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NCLT Directs Liquidation of Choksi’s Gitanjali Gems

February 20, 2024 | by indiatoday360.com

The National Company Law Tribunal (NCLT) has ordered the liquidation of Gitanjali Gems, a jewellery retailer promoted by absconding businessman Mehul Choksi, under Section 33 of the Insolvency and Bankruptcy Code, 2016. The order was pronounced on February 7, 2024, after the resolution professional of the company filed an application for liquidation.

Background of the case

Gitanjali Gems was admitted under the Corporate Insolvency Resolution Process (CIRP) in October 2018, with liabilities of over Rs 12,558 crore. The company was under investigation by multiple law enforcement agencies, such as the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI), for its alleged involvement in the Punjab National Bank fraud case. The fraud case involved Choksi and his nephew Nirav Modi, who are accused of defrauding the bank of over Rs 13,000 crore by obtaining fraudulent letters of undertaking (LoUs).

The resolution professional informed the tribunal that he was denied access to the properties, assets, stocks and records of Gitanjali Gems by the ED, which had attached them under the Prevention of Money Laundering Act (PMLA). He also said that due to the lack of ongoing business operations and the bleak chances of receiving any resolution plan, it was necessary to proceed with the liquidation of Gitanjali Gems.

Order of NCLT

The tribunal observed that the Committee of Creditors (CoC) of Gitanjali Gems had approved the liquidation by a majority of 90.16% voting in favour. It also noted that it had limited powers of judicial review in such matters of commercial wisdom. Hence, it ordered the liquidation of Gitanjali Gems and appointed Santanu T Ray as the liquidator.

The tribunal also directed the liquidator to take charge of all the assets and records of Gitanjali Gems and to submit a preliminary report within 75 days. It also asked the liquidator to cooperate with the investigation agencies and to file an application for appropriate relief if any difficulty arises in the liquidation process.

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