NCLT Mumbai Rejects Early Dissolution Plea, Holds CoC Wisdom Cannot Override Mandatory CIRP Requirements

April 2, 2026 : The National Company Law Tribunal (NCLT), Mumbai Bench-II has rejected an application seeking early dissolution of Jayesh Lifescience India Private Limited, holding that the commercial wisdom of the Committee of Creditors (CoC) cannot override mandatory statutory requirements under the Insolvency and Bankruptcy Code, 2016 (IBC).

The Bench comprising Judicial Member Sushil Mahadeorao Kochey and Technical Member Sanjiv Dutt was dealing with an application filed under Section 54(1) of the Code by the Resolution Professional (RP) seeking dissolution of the Corporate Debtor.

The Tribunal underscored that dissolution is not a mechanical consequence of a CoC decision, especially where essential steps in the Corporate Insolvency Resolution Process (CIRP) remain incomplete. It reiterated that before allowing dissolution, the Adjudicating Authority must be satisfied that the affairs of the Corporate Debtor have been fully wound up and no further investigation, recovery, or asset tracing is required.

Background:
The Corporate Debtor was admitted into CIRP on 05.08.2024. The CoC, comprising Axis Bank Limited and State Bank of India, eventually resolved with 100% voting share to recommend early dissolution on the ground that the Corporate Debtor had no assets and continuation of CIRP would only increase costs.

Although Form G was issued inviting Expression of Interest, no compliant resolution plan was received. Consequently, the RP approached the Tribunal seeking dissolution.

Tribunal’s Findings:
The Tribunal identified several critical deficiencies in the conduct of CIRP:

• Unverified Asset Position: Despite the RP’s claim that no assets existed, records showed secured charges over hypothecated assets such as stock and book debts. There was no clarity on their identification or realization.
• Incomplete Financial Records: The RP relied on provisional financial statements, with no audited financials available. This raised doubts about the accuracy of the claim that the Corporate Debtor had no assets.
• Failure to Conduct Transaction Audit: The Tribunal held that examination of avoidance transactions is a mandatory duty of the RP and cannot be bypassed merely because the CoC sought to avoid additional costs.
• Lack of Fund Flow Analysis: Although bank statements were obtained, there was no meaningful analysis of financial transactions or investigation into potential irregularities, particularly when the account had been classified as fraudulent.

The Bench observed that the CoC’s recommendation appeared to be driven primarily by cost considerations rather than compliance with statutory obligations.

Key Observation:
The Tribunal categorically held that while the commercial wisdom of the CoC is generally respected, it cannot override the statutory mandate to ensure that CIRP is conducted in a complete and proper manner.

Outcome:
Finding that essential steps such as asset tracing, financial scrutiny, and transaction audit had not been duly undertaken, the Tribunal rejected the dissolution application. However, it granted liberty to the Resolution Professional to file a fresh application after ensuring full compliance with the provisions of the Code and applicable regulations.

Case Details:
Mukesh Kumar Jain v. Jayesh Lifescience India Private Limited
IA No. 29/MB/2025 in CP (IB) No. 196/MB/2024