2019 (9) TMI 1463 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - Section 33 read with Section 34 of Insolvency Bankruptcy Code (IBC) 2016 - HELD THAT - Attempt have been made by the COC for resolution of insolvency first by reducing the net worth criteria as well as by giving opportunity to the promoter of the CD, being the resolution applicants to provide a better Resolution Plan to prevent the company from going into liquidation but despite best efforts of the COC, no resolution plan submitted by the resolution applicants was meeting their expectations as against the amount claimed by the creditors payment was only to the extent of 15.24% in relation to cash component and 8.27% by allotment of Equity share component in the Resolution Plan. It is pertinent to note that total amount claimed in relation to financial creditors, be it secured or unsecured as well as operational creditors including government and workmen and employees dues aggregates to a sum of ₹ 5175.63 lacs against which the admitted claim is to the extent of ₹ 5152.61 lacs, whereas the resolution plan provided only for 794.92 lacs in cash component and ₹ 426.21 lacs in Equity shares component expressed in value terms. The hair cut which was required to be suffered by the respective members of the COC is purely a commercial decision of the members of the COC and taking into consideration the overall interest including the commercial one, if a decision has been arrived at by the COC after making considerable efforts as is evident from the facts which have had transpired during the CIRP of the Corporate Debtor for resolution and by the rejection of the resolution plan the Creditor have thereby hurtled the CD to liquidation cannot be faulted. In view of the expiry of the period CIRP has contemplated under the provisions of IBC and as the resolution plan had also been rejected by the COC by overwhelming majority of more than 84%, this tribunal taking into consideration the provisions of Sec. 33 of IBC is perforce required to initiate the liquidation process in relation to the CD. The Corporate Debtor is allowed to be liquidated - application disposed off.

Summary

Issues:
Liquidation of Corporate Debtor under Sec. 33 read with Sec. 34 of IBC 2016.

Detailed Analysis:
The Resolution Professional (RP) sought liquidation of the Corporate Debtor (CD) under Sec. 33 and Sec. 34 of the Insolvency & Bankruptcy Code (IBC) 2016. The Corporate Insolvency Resolution Process (CIRP) was initiated following the admission of the main company petition by an Operational Creditor (OC). The Interim Resolution Professional (IRP) was initially appointed, followed by the present RP, who filed the application for liquidation. The Committee of Creditors (COC) was constituted, comprising various Financial Creditors with different voting shares. Despite efforts to resolve insolvency, no acceptable resolution plan was approved by the COC, leading to the expiration of the CIRP period. The RP submitted status reports on the progress made during the CIRP, highlighting various developments and actions taken.

The COC made attempts to prevent liquidation by revising net worth criteria and allowing the submission of revised Resolution Plans by the promoters of the CD. However, the resolution plans submitted did not meet the expectations of the COC, offering only a fraction of the total amount claimed by creditors. The rejection of the resolution plan by the COC, with a significant majority, necessitated the initiation of the liquidation process as per Sec. 33 of IBC. The decision was based on commercial considerations and the overall interest of the creditors, following the principles established by the Hon'ble Supreme Court.

The RP reported that applications related to undervalued and fraudulent transactions were pending, as the former Board and personnel of the CD did not cooperate during the CIRP. With the rejection of the resolution plan and the expiry of the CIRP period, the Tribunal was compelled to initiate liquidation. Mr. Ashwani Kumar Gupta was appointed as the Liquidator based on the COC's proposal and his consent. The Liquidator was directed to comply with IBC provisions, investigate financial affairs, issue public announcements, communicate with regulatory bodies, and proceed with the liquidation process as per the prescribed regulations.

The order issued specific directions for the Liquidator, including investigating financial affairs, intimating relevant authorities, ceasing the Moratorium under Sec. 14, and commencing a fresh Moratorium under Sec. 33(5) of IBC. The Liquidator was instructed to submit a preliminary report within a specified timeline, handle pending Company Applications, and manage liquidation expenses as per IBBI regulations. The application was disposed of with the outlined directives to facilitate the liquidation process effectively.