Introduction:

In a significant development, the National Company Law Tribunal (NCLT) in Mumbai has ordered the liquidation of a major jewellery retailing company, Gitanjali Gems, associated with fugitive Indian businessman Mehul Choksi. The decision, rendered on February 7, comes as the second instance of Choksi-linked companies being admitted to liquidation, with Nakshatra World preceding in July 2021. The coram of judicial member Kuldip Kumar Kareer and technical member Anil Raj Chellan issued the order, appointing Santanu T Ray as the liquidator.

Arguments of Both Sides:

The NCLT order cited the attachment of Gitanjali Gems’ assets by the Directorate of Enforcement under the PMLA, coupled with ongoing investigations, as grounds for the company’s bleak chances of insolvency resolution. The Committee of Creditors (CoC) voted overwhelmingly (90.16%) in favor of liquidation, given the circumstances. Resolution professional (RP) Vijay Kumar Garg highlighted the company’s alleged fraud and its concurrent investigation by law enforcement agencies, including the CBI and ED. The RP’s attempts to access information on attached properties for the Corporate Insolvency Resolution Process (CIRP) were denied by the agencies, leading to the RP’s plea for liquidation.

Court’s Judgment:

Considering the challenges posed by the ongoing investigations, attachment of assets, and the lack of a running business, the NCLT approved the liquidation, following the CoC’s resolution not to extend the CIRP. The RP’s reluctance to act as the liquidator led to the appointment of Santanu T Ray, bringing closure to Gitanjali Gems’ insolvency proceedings.