Truvisory Insolvency Professional Pvt. Ltd. vs Libra Fabric Designs Private Limited

Per: Smt. Lakshmi Gurung, Member (Judicial)

The present I.A. No. 10 of 2026 has been filed under Section 33(1) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘Code’) by the Resolution Professional of M/s Libra Fabric Designs Private Limited (‘Corporate Debtor’) seeking following reliefs as follows:

Upon an application filed by Mr. Ramesh Rughan (‘Financial Creditor’) against M/s Libra Fabric Designs Pvt. Ltd. (Corporate Debtor) under Section 7 of the Code, the Adjudicating Authority admitted the petition and Corporate Insolvency Resolution Process (‘CIRP’) of the corporate debtor commenced vide order dated 01.10.2024 and the Applicant was appointed as Interim Resolution Professional (‘IRP’). The said order dated 01.10.2024 is annexed to the application as Exhibit A.

It is submitted that the IRP issued the public notice inviting claims against the Corporate Debtor. Based on the claims received, a list of creditors was prepared and the Applicant formed a Committee of Creditors (COC) consisting of following member:

The Report certifying the constitution of CoC was taken on record by this Tribunal vide order dated 01.01.2025 in IA No. 6027 of 2024.

Subsequently, claims of one Mr. Ramesh Rughani (Unsecured Financial Creditor) was admitted and list of creditors was updated. However, being a related party, he was not included in the CoC and therefore, the composition of CoC remained unaffected. The updated list of creditors as on 07.11.2024, which was taken on record vide order dated 10.03.2023 in IA No. 1089 of 2025 is:

It is submitted that CoC members have conducted 12 meetings till date. The minutes of 1^st to 11^th CoC meetings along with the voting results are collectively annexed to the petition as Exhibit D (Colly).

The 1^st meeting of the COC was held on 28.10.2024 in which resolution was passed confirming the Applicant as the Resolution Professional of the Corporate Debtor.

The Applicant issued Form-G on 04.12.2024 inviting Expression of Interest (‘EOI’) from Prospective Resolution Applicants (‘PRA’) and last date for receipt of expression of interest was 19.12.2024 and last date for submission of resolution plans was 17.02.2025.

Based on EOIs received, there were two PRAs: a) Resurgent India Limited b) Mr. Mehul Sedani. The Form G dated 04.12.2024 is annexed to the petition as Exhibit H.

After verification of the EOI received, the Applicant circulated a provisional list of eligible PRAs and subsequently also circulated final list of eligible PRAs vide email dated 13.01.2025. The CoC members in its 3^rd CoC meeting held on 17.01.2025, approved that the resolution applicant to submit the Earnest Money Deposit (“EMD”) of Rs. 10,00,000 along with EOI and another Rs. 10,00,000 EMD to be submitted separately with the resolution plan.

Further it is submitted that, the Applicant circulated the Information Memorandum (‘IM’) to the COC on 04.01.2025 and the COC approved the issue of Request for Resolution Plan (‘RFRP’), evaluation matrix and IM to the PRAs. Thereafter the applicant circulated the IM, RFRP along with evaluation matrix to the PRAs on 18.01.2025.

As the Corporate Debtor is registered under the Micro, Small and Medium Enterprises Development Act, 2006 (‘MSMED Act’), the suspended director Mr. Mehul Sedani submitted the resolution plan, along with Earnest Money Deposit of Rs. 10,00,000/- which was submitted to the CoC in the 4^th CoC meeting held on 19.02.2025.

It is submitted that the period of 180 days from the commencement of CIRP was ending on 30.03.2025, therefore in the 6th CoC meeting held on 27.03.2025, the COC with 100% voting, instructed RP to make an application for extension of the CIRP period by a further period of 60 days. The Applicant vide an application bearing IA No. 2210 of 2025, sought a first extension of 60 days and the same was allowed by the Adjudicating Authority vide Order dated 29.05.2025.

It is submitted that the Applicant, with the consent of the CoC, had appointed the valuers who, in the 8^th COC meeting held on 07.05.2025, explained the methodology adopted by each valuer to determine the valuation of the assets of the Corporate Debtor.

The CoC in its 9^th meeting held on 22.05.2025, with 100% voting resolved for a further extension of 30 days of the CIRP period. Accordingly, the Applicant filed IA No. 3994 of 2025 seeking further extension of 30 days which was allowed vide order dated 03.09.2025.

