National Company Law Tribunal Orders Liquidation of Garvit Innovative Promoters Ltd.

The Allahabad Bench initiates liquidation due to non-cooperation from ex-management, absence of financial records, and illegal Ponzi scheme operations.

In a significant ruling, the National Company Law Tribunal (NCLT), Allahabad Bench, has ordered the liquidation of M/s Garvit Innovative Promoters Ltd. The judgment, delivered by Mr. Praveen Gupta, Member (Judicial), and Mr. Ashish Verma, Member (Technical), comes after the Committee of Creditors (CoC) unanimously recommended liquidation due to several operational and legal challenges faced by the Corporate Debtor.

The application for liquidation was filed by Mr. Dinesh Kumar Gupta, the Resolution Professional (RP) appointed for the Corporate Insolvency Resolution Process (CIRP) of Garvit Innovative Promoters Ltd. The RP cited non-cooperation from the suspended board of directors, absence of financial records due to alleged destruction by the ex-management, and the expiration of the CIRP period as primary reasons for the recommendation. Additionally, the illegal Ponzi scheme business model of the Corporate Debtor, which defrauded over 2 lakh investors, further necessitated the liquidation process.

The Tribunal has appointed Mr. Nirmal Kumar Bhesoni as the Liquidator to oversee the liquidation proceedings. The Liquidator is tasked with investigating the financial affairs of the Corporate Debtor, particularly in relation to preferential and undervalued transactions, and any fraudulent activities. The Tribunal has directed that the liquidation process be conducted in strict accordance with the Insolvency and Bankruptcy Code, 2016, and related regulations.

The order mandates the cessation of all powers of the Board of Directors and vests them with the Liquidator. A fresh moratorium under Section 33(5) of the Insolvency and Bankruptcy Code has been initiated, preventing any new suits or legal proceedings against the Corporate Debtor without prior approval.

The NCLT's decision underscores the seriousness of the financial irregularities and legal violations by Garvit Innovative Promoters Ltd., marking a crucial step towards addressing the grievances of the defrauded investors and creditors. The Liquidator is expected to submit a preliminary report within 75 days, detailing the financial status and the plan for liquidation.

Bottom Line:

Insolvency and Bankruptcy Code, 2016 - Liquidation process of Corporate Debtor initiated upon recommendation of the Committee of Creditors (CoC) with 100% voting approval due to lack of cooperation from ex-management, non-availability of records, expiration of CIRP period, and illegal business model of Ponzi scheme - Liquidator appointed to carry out liquidation process in accordance with the provisions of IBC, 2016 and attendant regulations.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 33(2), 33(5), 35(1), 60(5).

Mr. Dinesh Kumar Gupta, (NCLT)(Allahabad Bench) : Law Finder Doc Id # 2799500