2019 (2) TMI 1947 - AT - Companies Law

Liquidation Order - Section 33(1) of the Insolvency Bankruptcy Code - HELD THAT - The liquidator should act in terms of the directions of the Appellate Tribunal and take steps under Section 230 of the Companies Act. If the members of the Corporate Debtor or the creditors approach the company through the liquidator for compromise or arrangement by making proposal of payment to all the creditor(s), the Liquidator on behalf of the company will move an application under Section 230 of the Companies Act, 2013 before the National Company Law Tribunal. The steps should be taken for outright sale of the corporate debtor so as to enable the employees to continue in service on such outright sale. Appeal disposed off.

Summary

Issues:
- Challenge to the order of Liquidation under Section 33(1) of the Insolvency & Bankruptcy Code
- Compliance with corporate insolvency resolution process
- Applicability of Section 230 of the Companies Act, 2013

Challenge to Liquidation Order:
The appeal was filed challenging the order of Liquidation under Section 33(1) of the Insolvency & Bankruptcy Code by a Director/Shareholder of the Corporate Debtor. The appellant argued that the corporate insolvency resolution process did not proceed lawfully as all Board of Directors members were not directed to attend the Committee of Creditors meeting. Additionally, the Adjudicating Authority did not extend the time for resolution applicants to submit a plan to prevent liquidation. However, as no resolution plan was submitted within the stipulated time, the order of Liquidation was upheld by the Appellate Tribunal.

Compliance with Corporate Insolvency Resolution Process:
The Resolution Professional stated that no resolution plan was submitted within the required timeframe, leading to the passing of the Liquidation order by the Adjudicating Authority. In light of these facts, the Appellate Tribunal declined to interfere with the order of Liquidation dated December 20, 2018.

Applicability of Section 230 of the Companies Act, 2013:
The Appellate Tribunal directed the Liquidator to proceed in accordance with Section 230 of the Companies Act, 2013, and the decisions in 'Meghal Homes Pvt. Ltd.' and 'Swiss Ribbons Pvt. Ltd.' The Liquidator was instructed to verify all creditor claims, take control of the Corporate Debtor's assets, and conduct business for beneficial liquidation as per Section 35 of the I&B Code. Furthermore, the Liquidator was required to follow the procedures outlined in Sections 33, 38, 39, and 40 for claim verification and admission/rejection. Before selling the Corporate Debtor's assets, the Liquidator must adhere to Section 230 of the Companies Act, 2013, and the Adjudicating Authority may issue necessary orders. If revival efforts fail, the Liquidator should proceed with the sale of assets wholly or partially as per legal requirements.

Conclusion:
The Appellate Tribunal directed the Liquidator to act in accordance with the provided instructions and take steps under Section 230 of the Companies Act, 2013. If the Corporate Debtor's members or creditors propose a compromise or arrangement, the Liquidator should file an application under Section 230 before the NCLT. In case of failure, the Liquidator should proceed with the outright sale of the Corporate Debtor to facilitate the continuation of employee services. The appeals were disposed of with the mentioned directions and observations, without any costs incurred.