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2022 (10) TMI 1143 - AT - Insolvency and BankruptcyLiquidation of Corporate Debtor - it is contended that the decision of the CoC has been arbitrarily taken - It is submitted that the CoC never wanted to continue with the CIRP and after having been constituted, after admission of Section 10 application assets, were never handed over to the Resolution Professional, hence, Resolution Professional could not draw Information Memorandum and issue EOI - HELD THAT - The Explanation under Section 33 (2) has been inserted by Act of 26 of 2019 contains the legislative declaration and intention. The CoC in the Legislative Scheme has been empowered to take decision to liquidate the Corporate Debtor, any time after its constitution and before confirmation of the resolution plan. The power given to the CoC to take decision for liquidation is very wide power which can be exercised immediately after constitution of the CoC. The reasons which has been given in Agenda Item 1, it is made clear by the CoC that the Corporate Debtor is not functioning for last 19 years and all machinery has become scrap, even the building is in dilapidated condition and the CIRP will involve huge costs. We are not convinced with the submission of learned counsel for the Appellant that the CoC s decision is an arbitrary decision. CoC is empowered to take decision under the statutory scheme and when in the present case the decision of the CoC for liquidation has been approved by the Adjudicating Authority, we see not good ground to interfere at the instance of the Appellant. The Appeal is dismissed.
Issues:
1. Challenge to the decision of the Committee of Creditors (CoC) for liquidation of the Corporate Debtor. 2. Interpretation of Section 33(2) of the Insolvency and Bankruptcy Code, 2016 regarding initiation of liquidation. Analysis: Issue 1: The Appellant challenged the CoC's decision for liquidation, arguing that the decision was arbitrary and not based on commercial wisdom. The CoC initially considered withdrawal under Section 12A but later decided on liquidation due to the non-functionality of the Corporate Debtor for 19 years, dilapidated assets, and the lack of future viability as a going concern. The Appellant contended that the CoC's decision was not permissible under Section 10 since it was based on the Corporate Debtor's own application. However, the CoC's decision for liquidation was unanimously passed with 100% voting share. The Tribunal noted that the CoC's decision for liquidation, approved by the Adjudicating Authority, was within its wide powers granted by the legislative scheme. The Tribunal dismissed the appeal, emphasizing that each case's liquidation decision's judicial review depends on compliance with the I&B Code. Issue 2: The Tribunal referred to Section 33(2) of the I&B Code, which allows the resolution professional to intimate the Adjudicating Authority of the CoC's decision to liquidate the Corporate Debtor before the confirmation of a resolution plan. The legislative intent, as per the Explanation under Section 33(2), empowers the CoC to decide on liquidation after its constitution and before plan confirmation. The Tribunal highlighted that the CoC's decision for liquidation in this case, based on the Corporate Debtor's non-functionality and high costs involved in the CIRP, was within the statutory framework. The Tribunal emphasized that the CoC's decision for liquidation is subject to judicial review based on individual case facts and I&B Code compliance. In conclusion, the Tribunal upheld the CoC's decision for liquidation, emphasizing the wide powers granted to the CoC under the I&B Code and the need for compliance with the statutory scheme in each case.
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