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2019 (11) TMI 686 - Tri - Insolvency and BankruptcyLiquidation order - liquidation of Corporate Debtor - section 33 of Insolvency Bankruptcy Code, 2016 - HELD THAT - It is seen that the RP has filed an application for 'Liquidation' of the Corporate Debtor as the CoC has rejected the Resolution Plan submitted by Taguda with 77.61% voting share against the above mentioned resolution plan. This decision of CoC is being challenged by (i) Lodha (one of the Financial creditor of the Corporate Debtor having 1.03% share in CoC), (ii) the Promoters of the Corporate Debtor, (iii) the employees of the Corporate Debtor and the (iv) Resolution Applicant itself. The objection raised is regarding the justification of the alleged 'commercial wisdom' claimed to be exercised by the CoC. Canara Bank is supporting the decision of CoC for liquidation as it has given its own reasons for rejection of Resolution Plan. Having a supervisory jurisdiction over the CIRP proceedings it is desirable to examine whether due procedure of law has been followed or not. Under supervisory jurisdiction the job of the Adjudicating Authority is not merely a stamping authority to approve each and every decision of the CoC, but to test decision on three parameters i.e. (i) it's feasibility, (ii) it's viability , and (iii) it's effective implementation. If no 'Viability' and no 'feasibility' is demonstrated by CoC , then automatically such a decision is flawed one, as happened in this case. There was no sensible examination of facts figures by CoC, rather a senseless decision of liquidation was adopted - Liquidation has to be a last resort , that too in Public interest which ought to be fair and just, only in the absence of a Resolution Plan. Therefore the decision of CoC, which is adversely effecting so many lives, be based upon common judicious prudence coupled with commercial viability, and lack of these criteria is nothing but a bad exercise of a non-commercial decision. Recovery of existing receivables - HELD THAT - Any cash recoveries made by the Resolution Applicant and/or the Company after the expiry of 3 years from the Transfer Date (including cash recoveries from the Existing Receivables) shall be retained by the Company and shall be available for use at its discretion at all times including to pay such amounts to the Resolution Applicant. In order to make recoveries from the Existing Receivables, the Company shall be entitled to execute power of attorney in favour of the Resolution Applicant in the form proposed by the Resolution Applicant - All cash recoveries and costs and expenses shall be routed through a separate bank account opened by the Company with any of the scheduled bank who is a part of the Financial Creditors; however, it is clarified that the Financial Creditors shall not have any lien or charge, including bankers' lien, on such bank account. The Resolution Plan is binding on the Corporate Debtor and other stakeholders involved so that revival of the Debtor Company shall come into force with immediate effect and the Moratorium imposed under section 14 of I B Code shall not have any effect henceforth. The Resolution Professional shall submit the records collected during the commencement of the Proceedings to the Insolvency Bankruptcy Board of India for their record and also return to the Resolution Applicant or New Promoters. Certified copy of this Order be issued on demand to the concerned parties, upon due compliance. The Resolution Professional is further directed to handover all records, premises/factories/documents to Resolution Applicant to finalise the further line of action required for starting of the operation. The Resolution Applicant shall have access to all the records/premises/factories/documents through Resolution Professional to finalise the further line of action required for starting of the operation. Application for liquidation is hereby rejected.
Issues Involved:
1. Application for Liquidation of the Corporate Debtor. 2. Objections to the decision of the Committee of Creditors (CoC) for liquidation. 3. Resolution Plan submitted by Taguda Pte. Ltd. 4. Claims by various stakeholders including financial creditors, operational creditors, and employees. 5. Legal and procedural compliance under the Insolvency and Bankruptcy Code (IBC). Issue-wise Detailed Analysis: 1. Application for Liquidation of the Corporate Debtor: - Application No. 626 of 2019: Filed by the Resolution Professional (RP) under Section 33 of IBC, seeking an order for liquidation of the Corporate Debtor and appointment of Mr. Sudip Bhattacharya as the Liquidator. - Background: The Corporate Insolvency Resolution Process (CIRP) for the Corporate Debtor began on 14.05.2018, initiated by a financial creditor, SBI. The 270-day period for CIRP concluded on 07.02.2019. - CoC Decision: The CoC, with 77.61% voting share, rejected the sole resolution plan submitted by Taguda Pte. Ltd., leading to the RP filing for liquidation. 2. Objections to the CoC's Decision for Liquidation: - Miscellaneous Application No. 716 of 2019: Filed by Lodha Development Management Pvt. Ltd., a financial creditor with 1.03% voting share in CoC, arguing that the CoC's decision for liquidation was not based on credible information and that Taguda's resolution plan offered a better revival option. - Key Arguments: Lodha emphasized that Taguda's plan included an upfront payment of INR 200 Crores and a structured recovery mechanism for receivables, which was more beneficial compared to the liquidation value of INR 67 Crores. - Concerns Raised: Lodha questioned the credibility of SBI's assessment of recoverable receivables and highlighted the potential adverse impact on employees and the overall objective of the IBC. 3. Resolution Plan Submitted by Taguda Pte. Ltd.: - Miscellaneous Application No. 762/2019: Filed by Taguda Pte. Ltd., seeking approval of its resolution plan, which proposed an upfront payment of INR 200 Crores and additional payments based on receivables recovery. - Plan Details: The plan included provisions for CIRP costs, operational creditors, and capital infusion for the Corporate Debtor's revival. Taguda argued that the CoC's decision was based on unsubstantiated claims of receivables worth INR 400-500 Crores. - RP's Position: The RP stated that the Tribunal does not have jurisdiction to sit in appeal over the CoC's decision unless it is shown to be perverse or against the provisions of the Code. 4. Claims by Various Stakeholders: - Miscellaneous Application No. 857 of 2019: Filed by the Employees Association, challenging the CoC's decision and supporting Taguda's plan, emphasizing the lower liquidation value and adverse impact on employees. - Miscellaneous Application No. 517 of 2019: Filed by Canara Bank, seeking preferential treatment in the resolution plan, arguing that its secured claims were not adequately addressed. - Miscellaneous Application No. 989 of 2019: Filed by a promoter, challenging the CoC's decision and alleging procedural lapses in the CIRP, including non-disclosure of resolution plans to the promoters. 5. Legal and Procedural Compliance: - Judicial Precedents: The Tribunal referred to the Supreme Court's judgment in K. Sashidhar v. Indian Overseas Bank, emphasizing the non-justiciability of CoC's commercial decisions unless they contravene the provisions of the IBC. - Tribunal's Findings: The Tribunal found that the CoC's decision lacked prudence and commercial wisdom, as it was based on unsubstantiated claims of receivables. The Tribunal emphasized the objective of the IBC to promote resolution over liquidation and found Taguda's plan to be more beneficial for the stakeholders. Conclusion: - The Tribunal rejected the application for liquidation (MA 626 of 2019) and approved the resolution plan submitted by Taguda Pte. Ltd. (MA 762/2019). - The Tribunal directed the RP to hand over all records and premises to the Resolution Applicant for implementation of the plan. - The decision was based on the Tribunal's supervisory jurisdiction to ensure that the CoC's decisions align with the objectives of the IBC and are based on sound commercial judgment.
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