2019 (2) TMI 1886 - Tri - Insolvency and Bankruptcy

Early Dissolution of Corporate debtor - Section 54 of the Insolvency Code - Resolution Professional has reported that as per the Balance Sheet of the Debtor Company there was no Asset for Liquidation so as to satisfy the outstanding Debt - HELD THAT - From section 54, it is noticed that the Corporate Debtor do not have assets to be liquidated hence an Application is moved for the Dissolution of the Corporate Debtor . This Section is to be read along with Regulation 14 of IBBI (Liquidation Process) Regulations 2016 which says that any time after the preparation of a Preliminary Report if it appears to the Liquidator that the realizable properties of the Corporate Debtor are insufficient to cover the cost of Liquidation process, and the affairs of the Debtor do not require further investigation may apply to NCLT for early dissolution of the Corporate Debtor - it is also worth to refer Section 59, Sub-Section 7 of IBC, although this Section is in respect of Voluntary Liquidation of a Corporate Person, however, according to which where the affairs of the Corporate Person have been completely wound up, and its assets completely liquidated, the Liquidator shall make an Application to Adjudicating Authority for the Dissolution of such Corporate person. Once the affairs of a Company have been completely wound up, the Company Liquidator shall make an Application to the Tribunal for Dissolution of the Company as per Section 303 of the Companies Act, 2013, however, even this Section has not yet been enforced. A procedure is laid down, yet to be make applicable, that a copy of the Dissolution Order shall be forwarded to the Registrar who shall record in the Register of Registration regarding Dissolution of the Company. Although parallel provisions are made in the Insolvency Code as well as in the Companies Act, 2013, but the provisions of the Companies Act have not been notified Through this Order it is hereby declared that not only it is just and equitable but because of the fact that no asset is available for the purpose of 'Liquidation' as reported by Learned Resolution Professional, this is a fit case of a Corporate Debtor to be dissolved as prescribed u/s. 54 of The Insolvency Code. Ordered accordingly, stood 'Dissolved' from the date of this Order.

Summary

Issues involved:
1. Application for dissolution of corporate debtor under Section 54 of the Insolvency Code.
2. Appointment of Resolution Professional and initiation of insolvency proceedings under Section 9 of the Insolvency and Bankruptcy Code.
3. Approval of liquidation by the Committee of Creditors and subsequent liquidation of the debtor company.
4. Assessment of the company's financial position and liabilities by the Resolution Professional.
5. Collation of claims by financial creditors and operational creditors.
6. Application for early dissolution of the corporate debtor under Regulation 14 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations.
7. Interpretation and application of Section 54 of the Insolvency and Bankruptcy Code for dissolution of a corporate debtor.
8. Comparison with provisions of the Companies Act, 2013 regarding winding up and dissolution of companies.

Analysis:

1. The application for dissolution of the corporate debtor was submitted under Section 54 of the Insolvency Code, seeking an order for "Dissolution of Corporate debtor" in conjunction with Regulation 14 "Early dissolution" of the Corporate Debtor.

2. The insolvency proceedings were initiated upon receiving a petition from an Operational Creditor against the Corporate Debtor, leading to the appointment of a Resolution Professional and the imposition of a moratorium under Section 14 of the Code.

3. The Committee of Creditors approved the liquidation of the debtor company due to the absence of assets for liquidation to satisfy outstanding debts, resulting in an order for liquidation under Section 33(2) of the Code.

4. The Resolution Professional reported the company's financial position, highlighting the lack of assets for liquidation, as evidenced by the company's liabilities exceeding its assets, making it impossible to pay off debts.

5. Claims from financial creditors and operational creditors were collated, with detailed particulars of security held by each creditor, forming part of the total claim amount against the debtor company.

6. The Resolution Professional applied for early dissolution of the corporate debtor under Regulation 14 of the Liquidation Process Regulations, citing insufficient realizable properties to cover liquidation costs and no further investigation required into the debtor's affairs.

7. Section 54 of the Insolvency Code was interpreted and applied, allowing for the dissolution of the corporate debtor when its assets have been completely liquidated, and the liquidator makes an application to the Adjudicating Authority for dissolution.

8. Comparisons were drawn with provisions of the Companies Act, 2013, regarding the winding up and dissolution of companies, emphasizing the need for an application for dissolution when a company's affairs have been completely wound up.

This comprehensive analysis covers the key issues and legal aspects addressed in the judgment delivered by the National Company Law Tribunal, Mumbai Bench.