The NCLT has ordered the liquidation of a corporate debtor following the rejection of its only resolution plan by the Committee of Creditors (CoC). This ruling outlines the procedure in case of plan rejections.
Liquidation Approved Post Rejection of Resolution Plan
The NCLT Chandigarh Bench has issued an order for the liquidation of the company following the Committee of Creditors' (CoC) rejection of the sole resolution plan during the Corporate Insolvency Resolution Process (CIRP). This decision underscores a critical aspect of the IBC in scenarios with plan rejections.
The tribunal highlighted that the rejection of a viable resolution plan by the CoC effectively leads to the inability to resolve the company’s insolvency through restructuring. Consequently, liquidation becomes the only available option as mandated under Section 33 of the IBC. The bench emphasized the need for a cooperative effort among creditors to facilitate successful resolutions.
In the order, the NCLT mentioned, "When no resolution plan is accepted, the law necessitates the company to move toward liquidation under the IBC framework."
This order has broad implications for insolvency practitioners, particularly those involved in the preparation and approval of resolution plans, as they need to fully understand the repercussions of rejections at the CoC level.
Citations
- NCLT Judgement (2026) IBC 4