In the 10^th CoC meeting held on 21.06.2025, the Resolution Plan dated 21.06.2025 of Mr. Mehul Sedani was approved by the CoC with 100% voting. Accordingly, Mr. Mehul Sedani was declared as the Successful Resolution Applicant (SRA) of the Corporate Debtor. Further, the Applicant had sent a Letter of Intent (‘LOI’) dated 26.06.2025 wherein the SRA was directed to deposit the Performance Bank Guarantee/Performance Security amounting to Rs. 96,70,454/- within 10 days.

Immediately thereafter, on 27.06.2025, without waiting for the deposit of Performance guarantee, the Applicant filed an Interlocutory Application for approval of the Resolution Plan, vide filing receipt number 2709138060792025.

It is further submitted that in the 11^th CoC meeting held on 15.07.2025, the CIRP status of the Corporate Debtor was discussed and the applicant informed that it has filed the IA for submission of approved Resolution Plan before the NCLT and it was also apprised to the COC that the SRA was required to submit a Performance Security of Rs. 96,70,454/-, out of which only Rs. 20,00,000/- had been received as Earnest Money Deposit. The remaining amount of Rs 76,70,454/- was to be paid within ten days from the issuance of the Letter of Intent, which period expired on 06.07.2025. However, despite multiple follow-ups, SRA failed to remit the balance Performance Security amount.

The factum of non-receipt of the full Performance Security was discussed with the CoC in its 12^th meeting held on 05.01.2026. In this regard the SRA had submitted that since the Corporate Debtor is an MSME and the resolution plan was submitted by the Director/Promoter, the submission of the performance security amount may be relaxed. However, the CoC noted that the SRA had accepted all terms, including the obligation to submit Performance Security. The CoC discussed that SRA’s inability to arrange the performance security amount within the given time which not only raises a serious concern regarding the ability of the SRA in implementation of the resolution plan but also amounts to breach of the Resolution Plan dated 21.06.2025. Accordingly CoC with 100% votes decided to initiate liquidation proceedings against the Corporate Debtor under Section 33 of the Code. Copies of the minutes of the 12^th CoC meeting along with the voting result ( in Ballot Paper dated 06.01.2026) are annexed to the application as Exhibit N and Exhibit O, respectively.

Following Resolution was passed in the 12^th CoC meeting held on 05.01.2026:

In the same CoC meeting it was further discussed that the sole CoC member will communicate the name of the proposed Liquidator through Email, pursuant to which vide an email dated 07.01.2026 Mr. Nilesh Rajendra Kothari bearing IBBI No. IBBI/IPA-022/IPN01225/2022-2023/14132, Email: - [email protected], was recommended to act as a Liquidator for the Corporate Debtor. The email dated 07.01.2026 along with Form AA – (written consent to act as a liquidator) is annexed to the petition as Exhibit P.

Accordingly, the present Interlocutory Application has been filed under Section 33 of the Code on 28.01.2026 seeking Liquidation of the Corporate Debtor.

We have considered the submissions made by the counsel for the applicant and perused the record.

It is seen that the CoC had deliberated upon the resolution plan submitted by the suspended director/promoter (SRA) of the Corporate Debtor and had also approved the same. However, despite agreeing to submit the Performance Security as per its own the Resolution Plan, the SRA failed to comply the first requirement of submitting Performance security. CoC has taken a decision in its commercial wisdom that SRA has not only failed to comply with the terms of Resolution Plan rendering the resolution plan non-compliant but has also raised serious concerns about the ability of the SRA in implementation of the resolution plan and has declined to grant any waiver of Performance Security or extension of time in submitting the Performance Security. The decision of the CoC to liquidate the Corporate Debtor is based on exercise of its commercial wisdom which non-justiciable and cannot be interfered by this Tribunal. Therefore, this Tribunal has no option but to pass order of liquidation under section 33 of the Code. The said Section is quoted below for the convenience and the ready reference:

Given the facts and circumstances as discussed above, the present case falls under section 33(2) of the Code and this Adjudicating Authority shall pass an order for Liquidation of the Corporate Debtor. Hence ordered as follows:

Accordingly, I.A. (IBC)(LIQ.) No. 10 of 2026 is allowed and stands disposed of.