initially filed an application under seeking directions, but the allegedly insisted he file under instead. , which had earlier refrained from voting for liquidation, then instructed the RP to “proceed in accordance with the provisions of the IBC.”
On , the ordered liquidation based on the RP’s application, despite the continued OTS compliance. After the , allowed the personal guarantors to complete the OTS and issued a . The bank later filed an application under Section 12A to withdraw the CIRP, but it was dismissed by the NCLT.
The Court’s Sharp Critique of the RP and
The NCLAT found the RP’s conduct flawed. It observed that the RP had “started most appropriately” with a application but abandoned it based on advice. The bench noted that a must exercise and should not “trim his sails the way the instructs.” If the raised objections, the RP should have asked the matter to be placed before the tribunal.
The court also condemned the RP’s private consultation with outside the CoC, holding that this “plainly offends the .” It stated: “A good start ended abruptly inappropriately.”
Section 12A as a Tool for Insolvency Resolution
A critical legal question was whether CIRP could be revived after a to accommodate a Section 12A withdrawal. The court held that Section 12A is not merely a but “a to resolve an insolvency-condition.” It explained that the includes not only resolution plans under but also exit through settlement under Section 12A.
The bench emphasized that the 330-day outer limit for CIRP is , and that the RP should have waited until before invoking , especially since settlement was in progress.
Key Observations from the Judgment
“Where there are more options than one to end an insolvency condition of the corporate debtor, then fairness involved in choosing an option should be allowed to prevail.”
“A is central to the resolution process, but suddenly he appeared to have reacted in panic when he should have asserted his role.”
“Unfortunately, the has blurred the functional utility of Sec.12A as a tool of insolvency resolution.”
“If a statute has to be worked, not just purposively but also sensibly, then it is not just sufficient to look to the legality of a decision made, but it is fair to make the said decision when there is also available a .”
Decision and Implications
The NCLAT allowed the appeal, set aside the , restored the CIRP, and directed the to explore the Section 12A route. The court clarified that its decision was distinct from precedents like , which involved a corporate debtor already deep into liquidation. Here, the parallel OTS process made revival appropriate.
The judgment serves as a strong reminder that the insolvency framework must prioritize resolution over liquidation, and that stakeholders—especially Resolution Professionals—must act with fairness and independence, not under the shadow of interference or creditor vacillation.
