NCLT orders Mehul Choksi-promoted Gitanjali Gems' liquidation under IBC law

The National Company Law Tribunal (NCLT) has ordered liquidation of jewellery retailer Gitanjali Gems, promoted by absconding diamantaire Mehul Choksi, under Section 33 of the Insolvency and Bankruptcy Code, 2016.

The bench also appointed Santanu T Ray as the liquidator, who will complete the liquidation process as per the provisions of the IBC, 2016, according to an NCLT order, filed on BSE.

The resolution professional of the jewellery retailer, Vijay Kumar Garg, filed the application for liquidation in NCLT.

Garg informed the tribunal that on account of the alleged fraud perpetrated by Gitanjali Gems and its officers, the affairs were under investigation by multiple law enforcement agencies like the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI).

He said that the ED had issued orders attaching the properties of Choksi.

In his application, Garg informed the tribunal that immediately after the appointment he wrote to various investigation authorities (including the Directorate of Enforcement and the CBI) requesting for details and access to such properties, assets, stocks and records of Gitanjali Gems to proceed further with the CIRP.

However, the authorities denied Garg's request and refused to lift the attachment over the properties of Gitanjali Gems in CIRP.

Garg further said that as 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, he submitted an application to initiate the liquidation process. He also declined to serve as the 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.

Further, the order observed that "the CoC (Committee of Creditors) with requisite voting ... has approved the liquidation of Corporate Debtor in view of bleak chances of receiving any resolution plan... This Tribunal has very limited powers of judicial review in such matters of commercial wisdom."

Hence, the tribunal ordered the liquidation of Gitanjali Gems.

Gitanjali Gems, with liabilities of over Rs 12,558 crore, was admitted under the Corporate Insolvency Resolution Process (CIRP) in October 2018.