Legal consultant of Keval Ltd. has informed to the Board of directors that the company cannot evaluate voluntary liquidation just to save cost and time involved in ensuring compliances irrespective of the fact that prese

The contention of the legal consultant that Keval Ltd. cannot evaluate voluntary liquidation solely to save cost and time involved in ensuring compliances, even if it has no business, is not correct . Legal Position and Case Law: Voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code, 2016 (IBC), is a legitimate process for winding up the affairs of a solvent company. One of the primary reasons companies opt for voluntary liquidation is indeed to cease operations and avoid the ongoing costs and compliance burdens associated with maintaining a corporate entity that no longer serves its purpose. This principle was affirmed in the case of Nippei Toyoma India Private Limited before the NCLT, Mumbai Bench. The facts of the case were: The company was incorporated in 2007 and was engaged in providing engineering services and trading automotive components. Crucially, the company did not have any operations and was not carrying on any business activities . Considering the cost and time involved in ensuring compliances, the members of the company resolved to voluntarily liquidate it in an Extra Ordinary General Meeting. The directors declared on affidavit that they had made full inquiry into the company's affairs, were of the opinion that the company had no debts or would be able to pay its debts in full, and that it was not being wound up to defraud any person. The company completed the liquidation process, discharged all assets to creditors, and submitted a final report to the Registrar of Companies. The NCLT, after examining the submissions and documents, noted that the company's affairs had been completely wound up and its assets fully liquidated. Consequently, the NCLT directed that the company be dissolved. Conclusion: The Nippei Toyoma India Private Limited case clearly demonstrates that a company with no ongoing business operations can indeed initiate voluntary liquidation. The rationale often includes saving costs and time associated with statutory compliances for a non-operational entity. Therefore, the legal consultant's contention is incorrect. Keval Ltd. can evaluate and proceed with voluntary liquidation for the stated reasons, provided it meets all other conditions for voluntary liquidation under the IBC (e.g., solvency, no intent to defraud, proper approvals).