2021 (4) TMI 1288 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - non-compliance with the order dated 16.03.2021, the direction that the CoC shall deliberate and take a decision on the resolution plan, on or before 25.03.2021 - whether there has been any violation of the order dated 16.03.2021 and if so, whether it is sufficient to order liquidation of the corporate debtor? - HELD THAT - The argument that in view of the extension and exclusion granted by this Adjudicating Authority, there was plenty of time left for concluding the CIRP and therefore, the CoC was justified in taking time in violation of the order dated 16.03.2021, cannot be countenanced at all. While it is true that following the order of exclusion of 52 days vide order dated 16.03.2021 in IA 259/KB/2021, the CIRP was to expire only on 07.05.2021, it does not follow as a natural corollary that time up to 07.05.2021 is available with the CoC to take final call on the resolution plan. The entire CIRP was to be completed on or before 07.05.2021, which is to say, either the resolution plan was to be finally approved after a resolution in its favour was passed by the CoC, or the corporate debtor would have to be sent into liquidation. This was the underlying intention of the order dated 16.03.2021, which specifically provided for a decision to be taken on or before 25.03.2021. The defence that the CoC took the decision that it did on the ground of maximisation of the corporate debtor cannot be accepted because the IBC envisages maximisation of value but within a definite timeframe. Emphasising one aspect at the expense of the other will derail the whole process of resolution. Therefore, the RP and the CoC were certainly not correct in not adhering to the timelines given in the order dated 16.03.2021 without approaching or even once mentioning the matter before the Court for enlargement of time. Given the circumstances and the fact that voting has already been taken place in resolution plan, we do not at this stage pass any orders with respect to liquidation of the corporate debtor. However, the conclusion is inescapable that we have been presented with a fait accompli both by the RP and by the CoC in the guise of maximisation of value of the corporate debtor - Application disposed off.

Summary

Issues:
Violation of timeline specified in the order dated 16.03.2021 by RP and CoC; Allegations of illegal extension of decision on resolution plan; Request for liquidation order under section 33 of the Code.

Analysis:
1. The applicant sought injunctions against the respondents from acting on the resolution plan beyond the specified timeline. The applicant alleged that the CoC did not vote on the resolution plan by 25.03.2021 as directed, leading to a request for liquidation. The applicant argued that allowing the submission of a fresh plan beyond the deadline was unlawful.

2. The Applicant's counsel contended that the CoC's actions post the timeline lapse were unauthorized, citing a Supreme Court decision emphasizing adherence to timelines in resolution plans. The RP, represented by another counsel, explained the sequence of CoC meetings and the subsequent modified plan submission, justifying the delay due to negotiations for plan improvements.

3. The Resolution Applicant's counsel defended against the violation allegation, stating that the order was initially at their instance. It was argued that the RP and CoC's failure to meet the deadline should not prejudice the Resolution Applicant's diligent efforts.

4. The Adjudicating Authority disapproved of the RP and CoC's actions for not adhering to the specified timeline and unilaterally extending the decision deadline. Despite the CIRP's extended timeline, the CoC's delay in approving the plan was deemed unjustified, emphasizing the importance of timely resolution under the IBC.

5. While refraining from ordering immediate liquidation due to the completed voting process, the Authority criticized the RP and CoC for prioritizing asset maximization over timeline compliance. The decision highlighted the need for strict adherence to resolution timelines and expressed displeasure at the presented situation.

6. The IA seeking injunction relief was not granted at the current stage, but the Authority directed the expedited conclusion of the entire process. The judgment emphasized the need for careful adherence to timelines and efficient resolution proceedings, concluding the matter without liquidation orders at the time.