2019 (6) TMI 1029 - AT - Insolvency and Bankruptcy

Liquidation of Global Houseware Limited - non-consideration of Resolution plan - grievance of the Appellant(s) are that their Resolution Plan was not considered by the Committee of Creditors on the ground that they are related party - HELD THAT - We uphold the decision of liquidation as more than 270 days have passed. Appeal disposed off.

Issues Involved:
1. Rejection of the Resolution Plan by the Committee of Creditors.
2. Eligibility of the Appellant under Section 29A of the Insolvency & Bankruptcy Code (I&B Code).
3. Liquidation of Global Houseware Limited.
4. Application of amendments to the I&B Code.
5. Steps to be taken during the liquidation process.

Detailed Analysis:

1. Rejection of the Resolution Plan by the Committee of Creditors:
The Appellant, a 'Resolution Applicant,' challenged the order dated 19th December 2018 by the Adjudicating Authority (National Company Law Tribunal), New Delhi, which directed the liquidation of Global Houseware Limited. The Committee of Creditors (CoC) rejected the Resolution Plan submitted by eligible Resolution Applicants on 16th April 2018, with an 83.45% voting share. The Appellant contended that their Resolution Plan was not considered by the CoC because they were deemed a related party.

2. Eligibility of the Appellant under Section 29A of the Insolvency & Bankruptcy Code (I&B Code):
The Appellant argued that Global Houseware Limited is a small-scale industry, and thus, they should not be held ineligible under Section 29A of the I&B Code. However, since the Resolution Plan was rejected on 16th April 2018, the Appellate Tribunal concluded that the Appellant could not benefit from the amendments made to the Act on 6th June 2018. The Tribunal also chose not to decide on the issue of whether the Appellant was a related party, as more than 270 days had passed since the resolution process began.

3. Liquidation of Global Houseware Limited:
The Tribunal upheld the decision to liquidate Global Houseware Limited, given that more than 270 days had elapsed. The Tribunal referenced its decision in "Y. Shivram Prasad Vs. S. Dhanapal & Ors." and emphasized that the liquidator must act in accordance with the directions provided in that case.

4. Application of amendments to the I&B Code:
The Tribunal noted that the Appellant could not take advantage of the amendments made to the I&B Code on 6th June 2018, as the Resolution Plan was rejected prior to this date. This highlights the non-retroactive application of amendments to the I&B Code.

5. Steps to be taken during the liquidation process:
The Tribunal referred to its previous rulings, including "S.C. Sekaran v. Amit Gupta & Ors." and "Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors.," to outline the steps required during the liquidation process. These steps include:
- Ensuring the revival and continuation of the Corporate Debtor by protecting it from its management and preventing liquidation.
- Exploring compromise or arrangement with creditors or members under Section 230 of the Companies Act, 2013.
- Selling the business of the Corporate Debtor as a going concern if revival efforts fail.
- Liquidation as the last resort, to be avoided if possible.

The Tribunal directed the liquidator to verify claims, take control of assets, and carry on the business for beneficial liquidation. The liquidator must follow Section 230 of the Companies Act, 2013, and prioritize the revival of the Corporate Debtor. If revival is not possible, the liquidator should proceed with the sale of the company's assets.

The appeal was disposed of with these observations and directions.

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