NCLT reserves order on Sapphire Land Development liquidation plea

The National Company Law Tribunal (NCLT) has reserved its order on a petition seeking liquidation of Sapphire Land Development, triggering debate in insolvency circles over whether a company can be liquidated without completing a mandatory procedural requirement under the Insolvency and Bankruptcy Code (IBC).

The case has spotlighted a critical gap in the Corporate Insolvency Resolution Process (CIRP): the non-publication of Form G, the official invitation for Expressions of Interest (EOIs) from prospective resolution applicants. During the hearing, the Resolution Professional informed the tribunal that the statutory CIRP timeline had expired.

Form G was never published because the Committee of Creditors (CoC) did not approve its issuance. Suraksha Asset Reconstruction Ltd., which moved the liquidation plea, argued that the process had effectively run its course, with significant CIRP costs already incurred and no realistic chance of a successful resolution. However, Unity Small Finance Bank strongly opposed the plea, contending that the CIRP remained incomplete. The bank pointed out that Regulation 36A of the CIRP Regulations mandates the publication of Form G to invite potential resolution applicants. In its absence, no opportunity was given to investors or bidders to submit resolution plans.

The lender further submitted that while the proposal to publish Form G was placed before the CoC, the voting process was never concluded, preventing the process from advancing to the stage of inviting, evaluating, and considering competing resolution plans. The development has raised a broader legal question: Can a corporate debtor be pushed into liquidation when a core step designed to test market interest in its revival has not been undertaken? Insolvency professionals emphasise that Form G is not a mere formality but the primary mechanism to expose distressed assets to the market and attract potential rescuers. Skipping it, they argue, undermines the IBC’s core objective of prioritising resolution over liquidation.

Legal experts are watching the NCLT’s forthcoming order closely. It could set a precedent on how tribunals should handle cases involving incomplete procedural steps. Possible outcomes include directing the completion of the remaining CIRP formalities before considering liquidation, or ruling that the expiry of the statutory timeline overrides the procedural lapse.

Any liquidation order is likely to be challenged before the National Company Law Appellate Tribunal (NCLAT), where issues concerning compliance with Regulation 36A and the IBC’s preference for resolution are expected to come under judicial scrutiny.

The tribunal has reserved its order, with the decision awaited in the coming days.