2018 (10) TMI 230 - Tri - Insolvency and Bankruptcy

Liquidation proceedings - 60 days delay has been taken in RP taking charge - 64 days be excluded while computing 180 days time period of the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor - Alternatively, the Committee of Creditors (CoC) be directed to extend the CIRP time period for a further period of 90 days - Held that - It is nothing but delay tactics to deprive the CoC from proceeding further to realise whatever that is remained in the company. There is no requirement to see the valuations or to see the Information Memorandum to order for liquidation u/s. 33 except seeing as to whether resolution plan has been received under sub-section (6) of Section 30 or the rejected resolution plan u/s. 31 of the Code. That being the legal proposition, there is no need to put the clock back to direct CoC for inviting EOI, and for receiving resolution plans, then to examine the same. In view of the reasons aforementioned, CoC not approving to invite resolution plans will not become non-compliance of the duties of the RP because this duty will cast upon the RP only when a decision has been approved by the CoC to invite resolution plans therefore, the RP not inviting resolution plans will not tantamount to non-compliance of Section 25(2)(h) of the Code. As to exclusion of 60 days from CIRP period, none of the applications filed by the parties can be considered as having grievance because as to RP is concerned, his only duty is to carry out the approvals given by the CoC, he cannot question that as to why CoC has not sought for extension of time, as to why CoC has not given approval for invitation of resolution plans. He is neither an Adjudicating Authority nor an officer to supervise the discretion vested with the CoC. Suspended directors cannot have any grievance to say that if the company is opted for resolution, they would get something out of the company. Here the principal stakeholders are the creditors, more specifically financial creditors whose interest is stuck in the Corporate Debtor, if they themselves opt for liquidation, such decision or indecision cannot be reversed so as to send it back to the CoC. Moreover, I say that this Adjudicating Authority has no jurisdiction either u/s. 31 or u/s. 33 to send it back to the CoC. The reason is, under Section 31 it has to either accept, reject or modify the resolution plan, under Section 33, it has to pass an order for liquidation when it is in compliance of 33(l)(a) or 33(l)(b) of the Code. Therefore, we have not found any merit in the application filed by the suspended directors as well. As to application filed by a company called Clean Coal Enterprises Pvt. Ltd. styling itself as prospective resolution applicant, I wonder what kind of locus it has, to file this application before this Bench when the CoC has not even invited resolution plans by giving an advertisement. This application is not only devoid of any merit but also abuse of process of law. As to MA filed by SREI Equipment Finance Ltd. having 2.79% voting share in the CoC seeking exclusion of 60 days time, its voting share will not make any difference to any of the decisions of the CoC. First its voting share is miniscule moreover whatever that is required to be done within 270 days, i.e. to go for resolution or for liquidation, that exercise has already been taken place, discussion has happened in the CoC and voting has taken place. Voting has been fractured not weighing either side. In this backdrop, law does not permit this Bench to send it back to the CoC jumping all the provisions of law. CoC has discussed every issue accordingly, they voted therefore, whatever to be done within the CIRP period that has been done, and henceforth there is no requirement of exclusion of the period that has been mentioned in this application. In view of the same, we don t find any merit in this application filed by this financial creditor having 2.79% voting share in the CoC. This Bench hereby orders the Corporate Debtor to be liquidated in the manner as laid down in the Chapter by issuing a Public Notice stating that the Corporate Debtor is in liquidation with a direction to the Liquidator to send this order to RoC under which this Company has been registered.

Summary

Issues Involved:
1. Intervention in CP 1239/MAH/2017.
2. Exclusion of 64 days in CIRP computation.
3. Extension of CIRP by 90 days.
4. Approval and payment of costs for Valuation Report.
5. Preparation and publication of Information Memorandum.
6. Approval of draft invitation for Expression of Interest (EOI).
7. Publication of EOI.
8. Liquidation of Corporate Debtor.

Detailed Analysis:

1. Intervention in CP 1239/MAH/2017:
The Directors of the suspended Board of Directors of the Corporate Debtor requested leave to intervene in CP 1239/MAH/2017. The Tribunal did not grant this request, emphasizing the role of the Committee of Creditors (CoC) and the Resolution Professional (RP) in the Corporate Insolvency Resolution Process (CIRP).

2. Exclusion of 64 days in CIRP computation:
The Directors sought exclusion of 64 days from the 180-day CIRP period. The Tribunal found no merit in this request, noting that the Interim Resolution Professional (IRP) continued to function until the RP took over. The Tribunal emphasized that the CIRP was not brought to a standstill during this period.

3. Extension of CIRP by 90 days:
The Directors and other applicants, including SREI Equipment Finance Ltd. and Clean Coal Enterprises Pvt. Ltd., sought a 90-day extension of the CIRP. The Tribunal noted that the CoC did not approve the extension, and emphasized that the decision to extend the CIRP lies within the discretion of the CoC. The Tribunal cannot compel the CoC to opt for resolution over liquidation.

4. Approval and payment of costs for Valuation Report:
The RP was unable to collect valuation reports due to the CoC not contributing towards the costs. The Tribunal acknowledged this issue but did not provide a direction to the CoC to pay these costs, reiterating the CoC's discretion in financial decisions.

5. Preparation and publication of Information Memorandum:
The RP was unable to prepare the Information Memorandum due to the lack of valuation reports. The Tribunal did not find the RP at fault, as the preparation of the Information Memorandum is contingent upon the CoC's approval and payment for the valuation reports.

6. Approval of draft invitation for Expression of Interest (EOI):
The RP circulated a draft EOI, but the CoC did not approve it. The Tribunal emphasized that under Section 25(2)(h) of the Insolvency & Bankruptcy Code, 2016, the RP must obtain the CoC's approval to invite prospective resolution applicants. The Tribunal cannot override the CoC's decision.

7. Publication of EOI:
The Tribunal reiterated that the publication of the EOI requires CoC approval. Since the CoC did not approve the EOI, the Tribunal cannot direct the RP to publish it.

8. Liquidation of Corporate Debtor:
The RP, in the absence of a resolution plan and CoC's cooperation, sought liquidation of the Corporate Debtor under Section 33 of the Code. The Tribunal ordered the liquidation of the Corporate Debtor, appointing the RP as the Liquidator. The Tribunal emphasized that if no resolution plan is received or approved within the stipulated time, liquidation is mandated under Section 33(1) of the Code.

Conclusion:
The Tribunal dismissed the applications seeking intervention, exclusion of days, and extension of the CIRP period. It ordered the liquidation of the Corporate Debtor, appointing the RP as the Liquidator, and directed the issuance of a public notice stating the Corporate Debtor is in liquidation. The Tribunal emphasized the CoC's discretion in financial and strategic decisions during the CIRP and upheld the legal framework governing the insolvency process.