Liquidation Of Corporate Debtor Can Be Ordered If Successful Resolution Applicant Cannot Obtain Necessary Approvals Within One Year: NCLAT

The National Company Law Appellate Tribunal (NCLAT) has ruled that a corporate debtor can be pushed into liquidation if the successful resolution applicant fails to obtain all the necessary approvals for the resolution plan within one year of its approval by the NCLT. This ruling emphasizes the time-bound nature of the insolvency resolution process. The NCLAT held that if the implementation of the plan is getting indefinitely delayed because the new management is unable to secure the required regulatory or other approvals, then it is better to order the liquidation of the company rather than leaving it in a state of suspended animation. This ensures that the assets of the company are not eroded due to a prolonged and uncertain resolution process, and it provides a quicker, though less desirable, exit route for the creditors.