NCLT Hyderabad Slams Liquidator for 'Gross Negligence' in VNR Infrastructures Case, Orders Full Disclosure and IBBI Referral

Hyderabad: The National Company Law Tribunal (NCLT), Hyderabad Bench, has come down heavily on the Liquidator of VNR Infrastructures Limited, citing "gross negligence and non-compliance" with statutory provisions. In a significant order delivered on May 27, 2025, the Coram of Hon'ble Member (J) Rajeev Bhardwaj and Hon'ble Member (T) Sanjay Puri directed the Liquidator to provide comprehensive details on the liquidation process and referred the matter to the Insolvency and Bankruptcy Board of India (IBBI) for disciplinary action.

The ruling was made in the context of an application (IA No. 742/2021 in CP (IB) No. 12/2017) filed by Mr. TSN Raja , the Liquidator, seeking his discharge following the sale of VNR Infrastructures Limited (the Corporate Debtor) as a going concern. However, serious concerns were raised by the State Bank of India (SBI), the lead financial creditor (Respondent No. 1), and Mr. T Rajakishore , the successful bidder who purchased the company (Respondent No. 2).

Background of the Case

VNR Infrastructures Limited, a company involved in infrastructure projects, was admitted into the Corporate Insolvency Resolution Process (CIRP) on February 10, 2017, on a petition filed by the SBI-led consortium. Subsequently, the company was ordered to be liquidated on September 21, 2017, and Mr. TSN Raja was appointed as the Liquidator.

During the liquidation, the Liquidator opted to continue the company as a going concern due to concerns about bank guarantee invocations. An e-auction was held on February 18, 2020, for the sale of the company as a going concern, including ongoing works, contracts, and assets. The sale to Mr. T Rajakishore and others was approved by the NCLT on July 7, 2021. The Liquidator then filed the present application seeking his discharge, citing the successful sale and handover of assets on September 30, 2021.

Allegations Against the Liquidator

Both the financial creditors (SBI) and the purchaser raised numerous red flags regarding the Liquidator's conduct and the transparency of the liquidation process.

SBI alleged that the Liquidator failed to adequately inform the Stakeholders’ Consultation Committee (SCC) and Joint Lenders Forum (JLF) about critical developments. They questioned the lack of clear authorization for SBI to pursue pending litigations, highlighted insufficient clarity on the status of unsold assets, receivables, bank guarantees (BGs), and demanded details of assets included/excluded from the sale, specifically mentioning the Bogibeel project. SBI also pointed out discrepancies in asset realization amounts and unanswered queries regarding missing properties and police complaints.

The purchaser (Respondent No. 2) echoed concerns about transparency and compliance. They alleged that the Liquidator failed to comply with previous NCLT orders directing him to provide audited/provisional financial statements, project agreements, and details of receivables. They highlighted the non-filing of statutory returns with the Registrar of Companies (ROC) and Income Tax Department since 2013-14/2017, the ambiguity regarding the list of 89 projects mentioned in the auction notice versus those actually transferred, and issues concerning withheld funds by banks.

NCLT's Strong Findings

The NCLT Bench, after reviewing the application, counter affidavits, rejoinders, and written submissions, found substantial merit in the concerns raised by the respondents. The Tribunal noted that despite approving the sale and handover, significant issues persisted due to the Liquidator's conduct.

The Bench specifically highlighted the Liquidator's failure to comply with prior NCLT orders directing him to furnish financial statements, project documents, and ensure statutory filings with ROC and Income Tax. The judgment states:

> "The Liquidator has failed to comply with directions passed by this Authority... including filing of returns with the RoC and Income Tax Department, and providing audited/provisional financial statements and project-related documents."

The Tribunal found the Liquidator's explanation for non-compliance with statutory filings unconvincing, stating that a previous application regarding audit discrepancies did not absolve him of the responsibility for current filings.

Furthermore, the NCLT found the Liquidator's information regarding receivables, unsold assets, pending litigations, and BGs to be inconsistent and inadequate. The judgment noted:

> "He has made contradictory statements in various meetings of the Stakeholders Consultation Committee and Joint Lenders’ Meetings."

The Bench pointed out the lack of clarity on the status of the 89 projects, the Bogibeel project, scrap disposal, and the discrepancy between reported asset valuation and realization.

The Tribunal concluded that the Liquidator had not submitted a complete final report as required by regulations, despite having drawn substantial fees (approximately ₹2.49 crores) without apparent prior approval. The order states:

> "His conduct reflects gross negligence and non-compliance with statutory provisions under Sections 35 and 37 of the Code and Regulations 44 to 47 of the Liquidation Regulations. His evasive pleadings, contradictory statements, and failure to provide accurate and timely disclosures undermine the fiduciary trust placed in a Liquidator."

The NCLT emphasized that a Liquidator's duty extends beyond asset auction to ensuring a transparent and complete process until final closure, including maintaining records and ensuring statutory filings.

Directions and Referral to IBBI

In light of its findings, the NCLT rejected the immediate request for discharge and issued stringent directions to the Liquidator. He has been ordered to file a detailed Compliance Affidavit within 15 days providing:

A comprehensive list of all receivables (retention money, security deposits, contractual payments) with beneficiary details.

Details of all pending and disposed of litigations concerning the company.

The status of all 89 projects, specifically listing those transferred to the purchaser.

A full statement of accounts from the start of liquidation, detailing receipts and disbursements.

A detailed distribution schedule and breakdown of fees claimed and received.

A compliance report on all statutory filings with ROC, Income Tax, and GST authorities since FY 2013-14.

Crucially, the NCLT also directed that the matter be referred to the Insolvency and Bankruptcy Board of India (IBBI) for taking appropriate action against the Liquidator based on the findings of gross negligence and non-compliance.

The case is now listed for further hearing on June 9, 2025. The order underscores the NCLT's commitment to ensuring accountability and transparency from Insolvency Professionals conducting proceedings under the IBC.