2018 (12) TMI 888 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process (CIRP) - liquidation mode - Held that - Going by the rationale of the Hon ble Supreme Court in a judgment recently rendered in the matter of Arcelormittal india pvt. Ltd. Vs. satish Kumar Gupta & Ors 2018 (10) TMI 312 - SUPREME COURT OF INDIA wherein it has been held that in the interest of the Corporate Debtor and other stakeholders, every opportunity should be given for the Resolution of the Corporate Insolvency of a Corporate Debtor and that the liquidation should be a last resort. We find that the sole resolution plan filed by the Board of Directors of the Corporate Debtor, namely, Mr. Mayank Patodia, Mr. Pawan Kumar Patodia & Mr. Prateek Patodia respectively had been considered and rejected by the COC in the meeting held on 08.08.2018 based on the resolution which has been fully extracted as above in paragraph supra. It is also evident that two persons who had initially shown interest by answering to the invitation of resolution plans, however, had subsequently withdrawn from submitting the resolution plans which would have enabled the COC to consider the same and come to a conclusion. As against the claim made by the Creditors including the Financial Creditors, Operational Creditors whether secured or not aggregating to a sum of ₹ 86,16,30,246 the fair value as well as the liquidation value as made available to this Tribunal based on its direction by the Resolution Professional does not even come to l/5th of the amount claimed, taking into consideration, both the fair value and as well as the liquidation value which falls well below the total claims. The resolution of the CoC made on 08.08.2018 to go in for liquidation mode after rejecting the sole Resolution Plan of the directors whose powers stood suspended had not been challenged by any of the parties before this Tribunal and in the circumstances, taking into consideration the provisions of Section 33(1) of IBC, 2016 and in view of the period of CIR process having expired, namely, 270 days period and since no resolution plan has been approved but on the other hand, the CoC has rejected the resolution plan under Section 31 of IBC, 2016 this Tribunal is constrained to pass an order requiring the Corporate Debtor, namely, Ashoka Multiyarn Mills Limited to be Liquidated in the manner as laid down under the provisions of IBC, 2016, more particularly given in Chapter III of IBC, 2016 and also in terms of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. Consequently, the Liquidator named will act as the liquidator for the purpose of carrying forward the liquidation mode and is directed to issue a public announcement as envisaged under the provisions of IBC, 2016

Summary

Issues Involved:
1. Liquidation of the Corporate Debtor.
2. Rejection of proposed resolution plans by the Committee of Creditors (CoC).
3. Compliance with the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC).
4. Classification and claims of creditors.
5. Appointment of a liquidator.

Detailed Analysis:

1. Liquidation of the Corporate Debtor:
The Tribunal considered the liquidation of the Corporate Debtor due to the rejection of the proposed resolution plan by the CoC in multiple meetings. The CoC recommended liquidation following the rejection of the sole resolution plan. The Tribunal noted that the liquidation should be a last resort, but in this case, it was deemed necessary due to the lack of an approved resolution plan and the expiration of the CIRP period.

2. Rejection of Proposed Resolution Plans by the CoC:
The resolution plan submitted by the Corporate Debtor's Board of Directors was rejected by the CoC in its meeting held on 08.08.2018. The voting results showed a 95.3% rejection, with the principal Financial Creditor, Union Bank of India, and other creditors voting against the plan. The CoC had previously considered other potential resolution applicants who later withdrew, leaving the Board of Directors' plan as the sole proposal, which was ultimately rejected.

3. Compliance with CIRP under IBC, 2016:
The Tribunal reviewed the compliance with the CIRP process, noting the sequence of events and meetings held by the CoC. The process began with the admission of the petition filed by Union Bank of India on 15.11.2017. The IRP made public announcements for claims, and multiple CoC meetings were held to discuss interim finance, classification of creditors, and resolution plans. Despite efforts to extend the CIRP period by 90 days, no viable resolution plan was approved.

4. Classification and Claims of Creditors:
The IRP received claims from both Financial and Operational Creditors. The largest claims were from two Financial Creditors, with significant claims from related parties and Operational Creditors. The CoC meetings discussed the classification of creditors, including a dispute over whether Gangpur Weavers Co-operative Spinning Mills Limited should be classified as a 'Secured Financial Creditor' or an 'Operational Creditor.' The total claims admitted against the Corporate Debtor amounted to ?86,16,30,246.

5. Appointment of a Liquidator:
The Tribunal ordered the liquidation of the Corporate Debtor and appointed the current Resolution Professional (RP), Mr. Pinaki Sircar, as the liquidator. The liquidator was directed to issue a public announcement of the liquidation, communicate with the Registrar of Companies, and notify relevant tax and revenue authorities. The liquidator is also required to file periodic reports with the Tribunal as mandated by the IBC and associated regulations.

Conclusion:
The judgment concluded with the Tribunal ordering the liquidation of the Corporate Debtor, Ashoka Multiyarn Mills Limited, due to the rejection of the resolution plan and the expiration of the CIRP period. The RP, Mr. Pinaki Sircar, was appointed as the liquidator to carry out the liquidation process in accordance with the IBC, 2016 and related regulations. The moratorium granted under Section 14 of the IBC was lifted, and the provisions of Sections 33(5) and 33(6) were made applicable.