2020 (12) TMI 1321 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - section 33(1) 34(1) of the IB Code - HELD THAT - On perusal of the records, it is found that Suspended Management has already appeared in the matter. Though they were allowed time to file reply on 12.11.2020, within two weeks, but has failed to file reply. However, the Suspended Management, being promoter, was always present in the COC meetings and never raised any objection. It is a matter of record that there is only one member in the Committee of Creditors i.e. Punjab National Bank, who has passed the resolution for liquidation with 100% voting, as NPV of ₹ 461.15 lakhs, proposed by the Resolution Applicant, was less than the liquidation value of the assets of the Corporate Debtor - it is also pertinent to mention herein that recently the Hon ble Supreme Court of India in its judgement of committee of Creditors of Essar Steel India Limited through Authorised Signatory vs. Satish Kumar Gupta Ors. 2019 (11) TMI 731 - SUPREME COURT where it was observed that the commercial wisdom has been exercised by the CoC after taking into count all the factors leading to maximisation of asset value of the Corporate Debtor, but the ultimate discretion of what to pay and how to pay each class or sub-class of creditors lies with the COC. The company is ordered to be liquidated - moratorium declared shall be cease to have effect - application allowed.

Summary

Issues: Liquidation of Corporate Debtor under Section 33 of the IB Code

Issue 1: Failure to file reply by Suspended Management
The judgment notes that the Suspended Management, despite being present in Committee of Creditors (COC) meetings, failed to file a reply after being granted time to do so. The Suspended Management, identified as the promoter, did not object during COC meetings, indicating their lack of response to the matter.

Issue 2: Committee of Creditors' decision for liquidation
The judgment highlights that the Committee of Creditors consisted of only one member, Punjab National Bank, which passed a resolution for liquidation with 100% voting. This decision was based on the fact that the proposed NPV by the Resolution Applicant was lower than the liquidation value of the Corporate Debtor's assets, as reflected in meeting minutes.

Issue 3: Judicial precedent and commercial wisdom of Committee of Creditors
The judgment references a Supreme Court judgment emphasizing that the commercial wisdom of the Committee of Creditors should not be interfered with by the Adjudicating Authority. The Supreme Court affirmed that the CoC has the discretion to decide on payment distribution among creditors to maximize the asset value of the Corporate Debtor.

Judgment and Orders
The Tribunal orders the cessation of moratorium under Section 14 of the IB Code upon liquidation, directs the Liquidator to issue a public announcement, and send a certified copy of the order to the relevant authority. Legal proceedings by or against the Corporate Debtor are restricted, except those initiated by the Liquidator with prior approval. The Liquidator is empowered with the duties and powers outlined in the IB Code and regulations. The Company Liquidator is tasked with managing the affairs of the Corporate Debtor, with support from its personnel. The Liquidator's fee is specified based on the value of the liquidation estate assets. The Registry is instructed to communicate the order promptly to relevant entities. The judgment allows the application for liquidation of the Corporate Debtor under Section 33 of the IB Code, appointing the RP as the Liquidator for the process.