The court has also granted permission for lenders to pursue recovery actions against the former promoters, even post-dissolution.
In a significant development, the bankruptcy court in Mumbai has granted approval to the application filed by the resolution professional of CG Power Solutions, paving the way for the dissolution of the company. This decision comes as a consequence of the lenders’ inability to revitalize the company, primarily due to the absence of substantial underlying assets. The tribunal has also consented to the lenders’ request to pursue recovery actions against the former promoters, even following the dissolution of the company. CG Power Solutions initially had only two creditors, comprising its holding company CG Power & Industrial Solutions and financial creditor Stickwell (India).
The Chennai-based Murugappa Group acquired CG Power & Industrial Solutions, previously promoted by Gautam Thapar, through a Swiss challenge mechanism. This acquisition occurred after the company was admitted under the insolvency resolution process. Presently, CG Power & Industrial Solutions is actively seeking to recover an outstanding amount of approximately ₹1,407 crore from the former management.
Jyoti A Singh, the founder of AJA Legal, commented on the situation, highlighting the significance of the court’s decision. “There is not enough data right now to assess the outcome of avoidance transactions including recoveries made thereunder,” she stated. “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.”
The resolution professional (RP) of CG Power Solutions initiated proceedings in the tribunal, seeking the dissolution of the company, given its non-operational status and lack of assets. Additionally, the RP submitted a separate application to the tribunal, seeking permission for its lenders to pursue recovery dues under Section 66 of the Insolvency and Bankruptcy Code (IBC). Under Section 66, a resolution professional or liquidator can approach the tribunal to recover losses resulting from fraudulent transactions. Directors responsible for such losses can also be held liable for compensation. Furthermore, legal experts suggest that, in addition to recoveries from avoidance applications, financial creditors may seek recovery from guarantors, whether personal or corporate, if applicable.