2019 (1) TMI 1786 - Tri - Insolvency and Bankruptcy

Liquidation Order - CIRP Process - expiry of period of 180 days' of CIRP period - HELD THAT - The Secured Creditor, who is none other than the SBI has already filed winding up Petition before the Hon'ble High Court, Orissa. However, it is submitted on the side of the SBI that that Petition was not admitted and publication was not at all ordered. Therefore, there is no bar in proceeding further with the CIRP process in the case in hand. As the Committee of Creditors and the IRP failed in obtaining a Resolution Plan, under sub-section 6 of Section 30 of the Insolvency Bankruptcy Code, 2016, and since there is no extension of period of CIRP beyond 180 days, at the instance of the Committee of Creditor, I have no other alternative other than to pass the order of liquidation in the manner as laid down in Chapter III, read with Section 33 of the Insolvency Bankruptcy Code, 2016. No reason advanced on the side of the SBI for not approving expenses rendered by the IRP. So also, no remuneration has been fixed at the said meeting. No reason also highlighted on the side of the CoC for non-approval of the fees claimed by the IRP. However, it appears to me that CoC is bound to reimburse the actual expenses rendered by the Operational Creditor for initiating the CIRP process. Therefore, the cost actually incurred and the fees for one month due to the IRP shall be fixed by the CoC and has to be paid to the Operational Creditor upon production of proof to prove that the expenses found spent by the IRP has been spent by the Operational Creditor. Upon satisfaction of SBI, the Financial Creditor the fees and expenses rendered by the IRP shall be fixed and upon proof of expenditure and payment of fees to the IRP, the CoC shall pay to the Operational Creditor within one month of the date of this order. Failing which the operational creditor can take appropriate steps to realise the cost and fees actually spent by it. An order of liquidation is passed - Application disposed off.

Summary

Issues:
Initiation of CIRP process under the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor, appointment and rejection of claims by the Interim Resolution Professional (IRP), failure to confirm IRP by the Committee of Creditors (CoC), recommendation of liquidation due to lack of resolution plan, reimbursement of expenses by the Committee of Creditors, appointment of Liquidator, and disposal of related applications.

Analysis:
The judgment involves an Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Powercon Projects & Association Limited. The Interim Resolution Professional (IRP) was appointed but faced challenges as the Committee of Creditors (CoC), mainly comprising the State Bank of India (SBI), did not confirm his appointment or approve necessary expenses, leading to a recommendation of liquidation due to the absence of a resolution plan.

The IRP rejected a claim from a Financial Creditor, Concept Management Consulting Limited, for lack of proof, which led to a legal challenge. The CoC expressed reluctance to bear expenses, leading to a resolution for liquidation without confirming the IRP as Resolution Professional (RP) or approving his fees. The judgment highlights the unfairness of passing a liquidation resolution without proper approval of the IRP and failure to explore resolution possibilities.

The judgment emphasizes that the Corporate Debtor had ceased operations with no assets, and the SBI had filed a winding-up petition. Despite this, the judgment clarifies that there was no legal impediment to continuing the CIRP process. As the CoC and IRP failed to secure a resolution plan within the stipulated period, the judgment mandated liquidation as per the Insolvency and Bankruptcy Code, 2016.

Regarding expenses, the judgment directs the CoC to reimburse the Operational Creditor for costs incurred in initiating the CIRP process. The Liquidator's appointment and responsibilities, including issuing public announcements and filing reports, were outlined. The judgment also addresses the dismissal of certain applications and the need for compliance with liquidation procedures and fee approvals.

In conclusion, the judgment orders the appointment of a Liquidator, cessation of the moratorium, and initiation of liquidation proceedings. It highlights the importance of CoC approval for expenses and emphasizes the need for adherence to regulatory requirements in the liquidation process.