2019 (2) TMI 1819 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - approval of CoC - whether the plan submitted for approval meets the requirement of law as stated in section 30(2) and section 31 of I B Code? - HELD THAT - The CoC having issued public notice of invitation of Eol/Plan on AS IS WHERE IS AND AS IS WHAT IS basis, the CoC made exception to the above condition and approved the plan. The plan as approved by them cannot be effectively implemented because resolution applicant made it very clear that his plan is subject to fulfilment of conditions, i.e. eviction of Daaksh Jute LLP. CoC ought not have approved the plan. The commercial wisdom of CoC herein is not questioned but it appears that the CoC did not consider the legal implications while approving the plan. They approved the plan ignoring the provisions of section 30(2)(e) of I B Code. The resolution plan submitted for my approval is in contravention of above provisions of law. It cannot be approved by this authority. The resolution plan of M/s. K.L.Jute Products Private Ltd. is rejected. CIRP period of 270 days already expired two months ago. Hence, it is of no use to refer other two plans- one by Mr. Madan Mohan Mal and the other by Mr. Prashant Damani back to CoC's consideration. It cannot be done now. I am not entering into controversy whether both of them are related party of the corporate debtor or not and whether the provisions of section 29A are not applicable to the corporate debtor, in view of section 240A of I B Code. Such questions are irrelevant. CoC has approved the only one plan i.e. M/s.K.L.Jute Private Ltd. However, in my considered opinion that plan does not comply all provisions stated in section 30(2) of I B Code. I have to reject that plan. The Liquidator, in view of provision of section 33(6) of I B Code is replaced - Corporate Debtor - Tirupati Jute Industries Limited is liquidated as a going concern under regulation 32(c) of the IBBI (Liquidation Process), Regulation 2016. List the matter on 30.04.2019 for filing of the progress report.

Issues Involved:

1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Formation and decisions of the Committee of Creditors (CoC)
3. Approval and objections to the resolution plan
4. Validity of the lease agreement with Daaksh Jute LLP
5. Compliance with legal provisions under the Insolvency and Bankruptcy Code (IBC)
6. Liquidation of the Corporate Debtor

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):

The Small Industries Development Bank of India filed an application under section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC), against Tirupati Jute Industries Limited for defaulting on a financial debt of ?7,18,21,128/-. The Tribunal admitted the corporate debtor into CIRP on 12.01.2018 and appointed Mr. Pinaki Sircar as the Interim Resolution Professional (IRP).

2. Formation and Decisions of the Committee of Creditors (CoC):

The IRP called for claims from creditors and formed the CoC, which included:
- Federal Bank Ltd. (75.18% voting share)
- Small Industries Development Bank of India (22.51%)
- Abhinandan Holdings Private Ltd. (2.31%)

The first CoC meeting confirmed the appointment of the IRP as the Resolution Professional (RP). Subsequent meetings discussed the status of the corporate debtor's jute mill, operated by Daaksh Jute LLP under a lease agreement dated 01.01.2016. The CoC directed the RP to publish a notice for Expressions of Interest (EoI) and resolution plans on an "AS IS WHERE IS and AS IS WHAT IS BASIS."

3. Approval and Objections to the Resolution Plan:

The RP received three resolution plans from K.L. Jute Products Pvt. Ltd., Madan Mohan Mal, and Prashant Damani. The CoC approved K.L. Jute's plan by 97.25% voting share. However, objections were filed by the other two applicants and some workers, arguing that the plan did not adequately protect workers' interests and contained numerous conditional clauses.

4. Validity of the Lease Agreement with Daaksh Jute LLP:

The lease agreement with Daaksh Jute LLP, executed after the corporate debtor received a notice under section 13(2) of the SARFAESI Act, was contested. The RP filed an application for its cancellation, but the Tribunal noted that such an application might not be maintainable under section 46 of the IBC. The CoC's approval of K.L. Jute's plan, which required the termination of this lease, was deemed improper as it contravened the established procedure of law.

5. Compliance with Legal Provisions under the Insolvency and Bankruptcy Code (IBC):

The Tribunal emphasized that it could not sit in appeal against the CoC's commercial decisions but must ensure compliance with section 30(2) and section 31 of the IBC. The resolution plan by K.L. Jute was found to contravene section 30(2)(e) of the IBC, as it required the Tribunal to cancel the lease deed with Daaksh Jute LLP, a jurisdiction beyond the Tribunal's authority.

6. Liquidation of the Corporate Debtor:

Given the expiration of the CIRP period and the rejection of K.L. Jute's resolution plan, the Tribunal ordered the liquidation of Tirupati Jute Industries Limited as a going concern under regulation 32(c) of the IBBI (Liquidation Process) Regulations, 2016. Mr. Chhedi Rajbhar was appointed as the Liquidator, replacing the current RP. The Tribunal directed the Liquidator to issue a public announcement and proceed with the liquidation process in accordance with Chapter III of the IBC.

Conclusion:

The Tribunal rejected the resolution plan of K.L. Jute Products Pvt. Ltd. due to its non-compliance with legal provisions and ordered the liquidation of Tirupati Jute Industries Limited as a going concern, appointing a new Liquidator to oversee the process.

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