Court accepts plea to dissolve CG Power

Court accepts plea to dissolve CG Power

Mumbai: The bankruptcy court in Mumbai has allowed an application filed by the resolution professional of CG Power Solutions to dissolve the company after the lenders of the company failed to revive the company due to lack of any underlying assets.

The tribunal had also allowed the lenders’ plea to pursue recovery against the erstwhile promoters under the bankruptcy laws even after the dissolution of the company. Originally, the company had only two creditors including its holding company CG Power & Industrial Solutions and its financial creditor Stickwell (India).

In November 2020, Gautam Thapar-promoted CG Power & Industrial Solutions was acquired by Chennai-based Murugappa Group through a Swiss challenge mechanism, after the company was admitted under the insolvency resolution process. Now, CG Power & Industrial Solutions is trying to recover about ₹1,407 crore from the erstwhile management.

“There is not enough data right now to assess the outcome of avoidance transactions including recoveries made thereunder,” said Jyoti A Singh, founder of law firm AJA Legal. “However, as per this order, such applications are maintainable even beyond liquidation, which is good news for the stakeholders. Financial creditors can take charge of such applications post-liquidation and pursue the same for reliefs under such applications – mainly recoveries.”

Last year in December, the resolution professional (RP) of CG Power Solutions moved to the tribunal seeking to dissolve the company since it neither is an operating company nor has any assets.

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The RP had also moved a separate application to the tribunal to allow its lenders to pursue recovery dues under Section 66 of the IB Code. Under Section 66, resolution professional or liquidator can approach the tribunal to recover losses that occurred on account of any fraudulent transaction and the directors of such company who caused such losses can be made liable to make good for such losses. In addition to the recoveries which can be made from the avoidance applications, the financial creditors may recover from the guarantors (personal or corporate), if any, feels a legal expert.

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