Case Details

Case Name: Allahabad Bank vs. Sarda Agro Oils Limited

Court/Authority: National Company Law Tribunal, Hyderabad Bench-II

Case Numbers: IA (IBC)/542/2025 and IA (IBC)/543/2025 in CP (IB) No.102/7/HDB/2019

Date of Order: 22.05.2026

Period of Dispute: The corporate debtor was admitted into CIRP on 27.08.2019 and ordered into liquidation on 09.01.2023. The compromise scheme was initially submitted on 13.02.2023.

Parties Involved

Petitioners/Applicants:

  • Mr. Ashok Kumar Sarda (Promoter & Ex-Director of Sarda Agro Oils Limited)
  • Mr. Vijay Sarda (Shareholder of Sarda Agro Oils Limited)

Respondents:

  • M/s. Sarda Agro Oils Limited (through its Liquidator)
  • Mr. Madhusudhan Rao Gonugunta (Liquidator of Sarda Agro Oils Limited)

Financial Creditors:

  • Allahabad Bank (now Indian Bank)
  • Bank of Baroda

Other Relevant Parties:

  • Ex-Directors Mr. Jagdish Prasad Sarda and Mr. Manohar Lal Sarda (declared wilful defaulters, later quashed)
  • M/s. Prakash Oil Depot (another shareholder who submitted a scheme)
  • M/s. BRS Refineries (investors who deposited Rs. 4.3 crore on behalf of applicants)

Issues / Allegations / Violations

The Applicants challenged the rejection of their Scheme of Compromise and Arrangement under Section 230 of the Companies Act, 2013, which was rejected by the Liquidator primarily on grounds of ineligibility under Section 29A of IBC read with Regulation 2B of IBBI (Liquidation Process) Regulations, 2016.

The ineligibility arose because the ex-Directors of the Corporate Debtor (Mr. Jagdish Prasad Sarda and Mr. Manohar Lal Sarda) had been declared wilful defaulters by Indian Bank, and the Applicants (being brother and son respectively of the ex-Directors) were treated as "connected persons" under Section 29A.

The Applicants alleged that they were denied a reasonable opportunity to present and negotiate their revised scheme, and that the rejection became unsustainable after the Hon'ble High Court of Telangana quashed the wilful defaulter classification of the ex-Directors.

Findings & Observations

The Tribunal found that the Corporate Debtor was admitted into CIRP on 27.08.2019 and ordered into liquidation on 09.01.2023.

The Applicants had submitted a Scheme of Compromise and Arrangement on 13.02.2023 offering Rs. 29 crores, which was revised to Rs. 34.71 crores on 20.03.2023, and further enhanced to Rs. 43 crores with a 10% EMD deposit of Rs. 4.3 crores through M/s. BRS Refineries.

The Liquidator rejected the proposal on 26.10.2023 citing ineligibility under Section 29A due to the Applicants being connected persons of wilful defaulters.

The Hon'ble High Court of Telangana in W.P. No.30334 of 2023 vide interim order dated 04.12.2023 stayed proceedings related to the wilful defaulter declaration for two weeks, and vide final judgment dated 02.09.2024 set aside the wilful defaulter classification entirely.

The Tribunal observed that since the foundation of ineligibility (the wilful defaulter classification) had been quashed by the High Court, the basis for rejecting the Applicants' compromise proposal no longer survived.

Penalties / Settlements / Directions

The Tribunal allowed IA (IBC) No. 542 of 2025 and directed that the pending Scheme of Compromise and Arrangement submitted by the Applicants deserves to be reconsidered strictly in accordance with the law.

The Tribunal declined the relief sought in IA (IBC) No. 543 of 2025 seeking a stay of the liquidation proceedings.

The liquidation period had been extended by six months from 01.04.2026 till 30.09.2026 prior to this order.

Corrective Actions & Future Obligations

The Liquidator is directed to reconsider the Applicants' Scheme of Compromise and Arrangement in light of the High Court's judgment quashing the wilful defaulter classification.

The reconsideration must be done strictly in accordance with the law and applicable regulations.

The liquidation process continues without stay as the request for interim stay was declined.

Final Ruling & Enforcement

IA (IBC) No. 542 of 2025: Allowed and disposed of. The Liquidator must reconsider the Applicants' compromise scheme.

IA (IBC) No. 543 of 2025: Relief seeking stay of liquidation proceedings declined and application disposed of.

The order is signed by Hon'ble Shri Sanjay Puri (Member Technical) and Hon'ble Shri Rajeev Bhardwaj (Member Judicial).