Mehul Choksi’s Gitanjali Gems Ordered for Liquidation by NCLT Mumbai

Mehul Choksi’s Gitanjali Gems Ordered for Liquidation by NCLT Mumbai

On February 7, the National Company Law Tribunal (NCLT) in Mumbai ordered the liquidation of Gitanjali Gems, a jewellery retailing company where fugitive Indian businessman Mehul Choksi serves as the managing director.

A coram consisting of judicial member Kuldip Kumar Kareer and technical member Anil Raj Chellan also appointed Santanu T Ray as the liquidator.

The NCLT in its order highlighted that the assets of Gitanjali Gems were already under attachment by the Directorate of Enforcement under the provisions of the Prevention of Money Laundering Act (PMLA). Given the ongoing investigations and the attachment of assets, the Committee of Creditors (CoC) decided to liquidate the Corporate Debtor. The resolution in favour of liquidation was reached with a majority vote of 90.16 per cent. The NCLAT ruled that the Corporate Debtor must indeed be liquidated.

This marks the second instance of a company promoted by Choksi being admitted into liquidation. The first case involved Nakshatra World, another jewellery retailer, which underwent liquidation proceedings in July 2021.

Gitanjali Gems entered the Corporate Insolvency Resolution Process (CIRP) on October 8, 2018. This company faced an admitted liability of over ₹12,000 crore.

However, despite its prominence, it has now been ordered for liquidation by the NCLT due to ongoing investments and assets attachments.

The Resolution professional (RP) Vijay Kumar Garg apprised the NCLT that due to alleged fraudulent activities committed by the company, its affairs were under investigation by various law enforcement agencies, including the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED). The ED issued several orders seizing and attaching the company’s properties and assets.

Garg, in an effort to facilitate the CRIP, sought information from the authorities regarding the attached properties. Unfortunately, his request was met with refusal by the agencies, which declined to release the attachment on these properties. This development was communicated to the NCLT by Garg.

In response to this situation, the consortium head ICICI Bank and the RP took action. They approached the appellate authority under the PMLA. As a result, the attachment confirmation order was overturned in March 2019.

The RP faced challenges in gaining control over the assets and executing necessary activities to advance the CIRP. This information was duly communicated to the Committee of Creditors (CoC).

The CIRP was set to expire in April 2019, and the CoC made the decision not to extend it. This choice was influenced by the fact that Gitanjali Gems lacked an operational business, and all its assets had been either seized or attached by investigating agencies. Consequently, the prospects of formulating a resolution plan appeared grim.

As a result, the RP initiated the process for liquidation, which was subsequently approved by the NCLT. The RP also conveyed his reluctance to serve as the liquidator for the company. Therefore, a new liquidator was appointed with the consent of the CoC.

Advocates Rohit Gupta and Anant Upadhyay represented the Resolution Professional in the legal proceedings.