Effectuating Resolution Over Liquidation

Effectuating Resolution Over Liquidation: Can The Resolution Plan Value Be Less Than The Liquidation Value?

Ishika Neotia, O P Jindal Global University

“The soul of the code is to keep the firm by balancing the interests of all the stakeholders for which a successful resolution is needed”

- M.S. Sahoo, Chairperson of IBBI

Introduction

The desideratum of IBC is to consolidate and amend the laws pertaining to resolution and liquidation of insolvencies that caters to almost all types of business entities. The primary objective underlying the IBC is to maximize the value of the assets of the debtors and prevent the degradation of the same with the passage of time. The question that is faced by the courts in order to uphold this objective is whether they can allow a resolution plan having a lesser value than the value of the assets of company if it goes into liquidation?

In the case of CFM Asset Reconstruction Private Limited v SS Natural Resources Private Limited1 is was decided by NCLAT (New Delhi Bench) that a Corporate Debtor cannot into be sent into liquidation on the grounds that the liquidation value is more than the value of the Resolution Plan.