NCLAT scraps audit, reinstates Resolution Professional at Golden Tobacco

The Insolvency appellate tribunal NCLAT has set aside the directions of the NCLT for a forensic audit of Golden Tobacco, and a change in the resolution professional of the debt-ridden cigarette maker.

Passing an order over a batch of petitions filed against the NCLT order, the National Company Law Appellate Tribunal also extended the timeline for completing the CIRP (Corporate Insolvency Resolution Process) of Golden Tobacco till October 17, 2025.

Besides, the appellate tribunal has also directed the NCLT to decide over the claims of financial creditors -- Central Bank of India, Arrow Engineering and others and then to reconstitute the lenders' body -- Committee of Creditors (CoC).

"The direction of the Adjudicating Authority to conduct a forensic audit by KPMG is set aside," said a two-member bench comprising Chairperson Justice Ashok Bhushan and Member Barun Mitra.

Vadodara-based Golden Tobacco owns cigarette brands such as Panama, Chancellor, Golden's Gold Flake and Taj Chhap. It is a Dalmia Group-owned firm.

The appellate tribunal also set aside the direction of the NCLT, directing a change in the resolution professional of the company.

"Direction contained in the impugned order replacing the Appellant (RP) is set aside. Consequently, the direction to appoint a New Resolution Professional Sanjay Borad shall come to an end," it said, directing the new Resolution Professional who was allowed to function during the pendency of these appeals shall hand over all the records within seven days.

NCLAT was hearing a batch of petitions filed against an order passed by the Ahmedabad bench of the National Company Law Tribunal (NCLT) on May 13, 2024 in which the tribunal had passed several directions.

NCLAT in its 86-page-long order also dismissed the petition filed by Suraksha Realty and Sheth Developers, which were seeking the status of a 'secured' Financial Creditor of Golden Tobacco.

Both had challenged the order of NCLT passed on May 13, 2024 in this regard.

However, it also partially provided relief to Arrow Engineering, another Financial Creditor of the company, whose claim was restricted to Rs 40.75 crore.

Suraksha Realty and Sheth Developers have also filed another application seeking direction to remove and reject the claims filed by the Central Bank of India, Arrow Engineering and other Financial Creditors.

Moreover, over the Central Bank of India's plea, NCLAT "partly allowed deleting the observation made in the impugned order that the Resolution Professional has inflated the claim of the Central Bank of India."  It also dismissed the plea of Shree Ram Vessel Scrap, who could not submit a Resolution Plan by March 2, 2024, which was the last date for submitting a Resolution Plan. NCLAT granted liberty to it "to pursue its pending applications" before the NCLT there.

Moreover, the appellate tribunal has also directed to complete the CIRP (Corporate Insolvency Resolution Process) within a period of two months after the decision on the claims filed by its financial creditors - Central Bank of India, Arrow Engineering and others Financial creditors.

"The Resolution Professional after the decision of the Adjudicating Authority... shall reconstitute the CoC and convene a meeting for consideration of the Resolution Plans, in accordance with law," said a two-member bench.

NLCAT further extended the period for completion of CIRP till October 17, 2025.

"The period from 21.05.2024 till date is excluded from the CIRP process, during which period the interim order passed in the appeal has operated. CIRP period is extended till 17.10.2025 during which the entire CIRP process shall be completed," it said.

CIRP was commenced against Golden Tobacco on June 7, 2022, by NCLT after admitting the Section 7 application filed by Arrow Engineering.