Concept Group Vs Cns Fashions Retail Pvt Ltd - The liquidator shall call upon the financial creditors, being financial institutions, to contribute the excess of the liquidation costs over the liquid assets of the corporate debtor, as estimated by him, in proportion to the financial debts owed to them by the corporate debtor.

 NCLT ND-II (2025.01.15) in Concept Group  Vs Cns Fashions Retail Pvt Ltd  [IB-1024 /ND /2020 New IA-3/2025] held that;

• The liquidator shall call upon  the financial creditors, being financial institutions, to contribute the  excess of the liquidation costs over the liquid assets of the corporate  debtor, as estimated by him, in proportion to the financial debts owed  to them by the corporate debtor. 

Excerpts of the Order;

IA-3/2025: Issue notice to the ex-directors/suspended Board of Directors  qua the Corporate Debtor as also to Members of SCC returnable on  19.03.2025. 

In the meantime, it is made clear that if no funds are available with Corporate  Debtor, it is the liability of the Creditors to meet the cost of liquidation. The  Regulation 2A of IBBI (Liquidation Process), Regulations, 2016 reads thus: 

• “Regulation 2A: Contributions to liquidation costs. 

• 2A. (1) Where the committee of creditors did not approve a plan under  sub-regulations (3) of regulation 39B of the Insolvency and  Bankruptcy Board of India (Insolvency Resolution Process for  Corporate Persons) Regulations, 2016, the liquidator shall call upon  the financial creditors, being financial institutions, to contribute the  excess of the liquidation costs over the liquid assets of the corporate  debtor, as estimated by him, in proportion to the financial debts owed  to them by the corporate debtor. 

Illustration

Assume that the excess of liquidation costs over liquid assets is Rs.10,  as estimated by the liquidator. Financial creditors will be called upon  to contribute, as under: 

Sl. No.	Financial   creditors	Amount of  debt due  to financial creditors (Rs.)	Amount to be  contributed towards  liquidation cost (Rs.)
(1)	(2)	(3)	(4)
	Financial   institution  A	40	4
	Financial   institution  B	60	6
	Non financial   institution  A	50	0
	Non financial   institution  B	50	0
	TOTAL	200	10

(2) The contributions made under the plan approved under sub regulation (3) of regulation 39B of the Insolvency and Bankruptcy  Board of India (Insolvency Resolution Process for Corporate Persons)  Regulations, 2016 or contributions made under sub-regulation (1), as  the case may be, shall be deposited in a designated escrow account  to be opened and maintained in a scheduled bank, within seven days  of the passing of the liquidation order. 

(3) The amount contributed under sub-regulation (2) shall be  repayable with interest at bank rate referred to in section 49 of the  Reserve Bank of India Act, 1934 (2 of 1934) as part of liquidation cost.] [Explanation - It is hereby clarified that the requirements of this  regulation shall apply to the liquidation processes commencing on or  after the date of the commencement of the Insolvency and Bankruptcy 

In the wake, let the Creditors irrespective of being related party bear the cost  of liquidation to be determined as per law.  

List on 19.03.2025. 

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