CASE BRIEF: AFFINITY FINANCE SERVICES Pvt Ltd v. KIEV FINANCE Ltd

 

NAME OF THE CASE	Affinity Finance Services Pvt Ltd v. Kiev Finance Ltd
CITATION	Company Appeal (AT) (Insolvency) No. 171 of 2019
DATE OF JUDGEMENT	April 26, 2019
APPELLANT	Affinity Finance Services Pvt Ltd
RESPONDENT	Kiev Finance Ltd
BENCH /JUDGE	Justice Bansi Lal Bhat Member (Judicial) Mr. Balvinder Singh Member (Technical)
STATUTES INVOLVED	The Insolvency and Bankruptcy Code, 2016
IMPORTANT SECTIONS/ARTICLE	Section 9 of The Insolvency and Bankruptcy Code, 2016. Section 12 of The Insolvency and Bankruptcy Code, 2016. Section 30(3) of The Insolvency and Bankruptcy Code, 2016. Section 60 of The Insolvency and Bankruptcy Code, 2016.

Overview of the Case

The case is Affinity Finance Services Pvt. Ltd. vs. Kiev Finance Ltd. in which the appellant, Affinity Finance Services Pvt. Ltd., filed a petition invoking Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016. The corporate debtor, Kiev Finance Ltd., had defaulted on their debt obligations, and as such, the appellant petitioned for the initiation of a Corporate Insolvency Resolution Process (CIRP). The petition was admitted by the Kolkata Bench of the National Company Law Tribunal, which then initiated the Corporate Insolvency Resolution Process. As no resolution plan was received in spite of multiple meetings during the statutory period, CIRP ended up leaving only liquidation. Subsequently, a third party expressed interest in submitting a resolution plan after the liquidation order had been passed. The appellant sought to recall the liquidation order, which the NCLT dismissed. The National Company Law Appellate Tribunal (NCLAT) upheld the NCLT’s decision, stating that the IBC does not permit recalling liquidation orders once issued. This case highlights the IBC’s strict procedural structure, timelines, and adherence to legal finality in insolvency cases.

Facts of the Case

An operational creditor, Affinity Finance Services Pvt. Ltd., filed a petition under Section 9 of the IBC against Kiev Finance Ltd., claiming a default in the payment of dues. The NCLT admitted the petition and appointed an IRP. A CoC was formed to supervise the resolution process. The period of CIRP for 180 days, under the IBC, involved six meetings of the CoC, yet no resolution plan was submitted or approved. In the absence of any resolution, IRP applied for liquidation of the corporate debtor, which was approved by NCLT on September 10, 2018. Subsequently, M/s Nigania Promoters Pvt. Ltd expressed interest in submitting the resolution plan post-liquidation and the Liquidator filed an application before NCLT to recall the order of liquidation, but NCLT rejected the application holding that the orders of liquidation are declaratory in nature and not appealable under the IBC. Not being satisfied with this judgment, the appeal moved to NCLAT. However, NCLAT finally confirmed the order made by the NCLT.

Provisions and Concepts Involved 

1. Section 9 IBC: Section 9 enables operational creditors to move an application for the commencement of a CIRP against a corporate debtor upon the occurrence of default.

Application in this Case: The Appellant being an operational creditor, invoked Section 9 to initiate CIRP against the respondent on account of debts due. This was the start of the insolvency process.

1. Section 12 IBC: Section 12 says that the CIRP shall be completed within 180 days from the date of admission of the application, extendable by a further period of 90 days with the approval of the CoC.

Application in this Case: The CoC did not approve any resolution plan within the specified time frame of 180 days; thus, the Resolution Professional applied for liquidation of the corporate debtor.

1. Section 30(3) IBC:  Section 30(3) says that if the resolution plans meet all the conditions stipulated in Section 30(2), then the Resolution Professional shall submit resolution plans before the Committee of Creditors for its approval.

Application in this Case: No resolution plan was submitted during the CIRP, leaving no opportunity for the CoC to evaluate or approve any such plan.

1. Section 60(2) IBC: Section 60(2) provides jurisdiction to the NCLT for handling applications, appeals, or challenges arising under the IBC.

Application in this Case: The Liquidator filed an application under this section seeking a recall of the liquidation order which was dismissed by the NCLT.

1. Liquidation Provisions under IBC: If there is no approval of the resolution plan within the specified CIRP period, the corporate debtor shall be put into liquidation.

Application in this Case: Liquidation was directed as no workable plan of resolution was filed within the CIRP, and the IBC does not allow such orders to be recalled post-issue.

Arguments of the Appellant

The appellant, Affinity Finance Services Pvt. Ltd., submitted that the liquidation order deserves to be recalled as the company M/s Nigania Promoters Pvt. Ltd. had indicated its intention to file a resolution plan after the liquidation had been initiated.  The appellant argued that this would allow the CoC to assess the plan and even revive the corporate debtor as a going concern. Additionally, the appellant, being the sole member of the CoC, was worried about the likelihood of undervaluation of the assets of the corporate debtor during liquidation.  The appellant emphasized that the revocation of the order of liquidation would be in the best interest of all parties involved, with maximum asset value recovery.

Arguments of the Respondent

Kiev Finance Ltd., respondent, argued that the IBC imposes strict timelines for CIRP and prohibits recall or revocation of liquidation orders once passed.  They emphasized that no resolution plan had been submitted during the 180-day CIRP period, and any intent to submit a plan post-liquidation was legally irrelevant. It explained the aspect of liquidation of that would sell the corporate debtor as a going concern whereby every complaint regarding fair evaluation of its assets would have been sorted out.  Also, they claimed the process due was followed before getting to pass the order so nothing remained to interfere and or even reconsidered on those matters.

Judgment

The NCLAT confirmed the NCLT's order dismissing the appeal filed by the appellant to recall the liquidation order. It held that no resolution plan was filed during the CIRP, and the IBC has no provision for revoking the liquidation orders post-issue. The tribunal further held that the appellant's apprehension that the assets were undervalued was without any basis, as the liquidation process provides for the sale of the corporate debtor as a going concern. The judgment reiterated the strict need to abide by the timelines and procedures of the IBC for the finality and integrity of the insolvency process. While the judgment does not refer to any earlier cases, it is indicative of the settled principles of IBC regarding the finality of liquidation orders. The tribunal held that IBC does not allow the reconsideration of liquidation orders once issued and highlights the need for following the discipline of procedure and timelines of statute. The case is in line with the broader jurisprudence under the IBC whereby courts have uniformly held the liquidation orders as unalterable to achieve efficiency in insolvency proceedings.

Conclusion

This judgment emphasizes procedural discipline and abidance by statutory timelines in the Insolvency and Bankruptcy Code, 2016. It is hereby proved that the rejection of an appeal by a tribunal further enhanced the concept of finality in orders of liquidation because the IBC does not allow a retroactive review of decisions like these. Even though the IBC promotes resolution as a prime objective, it also makes sure that delays and inefficiencies are not allowed to defeat the insolvency process. This judgment is a reminder for all stakeholders to act in time to achieve the desired outcomes under the IBC framework. Finally, this case reaffirms the IBC's commitment to balancing resolution efforts, procedural efficiency, and legal certainty.