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2021 (3) TMI 1323 - AT - Insolvency and BankruptcyViolation of principles of natural justice - Corporate Debtor into liquidation on the recommendation of the Committee of Creditors (COC) comprising of the sole lender Punjab National Bank - allegation is that the Rules of Natural Justice have not been followed by the COC - HELD THAT - The Suspended Management being the Promoter was all along represented in the COC meetings and never raised any objection as emanates from para 1 of the impugned order. This being a matter of record, the Appellant- Promoter s disputing the factum of his participation in the COC meetings cannot be entertained. That apart, under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 read together with explanation inserted by Act 26 of 2019 enforced w.e.f. 16th August, 2019, the COC is empowered to take a decision in regard to liquidation of the Corporate Debtor even after an application has been filed by the Resolution Professional placing the Resolution Plan approved by the COC before the Adjudicating Authority for approval. Of course, the withdrawal of the Resolution Plan can be done before its approval by the Adjudicating Authority. This implies that even after approval of the Resolution Plan by the COC and laying it before the Adjudicating Authority, the COC can change its mind and pass a Resolution liquidating the Corporate Debtor subject to only exception that such course cannot be adopted after its confirmation i.e. after approval of the Resolution Plan by the Adjudicating Authority. Appeal dismissed.
Issues:
- Allegation of non-compliance with the Rules of Natural Justice by the Committee of Creditors (COC) in the liquidation process. Analysis: The appeal was filed against the order of the Adjudicating Authority, which had sent the Corporate Debtor into liquidation based on the recommendation of the COC, consisting of the sole lender Punjab National Bank. The primary contention raised was the alleged non-compliance with the Rules of Natural Justice by the COC. The Appellate Tribunal noted that the Suspended Management, acting as the Promoter, had been present in the COC meetings without raising any objections, as evident from the impugned order. The Tribunal emphasized that the Appellant, as the Promoter, disputing his participation after the fact could not be entertained. Referring to Section 33(2) of the Insolvency and Bankruptcy Code, 2016, along with an explanation inserted by Act 26 of 2019, the Tribunal highlighted the COC's authority to decide on liquidation even after presenting a Resolution Plan for approval. It was clarified that while the COC could withdraw the Resolution Plan before approval by the Adjudicating Authority, a decision to liquidate the Corporate Debtor could be made even after approval of the Resolution Plan, except after its confirmation by the Adjudicating Authority. The Appellate Tribunal, after hearing arguments from the Appellant's counsel, found no merit in the appeal and subsequently dismissed it. The Tribunal's decision was based on the understanding that the COC had the legal authority to decide on liquidation, even after the approval of a Resolution Plan, as long as it was before confirmation by the Adjudicating Authority. The Tribunal's analysis focused on the legal provisions governing the COC's powers in insolvency proceedings and emphasized the importance of record-based facts in determining compliance with procedural requirements. The judgment underscored the significance of following due process in insolvency matters while upholding the statutory framework provided under the Insolvency and Bankruptcy Code, 2016.
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