2018 (12) TMI 1708 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - rejection of resolution passed on 19th Committee of Creditors (CoC) meeting for liquidation of Corporate Debtor - exclusions from the time period of CIRP - Section 60(5)(c) of Insolvency and Bankruptcy Code 2016 r/w Rule 11 of the National Company Law Tribunal Rules 2016 - HELD THAT - The Counsel for the Applicant has submitted that since the Information Memorandum was not ready it was not possible to understand the detail position of the business of the Corporate Debtor and therefore there is non-compliance of the provisions of Section 29 of the I B Code 2016 r/w Regulation 40 A. Even if it is assumed that the Information Memorandum has not been made ready as per the model timeline then as to how one of the suspended Directors who is Applicant herein can said to be an aggrieved party. Nevertheless the other details were available with the Resolution Professional which he stated to have shared with the prospective Resolution Applicants such details were sufficient in nature to provide relevant information to them. The Resolution Professional has submitted that the Regulation 40-A was not in existence prior to its enforcement and the allegations leveled by the Applicant/suspended Director of the Corporate Debtor are for the period of time prior to the enforcement of the said Regulations so he cannot be said to have violated the said Regulation. Therefore the submissions made by the Counsel for the Applicant stand rejected the submissions made by the Resolution Professional seem to have force the same are accepted. There does not appear any justification for exclusion of the period of 79 days from the time period of CIRP. The time period of 270 days has already been completed on 08.06.2018 and Order for Liquidation of Corporate has also been passed. Application dismissed.

Summary

Issues:
1. Challenge to resolution for liquidation of Corporate Debtor
2. Delay in preparation of Information Memorandum
3. Jurisdiction of NCLT to entertain questions of law or facts
4. Exclusion of time period in Corporate Insolvency Resolution Process
5. Locus standi of suspended Director to file application
6. Compliance with Regulation 40A of Insolvency and Bankruptcy Board of India Regulations

Analysis:
1. The judgment concerns a challenge to the resolution for liquidation of a Corporate Debtor. The Applicant, a suspended Managing Director, filed an application seeking rejection of the resolution and issuance of Information Memorandum for consideration of Resolution Plans.

2. The Applicant argued a delay in preparing the Information Memorandum, violating Section 29 of the Insolvency and Bankruptcy Code. The Counsel sought exclusion of 79 days from the CIR Process period, emphasizing the importance of timely completion of CIRP.

3. The Counsel contended that NCLT has jurisdiction to address issues related to CIR Process. Citing the ArcelorMittal case, they stressed the balance between timely resolution and avoiding liquidation, especially for the benefit of employees.

4. The Resolution Professional countered, highlighting the steps taken during CIRP, including forensic audit due to involvement of suspended Directors in questionable transactions. Efforts to attract Resolution Applicants were detailed, with no successful submissions received.

5. The Resolution Professional challenged the locus standi of the Applicant, arguing that the CoC holds discretion over CIR Process timeframes. The Applicant's plea for exclusion of time was deemed a delay tactic to avoid liquidation.

6. The Resolution Professional emphasized compliance with Regulation 40A, inserted through an amendment, and refuted allegations of pre-enforcement violations. The Tribunal rejected the Applicant's claims, dismissing the application as lacking merit and maintainability.

In conclusion, the judgment underscores the importance of timely compliance in the insolvency resolution process and upholds the authority of the CoC in decision-making. The ruling clarifies the boundaries of jurisdiction for NCLT and highlights the necessity for all parties to adhere to regulatory requirements during insolvency proceedings.