2020 (7) TMI 421 - Tri - Insolvency and Bankruptcy

Dissolution of Corporate Debtor - section 54(1) of the IBC, 2016 R/w Rule 11 of NCLT Rules, 2016 - CIRP process - HELD THAT - The total outstanding amount payable by Corporate Debtor to Creditors was ₹ 8, 17, 19,714.00 as on date of Admission, out of which IRP/RP received total amount of ₹ 4,31,14,104.00. The total realizable Assets value of the Company as per the valuation done by the IBBI approved Valuers in terms of Regulation 27 is ₹ 8,00,234.00, against which Resolution Professional has recovered ₹ 8,70,479.19, which is over and above the liquidation and Fair Value. Therefore, the Resolution Professional paid on 20.03.2020 with breakup of, IRP/RP Professional Fee - ₹ 3,35,000.00; Towards Publication cost (reimbursement to IRP) - ₹ 29,778.00; To Valuers (4 Nos.) with GST-₹ 1,18,000.00. Therefore, the balance amount is ₹ 3,87,701.19, which is to be disbursed to the workmen as decided and approved by COC in its meeting held on 21.03.2020. However, the total claim of workmen is ₹ 5,29,203.00, which covers the period of twenty-four months preceding the Dissolution order date - it would be just and proper to permit the Resolution Professional to pay an amount of ₹ 3,72,363.00 to workmen on pro-rata basis, on making provision of ₹ 15,338.19 towards Bank service charges levied by the Bank. There would be no useful purpose be served, by placing the Corporate Debtor under Liquidation process, under the extant provisions of Code. Since the Assets of Company were realized and realised amounts were also distributed to the respective claimants except workmen, the liquidation process under the provisions of Code is deemed to have completed under Chapter Ill of Part Il of Code, and thus it would be just and proper for the Adjudicating Authority to dissolve the Company subject to finally distribute the remaining amounts, as stated by Resolution Professional - the instant Application is filed in accordance with law and the Resolution in question to dissolve the Corporate Debtor was approved by the Sole COC. It is hereby dissolved the Applicant Company, M/S. My Choice Knit Apparels Pvt. Ltd., with immediate effect.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Verification and admission of claims by creditors
3. Constitution and decisions of the Committee of Creditors (COC)
4. Valuation and realization of assets
5. Decision to dissolve the Corporate Debtor
6. Distribution of assets and payments to claimants
7. Legal provisions and jurisdiction

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The case was initially filed by M/S. Bannari Amman Spinning Mills Ltd. under Section 9 of the IBC, 2016, seeking to initiate CIRP against M/S. My Choice Knit & Apparels Pvt. Ltd. for a default amount of ?1,07,27,295/-. The Adjudicating Authority initially dismissed the case, but upon appeal, the NCLAT directed the Authority to admit the case, leading to the initiation of CIRP on 18.10.2019.

2. Verification and Admission of Claims by Creditors:
A public announcement was made calling creditors to submit their proof of claims. The claims from various financial creditors were scrutinized and verified by the Interim Resolution Professional (IRP). The Operational Creditor, M/S. Bannari Amman Spinning Mills Ltd., claimed ?1,61,08,284/-, out of which ?84,77,311/- was admitted after verification. No claims were received from workmen or employees.

3. Constitution and Decisions of the Committee of Creditors (COC):
The COC was constituted with Mr. Mohammed Shakir, Sole Proprietor of Techniks India, holding 100% voting rights. Related parties like Aaryan Klothing Co. and Mr. Balkishan Boob were not eligible to be members. The COC decided to continue the IRP as the Resolution Professional (RP). In the fifth COC meeting, it was resolved to dissolve the Corporate Debtor without opting for liquidation due to the absence of resolution plans and the non-viability of the company.

4. Valuation and Realization of Assets:
The valuation of the company's assets was conducted, showing a fair value and liquidation value sufficient to cover the CIRP costs. The company's major assets were sold, and the total realizable value was ?8,70,479.19, exceeding the liquidation value. The proceeds were used to cover CIRP costs, including professional fees, publication costs, and valuers' fees.

5. Decision to Dissolve the Corporate Debtor:
The COC resolved to dissolve the Corporate Debtor during the CIRP period itself, considering the time and cost involved in the liquidation process. The resolution was approved due to the absence of resolution plans, the non-operational status of the company, and the lack of assets for liquidation.

6. Distribution of Assets and Payments to Claimants:
The distribution of assets was conducted as per Section 53 of the IBC. The insolvency resolution process costs and liquidation costs were paid in full. The remaining amount was to be distributed to workmen on a pro-rata basis. The total claim of workmen was ?5,29,203/-, and an amount of ?3,72,363.00 was permitted to be paid on a pro-rata basis from the balance amount of ?3,87,701.19.

7. Legal Provisions and Jurisdiction:
The judgment referred to relevant provisions of the IBC, including Sections 33(2), 54, and 60, and Rule 14 of the IBBI (Liquidation Process) Regulations, 2016. The inherent powers of the NCLT under Rule 11 of the NCLT Rules, 2016, were also invoked to ensure speedy justice. The jurisdiction of the NCLT, Bangalore, was established as per Section 60 of the IBC.

Conclusion:
The NCLT, Bangalore, ordered the dissolution of M/S. My Choice Knit & Apparels Pvt. Ltd. with immediate effect. The Resolution Professional was directed to distribute the remaining assets to workmen on a pro-rata basis and to forward copies of the order to relevant statutory authorities. The personal liability of directors or promoters was not absolved by this order, and aggrieved parties were given the liberty to pursue legal action. No order as to costs was made.