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2019 (5) TMI 1667 - AT - Insolvency and BankruptcyLiquidation and appointment of Liquidator - Section 33 of the Insolvency and Bankruptcy Code 2016 - initiation of Corporate Insolvency Resolution Process - going concern - HELD THAT - Apart from the fact that Liquidator will ensure that Corporate Debtor remains a going concern we are of the view that the Liquidator should approach the Union of India through the concerned Department for realization of the funds to ensure that the Corporate Debtor remains a going concern. Union of India though not party before us is expected to release certain funds from the Consolidated Fund if permissible for ensuring that the Corporate Debtor remains a going concern and scheme or arrangement may be reached under Section 230 of the Companies Act 2013 or it can be sold as a going concern along with its employees/ workmen to a third party. Appeal disposed off.
Issues Involved:
1. Legality of the initiation of Corporate Insolvency Resolution Process (CIRP). 2. Absence of a Resolution Plan within the stipulated 270 days. 3. Liquidation of Hindustan Paper Corporation Ltd. 4. Steps to be taken by the Liquidator during the liquidation process. 5. Role of the Union of India in ensuring the Corporate Debtor remains a going concern. Detailed Analysis: 1. Legality of the initiation of Corporate Insolvency Resolution Process (CIRP): The Appellant argued that the initiation of the CIRP was illegal, claiming it was initiated with malicious intent for purposes other than resolving insolvency or liquidation. However, since the order initiating the CIRP was issued about a year prior and was not under challenge, the tribunal declined to deliver a judgment on this issue. 2. Absence of a Resolution Plan within the stipulated 270 days: The tribunal acknowledged that 270 days had passed without any Resolution Plan being submitted. Despite repeated opportunities, the person who intended to file a Resolution Plan failed to do so. Consequently, there was no other option but to pass an order under Section 33 of the Insolvency and Bankruptcy Code (I&B Code) for liquidation. 3. Liquidation of Hindustan Paper Corporation Ltd.: The tribunal noted that Hindustan Paper Corporation Ltd. (Corporate Debtor) is a Government of India Undertaking. Despite a proposal for distributing salaries to employees under the Consolidated Fund, the budgetary allocation was not sanctioned by the Cabinet. Therefore, the tribunal decided not to interfere with the impugned order dated 2nd May 2019, which ordered the liquidation of the Corporate Debtor and the appointment of a Liquidator. 4. Steps to be taken by the Liquidator during the liquidation process: The tribunal directed the Liquidator to follow its decision in Company Appeal (AT) Insolvency) No.224 of 2018 (Y. Shivram Prasad vs. S. Dhanapal & Ors.). During the liquidation stage, the Liquidator is required to take steps to ensure the company remains a going concern and to explore revival options for the Corporate Debtor. This includes: - Compromise or arrangement with creditors or members under Section 230 of the Companies Act, 2013. - Selling the business of the Corporate Debtor as a going concern if revival is not possible. - Avoiding the liquidation of the Corporate Debtor as a last resort. The tribunal emphasized that the Liquidator should verify claims, take custody of assets, and carry on the business for beneficial liquidation as prescribed under Section 35 of the I&B Code. The Liquidator should also take steps to sell the assets of the Corporate Debtor only after exhausting options under Section 230 of the Companies Act, 2013. 5. Role of the Union of India in ensuring the Corporate Debtor remains a going concern: The tribunal suggested that the Liquidator should approach the Union of India through the concerned Department to realize funds to ensure the Corporate Debtor remains a going concern. The Union of India, though not a party before the tribunal, is expected to release funds from the Consolidated Fund, if permissible, to ensure the Corporate Debtor remains operational. This would facilitate reaching a scheme or arrangement under Section 230 of the Companies Act, 2013, or selling the Corporate Debtor as a going concern along with its employees to a third party. Conclusion: The appeals were disposed of with directions for the Liquidator to ensure the Corporate Debtor remains a going concern and to approach the Union of India for necessary funds. The tribunal emphasized the importance of exploring revival options before proceeding with liquidation. No costs were awarded.
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