Corporate Debtor's affairs handed over to liquidator after 89.95% voting share of creditors resolve for liquidation; Liquidation process to be conducted under Insolvency and Bankruptcy Code, 2016
In a significant development in insolvency proceedings, the National Company Law Tribunal (NCLT), Ahmedabad Bench, on 7th October 2026, ordered the liquidation of Rainbow Paper Ltd. This decision follows the Supreme Court of India's setting aside of the previously approved resolution plan for the Corporate Debtor, which had remained unimplemented since the approval.
The Corporate Insolvency Resolution Process (CIRP) for Rainbow Paper Ltd was admitted on 12th September 2017 under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). A resolution plan submitted by Kushal Limited was approved by the NCLT on 27th February 2019, and the Corporate Debtor's affairs were handed over to the successful resolution applicant (SRA) on 27th April 2019. However, the Supreme Court, in Civil Appeal No. 1661 of 2020, set aside the resolution plan, which led to the CIRP process remaining in abeyance and no further extensions being sought by the Committee of Creditors (CoC).
Subsequently, the financial creditors, who had assigned their debts and securities to Neeraj Papers Agencies Ltd, convened a creditors' meeting as directed by the Tribunal. An overwhelming 89.95% voting share of the financial creditors resolved to initiate liquidation proceedings against Rainbow Paper Ltd. The SRA has reportedly expressed no objection to this course of action.
In its detailed order, the NCLT appointed Mr. Vikash Jain, a registered insolvency professional, as the liquidator tasked with taking over the assets, records, and management of the Corporate Debtor. The liquidator is directed to conduct the liquidation in compliance with the provisions of Chapter III of the IBC and the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.
The NCLT emphasized that all powers of the Corporate Debtor's Board of Directors and key managerial personnel will cease immediately, vesting entirely with the liquidator. Corporate Debtor's personnel are instructed to cooperate fully with the liquidation process. The liquidator is also mandated to value the Corporate Debtor's assets, prepare fresh financial statements covering the period from CIRP admission to liquidation commencement, and notify relevant government departments and employee associations about the liquidation.
Notably, the order highlights that once liquidation commences, no new suits or legal proceedings may be instituted against the Corporate Debtor, except with prior approval from the Tribunal, and the liquidator is empowered to initiate suits on behalf of the company.
The CoC has been directed to contribute to any shortfall in liquidation costs if the liquidation estate's value is insufficient to cover expenses. Furthermore, the former Resolution Professional is required to hand over all relevant documents to the newly appointed liquidator to ensure a smooth transition.
This judgment underscores the procedural rigor and legal framework governing insolvency and liquidation processes in India, affirming the NCLT's role in balancing creditor interests while adhering to Supreme Court directives.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Where approved resolution plan was set aside by Supreme Court and remained unimplemented, and creditors by 89.95% voting share resolved for liquidation, liquidation of Corporate Debtor was directed and liquidator appointed to take over assets, records and conduct liquidation process.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 - Sections 9, 33, 34, 35, 52, 53; Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016
Neeraj Papers Agencies Ltd v. Rainbow Paper Ltd, (NCLT)(Ahmedabad) : Law Finder Doc Id # 3000451
