NCLT Rules Winding Up Not at Irreversible Stage; Upholds Insolvency and Bankruptcy Code's Revival Mechanism Over Liquidation
In a significant judgment dated October 7, 2026, the National Company Law Tribunal (Principal Bench), New Delhi, presided over by Mr. Justice Anupinder Singh Grewal (President) and Mr. Ravindra Chaturvedi (Member Technical), admitted a petition filed by Punjab National Bank (PNB) under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), against M/s SVOGL Oil Gas and Energy Limited (formerly Shiv-Vani Oil & Gas Exploration Services Ltd.), a listed public company undergoing winding up proceedings.
The case arose from long-standing defaults by the corporate debtor on multiple credit facilities sanctioned by PNB and other members of a banking consortium led by the State Bank of India (SBI). These credit facilities ranged across term loans, foreign letters of credit, short-term loans, and bank guarantees, collectively amounting to several hundred crores of rupees. Following defaults and insolvency, the Delhi High Court had admitted winding up of the corporate debtor in July 2017, with the Official Liquidator (OL) appointed and some assets already sold.
However, in July 2023, the Delhi High Court transferred the matter to the NCLT under Section 434 of the Companies Act, 1956, upon applications by secured creditors including PNB and SBI. The High Court noted that the winding up had not reached an irreversible stage with no auctions conducted and no claims invited, allowing the company an opportunity for revival through the Corporate Insolvency Resolution Process (CIRP) under the IBC. The Official Liquidator consented to this transfer and did not object to initiation of CIRP.
The NCLT examined the legal position in light of the Supreme Court's precedents, particularly the landmark rulings in Action Ispat and Power Limited v. Shyam Metalics and Energy Limited (2021) and A. Navinchandra Steels Pvt. Ltd. v. SREI Equipment Finance Ltd. (2021), which hold that initiation of CIRP under the IBC is maintainable even if winding up proceedings exist, provided no irreversible steps in winding up have taken place. The Tribunal emphasized that the IBC's objective is revival and maximization of asset value through a time-bound and collective resolution process, which is preferable to piecemeal asset sales under winding up.
The Bench further held that the NCLT, as the Adjudicating Authority, cannot bypass the CIRP framework and proceed directly to liquidation merely because winding up proceedings have been admitted earlier. The Tribunal accordingly admitted the Section 7 petition filed by PNB, declared moratorium under Section 14 of the IBC, and appointed Resurgent Resolution Professionals LLP as the Interim Resolution Professional (IRP). The Official Liquidator was directed to hand over possession of the corporate debtor's assets, documents, and records to the IRP and to cooperate fully with the CIRP process.
The order underscores the primacy of the IBC's resolution mechanism over traditional winding up when revival remains possible. It also reflects the judiciary's intent to ensure that insolvency resolution is expedited by expert tribunals like the NCLT while preserving the interests of all stakeholders-including creditors, employees, and shareholders-of a listed public company.
This decision will have far-reaching implications, reinforcing that financial creditors can initiate CIRP despite ongoing winding up petitions, so long as the winding up has not progressed irreversibly, thereby ensuring that corporate insolvency law prioritizes revival over liquidation.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 Section 7 petition is maintainable and liable to be admitted even where winding up proceedings were earlier admitted and Official Liquidator had taken charge, provided no irreversible steps in winding up had been taken - NCLT cannot bypass CIRP and proceed straight to liquidation after transfer from High Court - revival under IBC must be preferred over continuation of winding up.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 7, 13, 14, 17; Companies Act, 1956 Section 434
