2020 (10) TMI 166 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - Section 33/34(1) of I B Code - HELD THAT - Upon a query posed to the Resolution Professional whether he is willing to act as a Liquidator, if appointed by this Authority, the Resolution Professional submitted that he is willing to act as Liquidator and the written consent has also been placed on record along with the Application. A perusal of it shows that the Resolution Professional has given a written consent by the signed letter dated 14.11.2019 to act as a Liquidator of the Corporate Debtor, if appointed by this Authority. Since, no Resolution Plan has been received by this Authority under Sub-section (6) of Section 30 of the I B Code, 2016, before the expiry of the maximum period of CIR Process, in exercise of powers conferred under Sub-Clauses (i) (ii) and (iii) of Clause (a) of Sub-Section (1) of Section 33 of the I B Code, 2016, this Authority proceeds to pass the Liquidation Order - Application disposed off.

Issues involved:
1. Liquidation order sought under Section 33(2) of the Insolvency and Bankruptcy Code, 2016.
2. Appointment of Resolution Professional as Liquidator.
3. Evaluation and rejection of Resolution Plan submitted by Promoters.
4. Disagreement among CoC members regarding Resolution Plan.
5. Application for extension of Corporate Insolvency Resolution Process (CIR Process) period.
6. Legal provisions and judicial precedents considered for ordering liquidation.

Issue 1: Liquidation order sought under Section 33(2) of the Insolvency and Bankruptcy Code, 2016

The Resolution Professional filed an application seeking a liquidation order for the Corporate Debtor, M/s. Everwin Textile Mills Private Limited, under Section 33(2) of the Insolvency and Bankruptcy Code, 2016. The application detailed the process followed, including the initiation of Corporate Insolvency Resolution Process (CIR Process) and the appointment of the Resolution Professional as Interim Resolution Professional (IRP). The Resolution Professional had taken over the management of the Corporate Debtor, invited claims from creditors, constituted the Committee of Creditors (CoC), and prepared necessary documents in accordance with the Code.

Issue 2: Appointment of Resolution Professional as Liquidator

Following a series of events, including challenges to decisions and orders by various parties, the Resolution Professional was appointed as the Liquidator by the Authority. The Resolution Professional expressed willingness to act as the Liquidator, and written consent was provided. The appointment was made considering the absence of any received Resolution Plan under Section 30 of the Code before the CIR Process's expiry, leading to the Authority passing the Liquidation Order appointing the Resolution Professional as the Liquidator.

Issue 3: Evaluation and rejection of Resolution Plan submitted by Promoters

The Resolution Plan submitted by the Promoters-Resolution Applicant faced challenges during CoC meetings. The Plan was revised following discussions, but disagreements arose among CoC members, particularly with one member, PNB, expressing dissatisfaction with the Plan's terms. Despite efforts to address concerns and seek justifications, the CoC faced deadlock due to differing opinions on the Plan's viability and terms of payment, leading to rejection by a significant member, PNB.

Issue 4: Disagreement among CoC members regarding Resolution Plan

The CoC members, especially PNB and EARC, had differing views on the Resolution Plan submitted by the Promoters-Resolution Applicant. While EARC was willing to support the Plan with conditions, PNB rejected it due to perceived inadequate value and demanded higher payments. Despite EARC's willingness, the Plan lacked necessary approval as PNB held a majority voting share, leading to a deadlock situation within the CoC.

Issue 5: Application for extension of Corporate Insolvency Resolution Process (CIR Process) period

Challenges arose due to the expiry of the maximum period for concluding the CIR Process, leading to the Resolution Professional seeking extensions based on amended provisions of the Code. The Authority granted extensions to accommodate pending legal proceedings and ensure due process, including extending the CIR Process period by additional days as per the amended provisions, considering the overall circumstances and legal requirements.

Issue 6: Legal provisions and judicial precedents considered for ordering liquidation

In reaching the decision for liquidation, the Authority considered relevant legal provisions under the Insolvency and Bankruptcy Code, 2016, including Section 33(1), and judicial precedents such as the Supreme Court's decisions emphasizing resolution over liquidation. Despite efforts to resolve disagreements and revive the Corporate Debtor, the Authority found it necessary to order liquidation based on the prevailing circumstances, legal framework, and representations made by the Resolution Professional regarding the Corporate Debtor's viability.

This comprehensive analysis of the judgment highlights the key issues, decisions, and legal considerations involved in the case before the National Company Law Tribunal, Chennai Bench.

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