2019 (11) TMI 1706 - AT - Insolvency and Bankruptcy

Withdrawal of CIRP application filed under section 7, 9 and 10 of IBC - liquidation order sought to be quashed - HELD THAT - The Promoters and or Shareholders and or Directors have been allowed to pay the dues in their individual capacity from their respective account which should not be proceeds of crime . We direct them to disclose source of the funds to Enforcement Directorate and Resolution Professional before such payment - For the purpose of finding out whether the amount paid to the Andhra Bank is proceeds of crime or not, we allow the Enforcement Directorate to find out whether the said amount is being paid in the individual capacity of the Promoters or Shareholders or Directors and not from the proceeds of crime . It is further clarified that if the order of this Appellate Tribunal dated 28th August, 2019 passed in terms of Section 12A is not given effect within a period of 30 days from the date of this order, in such case the order of this Appellate Tribunal dated 28th August, 2019 shall stand recalled and the order of liquidation dated 8th May, 2019 passed by the Adjudicating Authority shall stand restored - Resolution Professional are allowed to continue till the process is completed under Section 12A for a period of another 30 days. Application allowed.

Summary

Issues:
1. Setting aside the liquidation order and allowing the appellant to withdraw the application under Section 7.
2. Setting aside the Corporate Insolvency Resolution Process against the Corporate Debtor.
3. Continuation of proceedings by Enforcement Directorate and other authorities against the Corporate Debtor.
4. Expiry of the order under Section 12A and its implications.
5. Clarification regarding payment by Promoters/Shareholders/Directors and disclosure to Enforcement Directorate.
6. Continuation of Resolution Professional and Liquidator based on payment compliance.

Issue 1: Setting aside the liquidation order and allowing the appellant to withdraw the application under Section 7
The Appellate Tribunal held that the liquidation order was uncalled for and set aside the impugned order dated 8th May, 2019. The appellant, Andhra Bank, was allowed to withdraw the application filed under Section 7. Consequently, the Corporate Insolvency Resolution Process initiated against the Corporate Debtor, M/s. Sterling Biotech Ltd., was set aside, subject to the payment of amounts to stakeholders/creditors as approved by the Committee of Creditors with 90% voting share.

Issue 2: Setting aside the Corporate Insolvency Resolution Process against the Corporate Debtor
The Appellate Tribunal's decision to set aside the Corporate Insolvency Resolution Process did not interfere with any orders passed by the Enforcement Directorate regarding the Corporate Debtor's assets. The proceedings under the Prevention of Money Laundering Act (PMLA) would continue against the Corporate Debtor in accordance with the law. Observations made against the Resolution Professional were expunged due to the setting aside of the impugned order.

Issue 3: Continuation of proceedings by Enforcement Directorate and other authorities against the Corporate Debtor
The Appellate Tribunal allowed various authorities, including the Enforcement Directorate, Central Bureau of Investigation, Ministry of Corporate Affairs, Securities and Exchange Board of India, to continue or take any action against the Company, Promoters, Shareholders, or Directors under existing laws, irrespective of settlements made under Section 12A of the Insolvency and Bankruptcy Code.

Issue 4: Expiry of the order under Section 12A and its implications
If the order passed under Section 12A was not given effect within 30 days, the order of the Appellate Tribunal dated 28th August, 2019, would stand recalled, and the liquidation order passed by the Adjudicating Authority on 8th May, 2019, would be restored. The Resolution Professional was allowed to continue until the completion of the process under Section 12A for an additional 30 days.

Issue 5: Clarification regarding payment by Promoters/Shareholders/Directors and disclosure to Enforcement Directorate
Promoters, Shareholders, or Directors were allowed to pay dues in their individual capacity, provided the funds were not proceeds of crime. They were directed to disclose the source of funds to the Enforcement Directorate and Resolution Professional before making any payments. The Enforcement Directorate was permitted to verify if the payments were made from legitimate sources.

Issue 6: Continuation of Resolution Professional and Liquidator based on payment compliance
The Resolution Professional was allowed to continue until the Section 12A process was completed within 30 days. If the payment was not made within the specified time, the order of liquidation would be restored, and the Liquidator appointed by the Adjudicating Authority would take over. Interlocutory Application No. 2787 of 2019 was disposed of with the provided clarifications and directions.