2018 (6) TMI 493 - AT - Insolvency and Bankruptcy

Corporate insolvency procedure - liquidation proceedings - no person applied as a Resolution Applicant nor filed any Resolution Plan - Held that - Corporate Debtor had been incurring huge loss every year and the Audited Balance Sheets of the Corporate Debtor show that they had been incurring recurring losses every year and the losses have eroded its reserves and surplus Directors have committed various falsification of accounts irregularities and discrepancies in accounts have been made. Waiver of debts to the tune of ₹ 31.00 Crores, due to the Corporate Debtor has been shown as bad debts. This apart funds were collected from third parties by the Director, which were not reflected in the books of accounts of the Corporate Debtor . From the record it is clear that the Information Memorandum was prepared by the Resolution Professional which was published but in the absence of any Resolution Applicants , there was no other option for the Adjudicating Authority, but to go for liquidation on completion of 270 days.

Summary

Issues:
1. Liquidation order passed by the Adjudicating Authority.
2. Allegations of obstruction of revival by the Committee of Creditors.
3. Failure to seek opinion on extension of period before filing for liquidation.
4. Accusations against the Resolution Professional.
5. Attempts to stall the Resolution Process by the Board of Directors.
6. Lack of Resolution Plan submissions.
7. Financial irregularities and falsification of accounts by the Directors.
8. Liquidation decision due to absence of Resolution Applicants.

Analysis:
1. The appeal was against the liquidation order of the Corporate Debtor passed by the Adjudicating Authority on 19th March, 2018, after the completion of 270 days from the initiation of the insolvency process under the Insolvency and Bankruptcy Code, 2016 (I&B Code).

2. The Appellant, as a Director of the Corporate Debtor, alleged that the Committee of Creditors, particularly the State Bank of India, obstructed the revival of the company by voting against the extension of the Resolution Process, contrary to the objectives of the I&B Code.

3. It was argued that the Resolution Professional failed to seek the opinion of the Adjudicating Authority on the extension of the period before filing for liquidation, despite not having the required 75% of votes in favor of the decision.

4. The Appellant accused the Resolution Professional of bias and not acting neutrally as expected, leading to the filing of the liquidation application instead of pursuing the resolution process further.

5. The Board of Directors was alleged to have attempted to stall the Resolution Process, with no Resolution Plan filed and no Resolution Applicant coming forward, despite discussions and presentations by entities like IDBI Capital Markets Pvt. Ltd.

6. The absence of a concrete Resolution Plan and the failure of any Resolution Applicant to submit a proposal further complicated the situation, indicating a lack of viable options for the revival of the Corporate Debtor.

7. Serious financial irregularities, including recurring losses, falsification of accounts, and mismanagement by the Directors, were highlighted, showing a deteriorating financial position of the Corporate Debtor over the years.

8. The decision for liquidation was ultimately attributed to the absence of any Resolution Applicants despite efforts made, leading to the Adjudicating Authority having no choice but to opt for liquidation as the resolution process could not be successfully concluded.

In conclusion, the Appellate Tribunal found no merit in the appeal and dismissed it, vacating any previous stay orders without imposing costs on any party involved.