The National Company Law Tribunal (NCLT) Ahmedabad Bench has formally ordered the liquidation of Rainbow Paper Ltd., bringing a definitive end to a prolonged period of corporate uncertainty following the failed implementation of a previously approved resolution plan. The tribunal’s decision, delivered by Judicial Member Mrs. Chitra Hankare and Technical Member Dr. V. G. Venkata Chalapathy, necessitates that the corporate debtor now undergo liquidation proceedings in accordance with the Insolvency and Bankruptcy Code (IBC), 2016. Mr. Vikash Jain has been appointed as the liquidator to manage the dissolution of assets and oversee the finalization of the company’s outstanding financial liabilities.

The order marks a significant development in a case that has been trapped in procedural limbo for several years. Rainbow Paper Ltd. was originally admitted into the Corporate Insolvency Resolution Process (CIRP) on September 12, 2017, following a petition filed under Section 9 of the IBC. While the tribunal had initially sanctioned a resolution plan on February 27, 2019, allowing Kushal Limited to assume management control, the plan ultimately collapsed. Following extensive litigation, the Supreme Court of India set aside both the approval of the resolution plan and the subsequent National Company Law Appellate Tribunal (NCLAT) order that had upheld it. With the dismissal of a review petition by the Indian Overseas Bank on October 31, 2023, the tribunal faced a Corporate Debtor whose affairs remained effectively in abeyance since early 2019.

Shifting Control and Financial Realignment The application for liquidation was brought forward by Neeraj Papers Agencies Ltd., which had been substituted as an applicant following the assignment of debts and security interests by various financial creditors between September 2023 and March 2024. In justifying the necessity of the order, the tribunal emphasized the complete breakdown of the previous management structure and the lack of any representation for the successful resolution applicant in handling the company’s assets or pending litigation.

The tribunal observed, “This tribunal views the two crucial issues as the affairs of the CD handed over to the SRA do not have any representative any more since the approval of the Resolution Plan by COC to oversee the assets, various pending litigations and the COC members have assigned the debts in favor of the applicant.” Consequently, the Committee of Creditors (CoC), now reconstituted following the debt assignments, held a vote wherein 89.95% of members resolved to initiate liquidation.

The tribunal’s directive mandates that all powers previously held by the Board of Directors, key managerial personnel, and partners of the corporate debtor are immediately terminated and now vest entirely in the liquidator. Mr. Vikash Jain is tasked with evaluating the assets of the company and preparing a comprehensive balance sheet from the date of initial CIRP admission through the current date of liquidation. Furthermore, all personnel and management associated with the corporate debtor have been instructed to provide full cooperation to the liquidator to ensure the process remains efficient and transparent.

Addressing Outstanding Dues and Legal Claims The order includes specific provisions to address the interests of various stakeholders, including government authorities and employees. The State Tax Department has noted that its dues remain subject to the ongoing outcome of a curative petition pending before the Supreme Court. In response, the NCLT has directed the liquidator to notify all relevant government departments, including Income Tax and GST authorities, to ensure that their claims are formally recorded and addressed according to the priorities established under Section 53 of the IBC.

Regarding the workforce, the tribunal specified that the liquidation order serves as a formal notice of discharge for the officers, employees, and workmen, except for those whose services may be retained by the liquidator to continue specific business operations during the liquidation phase. The liquidator is also mandated to investigate the financial affairs of the company as per the provisions of Section 35(1) of the IBC, which includes scrutinizing previous transactions and handling any pending company applications.

Operational Mandates for the Liquidator As part of the procedural requirements, the liquidator must issue a public announcement confirming the liquidation of Rainbow Paper Ltd. and serve copies of the tribunal’s order to all relevant government bodies and employee associations. The tribunal further clarified the scope of the liquidator’s authority, noting, “The Liquidator has the liberty to institute a suit and other legal proceedings on behalf of the Corporate Debtor with the prior approval of this Adjudicating Authority, as provided in sub-section (6) of section 33 of the Code.”

The resolution professional who was involved in the previous, unimplemented plan is strictly directed to hand over all relevant documentation and management control to the newly appointed liquidator forthwith. The CoC has also been instructed to contribute to the liquidation costs should any shortfall arise from the realized liquidation value of the assets.

By issuing this order, the Ahmedabad bench of the NCLT has provided a clear path forward for the creditors of Rainbow Paper Ltd. As the company transitions into the liquidation process, the focus now shifts to the valuation of its assets and the equitable distribution of proceeds. The Registry of the tribunal has been instructed to communicate this order to the Registrar of Companies and the Insolvency and Bankruptcy Board of India (IBBI) within one week, ensuring that the transition to the new management structure under the liquidator is finalized without further delay. For all stakeholders, the priority now remains the structured closure of the corporate entity’s accounts and the fulfillment of legal obligations as established by the tribunal’s definitive ruling.