Despite Outstanding Income Tax Dues, NCLT Rules Liquidation Continuation Futile; Bank of India's Charge on Assets Rendered Infructuous
In a significant ruling dated October 8, 2026, the National Company Law Tribunal (NCLT), Ahmedabad Bench, presided over by Mrs. Chitra Hankare and Dr. V.G. Venkata Chalapathy, delivered a judgment ordering the dissolution of Captivate Foods Private Limited. The order came after the Tribunal found that the Corporate Debtor had no traceable assets, the registered office was merely rented premises, and the directors were absconding, thus rendering any further liquidation proceedings pointless.
The dissolution application was filed by Mr. Atul Sheth, the Liquidator appointed for Captivate Foods Pvt. Ltd. The company, incorporated in 2014, had entered insolvency proceedings initiated by an operational creditor in 2019, and the liquidation process was ordered in January 2024. The liquidator's efforts to identify and realize assets were fruitless; the only secured creditor, Bank of India, had borne the entire cost of the corporate insolvency resolution process (CIRP) and liquidation.
During the proceedings, the Income Tax Department objected to the dissolution on account of outstanding tax dues amounting to Rs. 280 for Assessment Year 2015-16 and Rs. 8,140 for Assessment Year 2016-17. However, the Tribunal held that in the absence of any realizable assets, such minor outstanding tax demands did not justify prolonging liquidation.
Bank of India had sanctioned loans worth over Rs. 1.95 crore to Captivate Foods and created a charge over the company's assets. However, inspections revealed that machinery had been removed from the company's premises and that the directors could not be located. The bank also issued pre-FIR notices to the absconding directors. Accordingly, the bank supported the dissolution application.
The Tribunal ordered:
- 1. Dissolution of Captivate Foods Pvt. Ltd. with immediate effect under Section 54 of the Insolvency and Bankruptcy Code (IBC), 2016.
- 2. Discharge of the liquidator from his duties, subject to statutory compliance.
- 3. Filing of the dissolution order with the Registrar of Companies (ROC) and the Insolvency and Bankruptcy Board of India (IBBI).
- 4. The ROC to take all consequential steps in line with the law.
- 5. The charge created by Bank of India to be dealt with as per law following the company's dissolution, clarifying that creditors may still pursue recovery proceedings against the suspended management in other courts.
- 6. Preservation of the company's books and records by the liquidator as per legal requirements.
This ruling clarifies that the absence of assets and inability to trace the management justify closing liquidation proceedings, even when small statutory dues remain unpaid. It also underscores that dissolution under Section 54 of the IBC does not bar creditors from pursuing separate legal remedies against errant management for asset recovery.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Dissolution of Corporate Debtor - Where no traceable assets of Corporate Debtor were available, registered office was on rented premises, Directors were absconding/not traceable, liquidation and CIRP costs were borne by sole secured stakeholder Bank of India, and Form-H under Regulation 45(3) was filed, Corporate Debtor was liable to be dissolved under Section 54 of IBC - Small outstanding Income Tax demands did not justify continuation of liquidation proceedings in absence of realizable assets - Dissolution would not bar creditors from pursuing appropriate proceedings against suspended management for recovery of mortgaged/charged assets.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 9, 52, 53, 54; Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, Regulation 45(3)
