In a significant development, the National Company Law Tribunal (NCLT) has issued an order for the liquidation of Gitanjali Gems Ltd, the jewelry company formerly helmed by fugitive businessman Mehul Choksi. The decision came following an application for liquidation submitted by Vijay Kumar Garg, the resolution professional overseeing Gitanjali Gems Ltd.

Gitanjali Gems Ltd was admitted to the Corporate Insolvency Resolution Process (CIRP) back in October 2018, with liabilities surpassing Rs 12,000 crore. The application for liquidation was approved by a division bench of the NCLT comprising Judicial Member Kuldip Kumar Kareer and Technical Member Anil Raj Chellan.

The resolution professional, Garg, informed the NCLT that investigations by the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI) into alleged fraudulent activities by the company were underway. Moreover, the ED had initiated the attachment of properties owned by Choksi, further complicating the company’s financial situation.

Despite efforts by Garg to seek assistance from the ED in the Corporate Insolvency Resolution Process, his requests were rejected. However, following an appeal by ICICI Bank, the head of the consortium, the ED’s order was overturned under the Prevention of Money Laundering Act (PMLA).

With the CIRP’s 180-day duration expiring in April 2019 and Gitanjali Gems lacking viable ongoing business operations, the prospects for the company’s revival appeared bleak. Consequently, Garg filed for liquidation, declining to serve as the liquidator himself. Subsequently, the NCLT appointed a new liquidator for the process.

In its order, the NCLT noted the ongoing investigations, asset attachments, and the slim likelihood of insolvency resolution, leading to the decision to proceed with the liquidation of Gitanjali Gems. The Committee of Creditors (CoC) had also resolved to liquidate the Corporate Debtor with a significant majority vote in favor, further solidifying the decision.

“It is evident that the assets of Gitanjali Gems were under attachment by the Directorate of Enforcement under the provisions of the PMLA, and considering the bleak chances of insolvency resolution amid the ongoing investigations and attachment of assets, the CoC had resolved to liquidate the Corporate Debtor by a majority of 90.16% voting in favor. This Bench is of the opinion that the Corporate Debtor is required to be liquidated,” the order reads.