2018 (6) TMI 1582 - Tri - Insolvency and Bankruptcy

Approval of the resolution plan - in-principle approval alleged to have been given by the Financial Creditors of the Corporate Debtor - HELD THAT - On perusal of this Affidavit filed by the RP, this Bench having noticed that the Affidavit moved by the RP to get an order under Section 33(1) of IB Code, 2016 and the Regulations thereof, this Bench hereby orders as follows a. This Bench hereby orders the Corporate Debtor to be liquidated in the manner as laid down in the Chapter by issuing a Public Notice stating that the Corporate Debtor is in liquidation with a direction to the Liquidator to send this order to RoC under which this Company has been registered. b. As to appointment of Liquidator, the Resolution Professional i.e. the applicant herein is hereby directed to act as a Liquidator for the purpose of liquidation with all powers of the Board of Directors, key managerial persons and the partners of the Corporate Debtor shall cease to have effect and hereby vested in the Liquidator. The personnel of the Corporate Debtor are directed to extend all co-operation to the Liquidator as may be required by him in managing the affairs of the Corporate Debtor. The Insolvency Professional appointed as Liquidator will charge fees for conduct of the liquidation proceedings in proportion to the value of the liquidation estate assets as specified under Regulation 4 of Insolvency and Bankruptcy (Liquidation Process) Regulations, 2016 and the same shall be paid to the Liquidator from the proceeds of the liquidation estate under Section 53 of the Code. c. Since this liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the Corporate Debtor without prior approval of this Adjudicating Authority save and except as mentioned in sub-section 6 of Section 33 of the Code. d. This liquidation order shall be deemed to be notice of discharge to the officers, employees and workmen of the Corporate Debtor except to the extent of the business of the Corporate Debtor is continued during the liquidation process by the Liquidator. The Registry is hereby directed to communicate this order to the parties, the Stock Exchanges where the shares of the company are listed and also to SEBI within seven days from the date order is made available.

Summary

Issues:
Approval of resolution plan with consequent directions based on in-principle approval by Financial Creditors, lack of unconditional approval, rejection of resolution plan by Bank of India, communication of final approval by other Financial Creditors, liquidation order passed due to failure to obtain necessary approvals.

Analysis:
The Tribunal examined an application seeking approval of a resolution plan based on alleged in-principle approval by Financial Creditors. The Resolution Professional filed the application despite the absence of unconditional approval from all Financial Creditors with voting shares in the Committee of Creditors (CoC). The Code's requirement of unconditional approval was emphasized, and the Resolution Professional was authorized to submit the plan with in-principle approval, awaiting final approval from the Financial Creditors.

The Resolution Professional later filed an affidavit stating that Bank of India, holding 52% voting share, rejected the resolution plan, leading to a negative mandate. Andhra Bank and ICICI Bank Ltd. did not communicate their final approval, while Standard Chartered Bank approved the plan. Consequently, the Resolution Professional sought rejection of the application, indicating the need for liquidation due to the lack of required approvals from Financial Creditors.

Upon reviewing the affidavit, the Bench ordered the liquidation of the Corporate Debtor, directing the Resolution Professional to act as the Liquidator. The Liquidator was granted powers equivalent to the Board of Directors, key managerial persons, and partners of the Corporate Debtor. All legal proceedings against the Corporate Debtor were prohibited without prior approval, except as specified in the Code. The liquidation order served as discharge notice to officers, employees, and workmen, except during the continuation of the business by the Liquidator.

The Registry was instructed to communicate the liquidation order to relevant parties, stock exchanges, and SEBI within seven days. The decision highlighted the significance of obtaining unconditional approval from Financial Creditors for resolution plan approval, leading to liquidation in the absence of necessary mandates.