NCLT orders Liquidation of Kwality Dairy (India) Ltd.

NCLT orders Liquidation of Kwality Dairy (India) Ltd.

On 11 January 2021, the National Company Law Tribunal, Delhi (NCLT) has directed to liquidate debt-ridden dairy firm Kwality Ltd. after it failed to finalize any bidder within the specified timeline

The National Company Law Tribunal (NCLT) ordered the liquidation of Kwality Limited (corporate debtor). The corporate debtor owes over Rs.1900 crore to its lenders.

A two-member bench of the NCLT comprising M S Tariq and N K Bhola stated, "In view of the facts and circumstances, this authority (NCLT) is satisfied that the application filed for initiation of liquidation proceedings against the corporate debtor (Kwality) is a fit case for ordering the liquidation of the corporate debtor namely Kwality Ltd in the manner laid down in IBC, 2016."

Kwality Ltd. was incorporated in 1992 as Kwality Dairy (India) Ltd. It was set up as a backward integration unit of Kwality Ice Creams India Ltd and was acquired by Dhingra Family in 2002 and has been in the business of products including milk ghee, milk powders, flavoured milk, etc.

The corporate debtor was already under scanner for cheating a consortium of banks led by the Bank of India. It was admitted into insolvency in December 2018 on a petition moved by Punjab National Bank (PNB) and global private equity firm K.K.R. India Financial Services Pvt. Ltd. (Financial Creditor).

Haldiram Snacks and Pioneer securities jointly made an initial offer of Rs. 130 crore which was later revised to Rs. 145 crore of which the majority of the funds in the resolution plan were allocated to the financial creditors. The said offer was rejected by the Committee of Creditors (CoC).

Following this, its resolution professional (RP) Mr. Shailendra Ajmera, had moved an application to initiate the liquidation process for the company as mandated under the Insolvency & Bankruptcy Code (IBC).

Mr. Ajmera was appointed as the liquidator by the NCLT. The Tribunal said, "The personnel of the corporate debtor are hereby directed to extend all corporations to the liquidator as may be required in managing the affairs of the corporate debtor."

The Tribunal further stated, "Moratorium passed under Section 14 of the IBC, 2016, shall cease to have its effect from the date of the order and that a fresh moratorium under Section 33(5) of IBC, 2016 shall commence."

The NCLT gave directions to the liquidator to send the copy of the order to the Registrar of Companies, the Insolvency and Bankruptcy Board of India, and the IT Department including the Assessing Officer of the IT Circle. It said, "The liquidator shall submit a preliminary report to the NCLT within 75 days from the liquidation commencement."