The Amaravati Bench of the National Company Law Tribunal (NCLT) has held that once a Resolution Plan is approved by the CoC and acted upon, the Adjudicating Authority has no jurisdiction to undo the distribution and recall amounts into the liquidation estate. The NCLT examined the scope of Section 36 of the IBC and observed that neither the first tranche amount nor the PBG was reflected as an asset of the Corporate Debtor in the audited Balance Sheet, since the funds had already been utilised and distributed by the Resolution Professional during the CIRP period.
The Bench noted that Section 36 of the IBC is silent on the treatment of amounts paid by the SRA and forfeited due to non-implementation of the Resolution Plan, and both counsels conceded that no judicial precedent exists on identical facts. The Tribunal held that once a Resolution Plan has been approved with the collective wisdom of the CoC and acted upon, the Adjudicating Authority has no jurisdiction to interfere with the distribution carried out in terms of the approved Resolution Plan, which is binding on all stakeholders under Section 31 of the IBC.
The Division Bench comprising Kishore Vemulapalli (Judicial Member) and Umesh Kumar Shukla (Technical Member) examined the scope of Section 36 of the IBC, which defines the ‘liquidation estate’. The Bench noted that Section 36(3)(a) contemplates inclusion of assets over which the Corporate Debtor has ownership rights, as evidenced in the balance sheet, while Section 36(3)(h) includes any property belonging to or vested in the Corporate Debtor at the insolvency commencement date.
On perusal of the audited Balance Sheet of the Corporate Debtor as on 7 November 2025, the Bench observed that neither the amount of Rs.2.60 crore nor the Performance Bank Guarantee (PBG) amount of Rs.2.57 crore was reflected as an asset of the Corporate Debtor. The Auditor had specifically recorded that during the CIRP period, the SRA had deposited an aggregate sum of Rs.5.17 crore in the bank account of the Corporate Debtor, and that the said funds had been utilised and distributed by the Resolution Professional on various dates during the CIRP.
The Bench further noted that Section 36 is silent on the treatment of amounts paid by the SRA and forfeited due to non-implementation of the Plan, and both counsels conceded that no judicial precedent exists on facts similar to the present case. The Bench also recorded that the distribution of the Tranche 1 amount and the forfeiture of the PBG were both specifically provided for in the approved Resolution Plan itself.
Briefly, National Company Law Tribunal (NCLT), Amaravati Bench, was seized of an interlocutory application filed by Srinivas Rao Gudla, the Liquidator of KVR Industries Private Limited (the Corporate Debtor), seeking a direction to Punjab National Bank (PNB) to remit Rs.2.60 crores received under the first tranche of the approved Resolution Plan, along with the forfeited Performance Bank Guarantee (PBG) amount, into the Liquidation Estate Account.
The Corporate Debtor was admitted into the Corporate Insolvency Resolution Process (CIRP) on 18 February 2022, on a petition filed by PP Bafna Ventures Private Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Resolution Plan submitted by the consortium of Bhumireddy Gari Mohan Reddy, Rajendra Kumar Goel, and Naveen Srinivasa Yalamanchili (the Successful Resolution Applicant or SRA) was approved by the Committee of Creditors (CoC) on 4 April 2023 and by the NCLT on 6 September 2024. Under the approved Plan, the SRA was required to pay a total settlement amount of Rs.25.70 crore in three tranches, Rs.2.60 crore within 30 days, Rs.2.60 crore within 120 days, and Rs.20.50 crore within 180 days of approval.
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The SRA paid only the first tranche of Rs.2.60 crore, of which Rs.1.36 crores were disbursed to financial creditors and PNB received Rs.1.28 crores in November 2024. The SRA defaulted on the remaining tranches of Rs.23.10 crore, and its application seeking extension of time was dismissed by the NCLT on 27 March 2025. The liquidation order under Section 33(3) was passed on 9 April 2025, and the Applicant was appointed as the Liquidator.
The SRA then appealed to the National Company Law Appellate Tribunal (NCLAT), which granted a final opportunity to pay the entire balance by 30 September 2025, failing which the liquidation order would stand revived, and the amounts already paid would stand forfeited. The SRA once again failed to comply, and the Monitoring Committee on 3 October 2025 resolved to continue the liquidation process and hand over the Corporate Debtor back to the Liquidator. The Liquidator accordingly filed application seeking directions to PNB to remit the first tranche amount and the forfeited PBG into the Liquidation Estate Account.
