2019 (12) TMI 1321 - Tri - Insolvency and Bankruptcy

Jurisdiction - power of adjudicating authority to interfere with the decision taken by Committee of Creditors - Replacement of IRP - order on the application for replacement of IRP was passed on 08.11.2019, much after the application filed for liquidation by the IRP when IRP/RP become functus officio - section 33(1), 33(2), 33(3) of the IB Code - HELD THAT - It is found that the Committee of Creditors passed resolution in its 3rd meeting dated 01.10.2019, wherein, COC voted in favour of the liquidation vide 100% voting. Since, the decision is taken by the Committee of Creditors, this Adjudicating Authority has no jurisdiction to interfere into the commercial wisdom of the Committee of Creditors. The Application so filed by the Committee of Creditors is allowed - The moratorium declared under Section 14 of the 1B Code shall cease to have effect from the date of the order of liquidation.

Summary

Issues: Liquidation application under section 33 of the IB Code; Replacement of IRP with RP; Jurisdiction of Adjudicating Authority over COC's commercial wisdom.

The judgment by the National Company Law Tribunal, Ahmedabad, adjudicated on an application filed under section 33 of the Insolvency and Bankruptcy Code. The Tribunal noted an order passed for the replacement of the Interim Resolution Professional (IRP) with the Resolution Professional (RP) by the Division Bench. The application was filed by the Committee of Creditors (COC) seeking liquidation, which was supported by a 100% voting share in favor of liquidation. However, the order for the replacement of the IRP was passed after the application for liquidation, when the IRP/RP had already become functus officio. The Tribunal emphasized that the COC's decision for liquidation, as observed in a Supreme Court judgment, is beyond the Adjudicating Authority's jurisdiction to interfere, respecting the COC's commercial wisdom in maximizing the asset value of the Corporate Debtor.

The Tribunal allowed the application filed by the COC, granting several directives upon the liquidation order. The moratorium under Section 14 of the IB Code was to cease from the date of the liquidation order, with the Liquidator instructed to issue a public announcement and send a certified copy of the order to the relevant authority. Legal proceedings against the Corporate Debtor were prohibited, except those initiated by the Liquidator with prior approval. The order clarified exceptions for legal proceedings concerning specific transactions notified by the Central Government. Furthermore, the Liquidator was empowered with the duties and responsibilities enumerated in the IB Code and related regulations.

The Tribunal's order included provisions for the cessation of powers of the Corporate Debtor's management, transferring them to the Company Liquidator. The Liquidator was authorized to charge fees proportionate to the liquidation estate assets' value. Additionally, the Corporate Debtor's personnel were directed to cooperate with the Liquidator. The Registry was tasked with communicating the order promptly to relevant entities for compliance. Ultimately, the Tribunal approved the liquidation of the Corporate Debtor under Section 33 of the IB Code and appointed a specific individual as the Liquidator, concluding the instant application.