Tribunal Declares Non-Cooperation by Respondents Illegal; Advises Liquidator to Approach PMLA Appellate Tribunal for Assets Attached by Enforcement Directorate
In a significant ruling on September 7, 2026, the National Company Law Tribunal (NCLT), Hyderabad Bench-I, headed by Mr. Rajeev Bhardwaj and Mr. Sanjay Puri, delivered a landmark judgment in IA(IBC) No. 23 of 2026 concerning the liquidation proceedings of M/s. MBS Impex Private Limited. The Tribunal directed several secured creditors to hand over possession and related documents of the assets forming part of the liquidation estate to the appointed Liquidator, Mr. Santosh Bhatia, declaring the inaction of some respondents as illegal and unjust.
The case arose after the Corporate Insolvency Resolution Process (CIRP) for MBS Impex Private Limited was admitted on November 13, 2019, and subsequently, the company was ordered into liquidation on March 1, 2022. The Liquidator sought directions under Sections 60(5) and 35 of the Insolvency and Bankruptcy Code (IBC), 2016, and the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, to take control of various assets detailed in the company's 2018-19 unaudited financial statements, which included land parcels and inventory comprising gold, diamonds, gemstones, and silver articles.
The secured financial creditors, primarily Respondents Nos. 2 to 5, had failed to realize or relinquish their security interests within the stipulated 180 days as mandated by Regulation 21A of the Liquidation Process Regulations, causing the assets to vest in the liquidation estate. Despite multiple communications and meetings of the Stakeholders' Consultation Committee (SCC) spanning from 2022 to 2025, the respondents did not cooperate by handing over the assets or documents to the Liquidator, thereby impeding the liquidation process.
The Tribunal meticulously examined the submissions and noted that none of the secured creditors had intimated their intention to relinquish their security interest within the prescribed period, nor had they realized the security interest. The Tribunal emphasized that the assets vested in the liquidation estate upon expiry of the 180-day period and dismissed extension requests, including one filed by Respondent No.3, which was rejected both by this Tribunal and the National Company Law Appellate Tribunal (NCLAT) due to delayed appeal filing.
Additionally, the Tribunal highlighted the complexity arising from the Enforcement Directorate's attachment of certain land assets under the Prevention of Money Laundering Act (PMLA), 2002. The Liquidator had challenged this attachment before the Delhi High Court and was directed to seek relief from the PMLA Appellate Tribunal. The Tribunal clarified that it is not the appropriate forum to order the release of assets under ED attachment and advised the Liquidator to pursue remedy under Sections 8(7) and 8(8) of the PMLA, supported by the Insolvency and Bankruptcy Board of India's Circular No. IBBI/CIRP/87/2025 dated November 4, 2025.
A significant facet of the judgment concerned the inventory consisting of precious metals and stones consigned to Respondent No.13 under a Consignment Agreement. Despite repeated demands, Respondent No.13, which had been struck off from the Registrar of Companies, failed to hand over the inventory or provide adequate accounting for payments allegedly made to secured creditors. The Tribunal declared such non-cooperation illegal and unlawful, directing Respondent Nos. 13 and 14 to immediately transfer the inventory to the Liquidator.
The Tribunal also ordered Respondents Nos. 9 to 12, 15, and 16 to provide police assistance to the Liquidator during site visits, demarcation, valuation, and possession-taking activities to ensure smooth progression of the liquidation process.
This ruling upholds the Liquidator's fiduciary responsibility to take custody of the corporate debtor's assets for the benefit of all stakeholders and reinforces the strict timelines prescribed under the Insolvency and Bankruptcy Code and associated regulations. It sends a clear message to secured creditors and other parties that non-cooperation in liquidation proceedings will be deemed unlawful, and appropriate legal consequences will follow.
Bottom Line:
Liquidation proceedings under the Insolvency and Bankruptcy Code, 2016 - Tribunal directed Respondents to hand over assets forming part of the liquidation estate to the Liquidator and upheld the inaction of certain Respondents as illegal, unjust, and unlawful.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 35, 36, 60(5), 196; Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 Regulation 21A; Prevention of Money Laundering Act, 2002 Sections 8(7), 8(8)
