2020 (2) TMI 693 - Tri - Insolvency and Bankruptcy

Liquidation of the corporate debtor - Section 33 of the Insolvency and Bankruptcy Code, 2016 - time limitation - HELD THAT - In the present case there is no dispute that expression of interest was invited on three occasions on 19.03.2019, 03.05.2019 and on 22.06.2019. Nevertheless, there was no acceptable resolution plan. That apart the initial insolvency period has since expired on 06.08.2019. In the facts CoC with 66% vote share decided to go for liquidation of the corporate debtor. Under the provisions of the Code CoC is the decision taking body and is the competent authority for taking appropriate commercial decision. Adjudicating Authority ought not transgress into the commercial decision and jurisdiction of the CoC. Upon failure of resolution process there being no acceptable resolution plan and as per decision of the CoC with requisite majority voting share; Liquidation has to follow in terms of sub-section 2 of Section 33 of the Code. Adherence to statutory requirement has to be in toto. When the language of the Code is clear and explicit the Adjudicating Authority must give effect to it whatever maybe the consequences - in the absence of any acceptable resolution plan; there is no other alternative but to order in conformity with the requisite majority decision of the Committee of Creditors for liquidation of the corporate debtor under Section 33 (2) of the Code. Liquidation of the company ordered.

Summary

Issues:
1. Application for liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016.
2. Challenge to the decision of the Committee of Creditors (CoC) to liquidate the corporate debtor.
3. Consideration of the CoC's decision for liquidation over extending the insolvency resolution period.
4. Statutory provisions under Section 33(2) of the Code regarding liquidation orders.
5. Judicial review of CoC's commercial decisions.
6. Appointment of Liquidator and directions for the liquidation process.

Analysis:

1. The application before the National Company Law Tribunal was filed by the Resolution Professional under Section 33 of the Insolvency and Bankruptcy Code, 2016, seeking directions for the liquidation of the corporate debtor, M/s. Santosh Overseas Limited.

2. The decision of the CoC to liquidate the corporate debtor was challenged by ex-directors, arguing that liquidation should have been avoided as it is considered the last resort in insolvency proceedings.

3. The CoC, with a 66% vote share, decided to proceed with liquidation as there was no acceptable resolution plan after multiple invitations for expressions of interest. The CoC's decision to liquidate was preferred over extending the insolvency resolution period.

4. The Tribunal referred to Section 33(2) of the Code, which mandates that if the CoC approves by not less than sixty-six percent of the voting share to liquidate the corporate debtor, the Adjudicating Authority must pass a liquidation order.

5. The Tribunal emphasized that the CoC is the competent authority for making commercial decisions in insolvency matters, and such decisions are not subject to judicial review unless there is a violation of statutory provisions or principles of natural justice.

6. The Tribunal allowed the application for liquidation, appointing Mr. Rohit Sehgal as the Liquidator and issuing various directions for the commencement and management of the liquidation process, including the submission of reports, cooperation from personnel, and investigation of financial affairs and pending applications.

In conclusion, the Tribunal upheld the CoC's decision for liquidation based on the absence of an acceptable resolution plan and in compliance with statutory requirements, appointing a Liquidator and providing detailed directions for the liquidation process in accordance with the Insolvency and Bankruptcy Code, 2016.