Corporate Debtor's Shareholdings Are An Integral Part Of Financial Assets, Can't Be Excluded From Valuation Report: NCLT Bengaluru
Mohd Malik Chauhan
14 Aug 2025 7:15 PM IST
The National Company Law Tribunal (NCLT), Bengaluru Bench of Shri Sunil Kumar Aggarwal (Judicial Member) and Shri Radhakrishna Sreepada (Technical Member) the has held that the shareholdings of the corporate debtor in its subsidiaries form an integral part of its financial assets therefore cannot be excluded from the valuation reports. Such exclusion of the financial assets compromise...
The National Company Law Tribunal (NCLT), Bengaluru Bench of Shri Sunil Kumar Aggarwal (Judicial Member) and Shri Radhakrishna Sreepada (Technical Member) the has held that the shareholdings of the corporate debtor in its subsidiaries form an integral part of its financial assets therefore cannot be excluded from the valuation reports. Such exclusion of the financial assets compromise the fairness and integrity of the CIRP.
The present applicant has been filed seeking fresh valuation of the subsidiaries and step down subsidiaries of the corporate debtor. It is further prayed that approval of the resolution plan should be deterred till the valuation is pending.
The Applicant submitted that the valuation of the corporate debtor just at 40 crores against the admitted debt of 2300 crores is based on incomplete information. It was further submitted that the failure of the RP to gain control over assets of the corporate debtor despite repeated non-compliance under section 19 of the IBC compromised the integrity of the CIRP and Valuation process.
Per contra, the Respondent submitted that the Applicant has no locus standi to challenge the valuation reports. The purpose of valuation is solely to assist the CoC in evaluating and approving a Resolution Plan. Once the Resolution Plan has been approved by the CoC, the scope of interference by the Adjudicating Authority is limited to checking compliance with statutory requirements under Sections 30 and 31.
The Tribunal noted that despite being aware of valuation gaps and repeated assurances from the suspended directors, the Resolution Professional failed to act under section 19(2) of the IBC. This conduct compromised the integrity of the CIRP and value maximisation. The RP had admitted in its white paper that the corporate debtor invested Rs. 448 crores in the subsidiaries and step down subsidiaries.
It further observed that however, shareholding of the corporate debtor in these subsidiaries only comes under CIRP estate, not underlying assets under section 18 of the IBC. Whereas liquidation estate under section 36 includes such shareholdings but after the liquidation begins. It held that during CIRP, the RP can value the corporate debtor's equity in the subsidiaries but is not empowered to value underlying assets.
In light of the above discussion, it held that the current valuation reports which do not take into consideration the corporate debtor's equity investment in the subsidiaries due to lack of information are inadequate. These shareholdings are an integral part of the corporate debtor's assets and cannot be excluded merely due to non-cooperation of the suspended directors.
It further held that despite repeated non-compliance under section 19(2) of the IBC, the RP failed to take any legal or coercive action or initiate contempt proceedings or seek directions from the Tribunal. This shows a serious lapse on the part of the RP therefore warrants referral to the IBBI for disciplinary inquiry.
It concluded that “considering the above factual position, the minutes of the meeting recorded of the Various meetings of the COC, this Authority comes to the Conclusion that the non-consideration of Value of the Investments made in Subsidiaries and Stepdown subsidiaries has led to Incorrect Valuation of the Corporate Debtor and has materially prejudiced the CIRP process.”
Accordingly, the present application was allowed.
Case Title: HDFC Bank Limited Versus Opto Circuits (India) Ltd.
Case Number: I.A. No. 433 of 2024 IN C.P. (IB) No. 199/BB/2018
Order Date: 29/07/2025