2020 (1) TMI 1221 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - HELD THAT - On perusal of the record, it is found that in the second meeting held on 12.11.2019, COC being sole financial creditors, has passed a resolution for liquidation of the Corporate Debtor with a 100% voting in favour of the liquidation - It is also to be noted that this Adjudicating Authority has no jurisdiction to interfere in the commercial wisdom of the COC. Liquidation order passed - moratorium declared.

Summary

Issues:
Liquidation order under Section 33(1) and 33(2) of the IB Code.

Analysis:
The Tribunal heard the application filed under Section 33(1), 33(2), and 34(1) of the Insolvency and Bankruptcy Code. The Suspended Management, represented by a Financial Creditor's Agent (FCA), expressed no objection to the passing of orders under Section 33(1) and 33(2). The Committee of Creditors (COC), consisting of sole financial creditors, unanimously passed a resolution for the liquidation of the Corporate Debtor in a meeting. The Resolution Professional (RP) diligently invited Resolution Plans but received none viable. The COC decided on liquidation due to the absence of viable plans, and the RP consented to act as the Liquidator. The Tribunal emphasized that it lacks jurisdiction to interfere in the commercial wisdom of the COC, citing precedents like K. Sasidhar's case and a judgment by the Supreme Court. The Supreme Court affirmed that the Adjudicating Authority cannot reverse the commercial wisdom of the COC, which decides on maximizing asset value and creditor payments.

The Tribunal issued several orders following the analysis. Firstly, the moratorium under Section 14 of the IB Code ceased upon the liquidation order. The Liquidator was directed to issue a public announcement regarding the liquidation, attempt to dispose of the Corporate Debtor as a going concern, and inform the relevant authority. Legal proceedings by or against the Corporate Debtor were prohibited, except those initiated by the Liquidator with prior approval. The order excluded certain legal proceedings specified by the Central Government. The order served as a discharge notice to officers, employees, and workmen, except during continued business by the Liquidator. The Liquidator assumed all powers of the Corporate Debtor's management, with specific duties outlined in the IB Code and related regulations. The Corporate Debtor's personnel were mandated to assist the Liquidator, who could charge a fee for liquidation proceedings. The Registry was instructed to communicate the order promptly to relevant entities for compliance.

Consequently, the Tribunal allowed the application for liquidation of the Corporate Debtor, appointing the RP as the Liquidator. The instant application was disposed of with the specified orders and observations.