2018 (3) TMI 1911 - Tri - Insolvency and Bankruptcy

Initiation of liquidation proceedings on property belonging to Smt. Saroj Singhania, which was also mortgaged to the Bank under the same Loan Agreement on the basis of which the Financial Debt in question - Insolvency Proceedings commenced against the Corporate Debtor - HELD THAT - There was no confusion for initiation of Liquidation Proceedings for IRP who is now to be termed as Liquidator . However, a question was raised that whether the process of Liquidation can also be initiated against a property belonging to Smt. Saroj Singhania. On enquiry it was affirmed by the RP and the Bank Authorities that the property belonging to Smt. Saroj Singhania was also mortgaged to the Bank under the same Loan Agreement on the basis of which the Financial Debt in question was sanctioned. It is, therefore, explained that since the property belonging to Smt. Singhania had already been mortgaged, therefore, to realize the Debt amount the said property is also to be liquidated. One more reason is that the total realizable value is about ₹ 4,68,15,000/- ₹ 12,90,00,000/- totalling to ₹ 17,58,15,000/- if both the properties are liquidated. Otherwise, the realizable value of the Corporate Debtor is only ₹ 4,68,15,000/- against the Debt of ₹ 41,38,06,010/-. If the amount of ₹ 4,68,15,000/- is to be received then the Banks shall have a very high haircut by sacrificing about 89% of the Debt in question and the recovered amount shall be only 11% of the total Debt. Therefore, to avoid such high percentage of sacrifice, it is necessary to take a decision in favour of the Financial Creditor to initiate Liquidation Proceedings against a Guarantor as well who had mortgaged the property and on that Guarantee the Loan in question was granted. The Debt in question is intricately linked with the property mortgaged hence cannot be segregated in the process of Liquidation proceedings. Therefore, it is hereby authorized that the Liquidator shall take necessary steps to liquidate the asset of Smt. Saroj Singhania, for which a Valuation Report is already on record. This decision is taken on the basis of one of the Sections as prescribed under the I B Code i.e. Section 60(2) which prescribes that where a Corporate Insolvency Resolution Process or Liquidation Process of a Corporate Debtor is pending before NLCT, an Application relating to the Insolvency Resolution or Bankruptcy of a Personal Guarantor of such Corporate Debtor shall be filed before such NCLT. A clarification can also be inserted at this juncture that the Resolution Process is distinct from Liquidation Process. The Resolution Professional is hereby appointed as a Liquidator to proceed with the Liquidation Process - Application disposed off.

Summary

Issues:
1. Initiation of insolvency proceedings against a corporate debtor by a financial creditor.
2. Lack of resolution plan and decision to initiate liquidation process.
3. Resolution for liquidation by the Committee of Creditors.
4. Valuation reports of properties belonging to the corporate debtor and a guarantor.
5. Decision to include the guarantor's property in the liquidation process.
6. Legal provisions allowing the inclusion of a guarantor's assets in liquidation proceedings.
7. Appointment of the Resolution Professional as the Liquidator.

Issue 1:
The judgment details the initiation of insolvency proceedings by a financial creditor, Punjab National Bank, against the corporate debtor, M/s. Vindhya Vasini Industries Ltd., under Section 7 of the Insolvency and Bankruptcy Code. The loan facility granted by the banks and the security provided by the borrower are highlighted, indicating the basis for the insolvency petition.

Issue 2:
Despite efforts to find a resolution plan, including public announcements and creditor meetings, no viable plan was received. The corporate debtor had ceased operations, leading to the decision by the Committee of Creditors to initiate the liquidation process due to the lack of alternative solutions.

Issue 3:
The Committee of Creditors, with a unanimous vote, resolved to liquidate the company as per Section 33(2) of the Code. This decision was made after multiple meetings and the absence of any resolution plans, leading to the necessity of liquidating the assets to recover debts.

Issue 4:
Valuation reports for properties belonging to the corporate debtor and a guarantor were submitted. The reports detailed the market values and realizable values of the properties, providing insight into the assets available for liquidation to settle the outstanding debts.

Issue 5:
The judgment discusses the inclusion of the guarantor's property, mortgaged as security, in the liquidation process. The decision was based on maximizing the realizable value to avoid significant losses for the financial creditors, as the guarantor's property added substantial value to the overall recovery amount.

Issue 6:
Legal provisions under Section 60(2) of the Insolvency and Bankruptcy Code allow for the inclusion of a personal guarantor's assets in the liquidation process of a corporate debtor. The judgment clarifies the distinction between resolution and liquidation processes and highlights the authority to liquidate the guarantor's assets to recover debts.

Issue 7:
The Resolution Professional was appointed as the Liquidator to oversee the liquidation process, as directed by the Committee of Creditors. The judgment concludes by disposing of the application accordingly, ensuring the orderly progression of the liquidation proceedings under the Code.