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2020 (12) TMI 33 - Tri - Insolvency and BankruptcyStay of liquidation application pending disposal of the instant Application - Liquidation of Corporate Debtor - it was alleged that the Applicant is not cooperating with the RP for providing the details of the Corporate Debtor and the said Application is pending adjudication before this Tribunal - Power of Adjudicating Authority (NCLT) to analyse or evaluate the commercial decision of the CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors - HELD THAT - The Applicant has not put forth any concrete proposal of settlement before the 2nd Respondent, who is a Financial Creditor, and thereby making a statement that the Applicant has identified a financier/buyer who would provide financial assistance to the Corporate Debtor and the Applicant would want the 2nd Respondent to negotiate the terms with the said financier/buyer. Power of Adjudicating Authority (NCLT) to analyse or evaluate the commercial decision of the CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors - HELD THAT - The legislature has not endowed the Adjudicating Authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of the CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I B Code. Reliance can be placed in the case of COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS 2019 (11) TMI 731 - SUPREME COURT , from where it is manifestly made clear that this Authority cannot venture in the commercial decision taken by the CoC and as such, the opinion to liquidate the Corporate Debtor is being made after due deliberations in the CoC meetings through voting, and hence the same is a collective business decision. As already stated in the Judgment, the legislature has consciously not provided any ground to challenge the commercial wisdom of the individual financial creditor or their collective decision before the Adjudicating Authority - Needless to say, that even during the Liquidation process, subject to Section 29A of the IBC, 2016 and as per Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016, a 90 day time period is provided to the Applicant to submit a Scheme as contemplated under Section 230 of the Companies Act, 2013, and if the Applicant is otherwise found eligible can very well submit a Scheme for the revival of the Corporate Debtor. Application dismissed.
Issues Involved:
1. Request to keep the liquidation application in abeyance. 2. Alleged non-cooperation and altercation between the Applicant and the Resolution Professional (RP). 3. Proposal for settlement of debts by the Applicant. 4. Decision of the Committee of Creditors (CoC) to liquidate the Corporate Debtor. 5. Judicial discretion and commercial wisdom of the CoC. Issue-wise Detailed Analysis: 1. Request to keep the liquidation application in abeyance: The Applicant sought to keep the liquidation application in abeyance pending the disposal of the instant application. The Tribunal noted that the liquidation application was based on a resolution passed by the CoC and had been reserved for orders. The Tribunal ultimately dismissed the Applicant's request, emphasizing that the CoC's decision to liquidate was made after due deliberations and voting. 2. Alleged non-cooperation and altercation between the Applicant and the RP: The Applicant alleged non-cooperation from the RP and filed a complaint with the Insolvency and Bankruptcy Board of India (IBBI), which was rejected. The RP, in turn, filed an application alleging non-cooperation from the Applicant, which was pending adjudication. The Tribunal noted these contentions but did not find them sufficient to halt the liquidation process. 3. Proposal for settlement of debts by the Applicant: The Applicant proposed a settlement plan for the Financial Creditors, detailing specific amounts and timelines for payment. The Tribunal observed that the Applicant had not put forth any concrete proposal before the 2nd Respondent, a Financial Creditor. The Tribunal referred to the decision in Abhishek Aggarwal -Vs- Mr. Alok Kumar Agarwal & Ors., emphasizing that the CoC's decision to liquidate must be adhered to when approved by the requisite majority. 4. Decision of the Committee of Creditors (CoC) to liquidate the Corporate Debtor: The CoC, with 87.57% votes, decided to liquidate the Corporate Debtor. The Tribunal highlighted the legislative intent and judicial precedence that prioritize the commercial wisdom of the CoC. The Tribunal referred to the Supreme Court's decision in Mr. K. Sasidharan -Vs- Indian Overseas Bank, which underscored that the Adjudicating Authority does not have the jurisdiction to analyze or evaluate the commercial decisions of the CoC. 5. Judicial discretion and commercial wisdom of the CoC: The Applicant argued for the Tribunal to exercise its discretionary power under Rule 11 of NCLT Rules, 2016, to grant time for settlement. The Tribunal referred to the Supreme Court's decision in Committee of Creditors of Essar Steel India Limited -Vs- Satish Kumar Gupta & Ors., which established that the commercial wisdom of the CoC must prevail and is non-justiciable. The Tribunal concluded that it could not interfere with the CoC's decision, which was a collective business judgment. Conclusion: The Tribunal dismissed the Applicant's application, affirming the CoC's decision to liquidate the Corporate Debtor. The Tribunal emphasized the paramount status of the CoC's commercial wisdom and noted that the Applicant could still propose a revival scheme during the liquidation process, subject to eligibility under Section 29A of the IBC, 2016.
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