Read Time: 04 minutes

Synopsis

The National Company Law Tribunal (NCLT) has ordered the liquidation of Gitanjali Gems Ltd, a jewellery company where fugitive businessman Mehul Choksi was the Managing Director.

Vijay Kumar Garg, the resolution professional of Gitanjali Gems Ltd, submitted the application for liquidation. The order was passed by a division bench consisting of Judicial Member Kuldip Kumar Kareer and Technical Member Anil Raj Chellan.

In October 2018, Gitanjali Gems was admitted to the Corporate Insolvency Resolution Process (CIRP) with liabilities exceeding Rs 12,000 crore. Another company linked to Choksi, Nakshtra World, was admitted for liquidation in July 2021.

Garg informed the NCLT that the affairs of Gitanjali Gems were under investigation by the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI) due to alleged fraudulent activities by the company.

Garg informed the NCLT that the ED had issued orders attaching the properties of Choksi. However, Garg’s representation before the ED to assist in the Corporate Insolvency Resolution Process (CIRP) was rejected.

Subsequently, ICICI Bank, the head of the consortium, approached the appellate authority under the Prevention of Money Laundering Act (PMLA), leading to the ED’s order being set aside.

The 180-day duration of the CIRP had already expired in April 2019, and with the company lacking ongoing business operations, the chances of the company’s revival were bleak.

Hence, Garg submitted an application to initiate the liquidation process. Garg declined to serve as the liquidator. Subsequently, the NCLT appointed a new liquidator.

The NCLT, in its order, observed that due to the ongoing investigations, attachment of assets and the low likelihood of insolvency resolution, it was necessary to proceed with the liquidation of Gitanjali Gems

“It is evident that the assets of Gitanjali Gems were under attachment by the Directorate of Enforcement under the provisions of the PMLA and considering the bleak chances of insolvency resolution amid the ongoing investigations and attachment of assets, the CoC had resolved to liquidate the Corporate Debtor by a majority of 90.16% voting in favour. This Bench is of the opinion that the Corporate Debtor is required to be liquidated,” the order reads.

Case title: ICICI Bank Ltd vs Gitanjali Gems Ltd