2021 (1) TMI 899 - Tri - Insolvency and Bankruptcy

Seeking extension of time period of Corporate Insolvency Resolution Process - seeking Audit and close the Accounts of the Corporate Debtor for the Financial Year 2015-2016 to 2019-2020 with the available records - avoiding examination of transactions covered under Sections 43 45 50 and 66 of I B Code 2016 - approval of eligibility of Resolution Applicant Celestial Garden Owners Association and participation of Resolution Applicant in voting of Resolution Plan - HELD THAT - Considering Section 30(4) of the I B Code instead of going for liquidation of the Corporate Debtor accepting the Resolution submitted by the Resolution Applicant is more viable. Section 31 of the IBC only bestowed the NCLT with the power to reject a Resolution Plan when the conditions in Section 30(2) have not been adequately met. Hence this Tribunal is only having a hands off role in the entire process of Corporate Insolvency Resolution Process - The proviso to the aforesaid Section mandates that Resolution Applicant does not have the voting right at the CoC while considering the Resolution Plan. The Resolution Applicant herein is the Home Buyers (52 Numbers) who are Financial Creditors with 3.91% voting rights in the CoC formed an association called Celestial Garden Owners Association . This Tribunal extend the period of CIR Process for a further period of 90 days from 11.12.2020 with a direction to the Resolution Professional to meticulously adhere to the Rules and Regulations issued by IBBI in this regard from time to time - application allowed.

Summary

Issues Involved:
1. Extension of time period of Corporate Insolvency Resolution Process (CIRP).
2. Audit and closure of accounts of the Corporate Debtor for specified financial years.
3. Avoidance of examination of transactions under Sections 43, 45, 50, and 66 of the Insolvency and Bankruptcy Code (I&B Code), 2016.
4. Eligibility and participation of the Resolution Applicant in the voting of the Resolution Plan.

Detailed Analysis:

1. Extension of Time Period of CIRP:
The Resolution Professional (RP) sought an extension of the CIRP period due to delays caused by a national lockdown and other procedural hindrances. The Tribunal examined Section 12 of the I&B Code, 2016, which allows for an extension of the CIRP period beyond 180 days if 66% of the Committee of Creditors (CoC) approves. The CoC, with a 100% voting share, approved the extension. Consequently, the Tribunal extended the CIRP period for an additional 90 days from 11.12.2020.

2. Audit and Closure of Accounts:
The RP reported that the company's accounts were recorded only up to 29.01.2015, with audits completed up to 31.03.2015. Due to the unavailability of records and staff, the CoC resolved to finalize the accounts with the available records. The Tribunal directed the RP to submit an affidavit from the auditor confirming the status of the accounts and allowed the RP to audit the remaining period through an authorized Chartered Accountant.

3. Avoidance of Examination of Transactions:
The RP highlighted the difficulties in conducting a forensic audit due to the non-functioning status of the company and lack of records. The CoC, considering the circumstances, resolved not to conduct a forensic audit. The Tribunal approved this resolution, acknowledging the unique challenges faced by the Corporate Debtor.

4. Eligibility and Participation of Resolution Applicant:
The Home Buyers, who are financial creditors with 3.91% voting rights, formed an association named 'Celestial Garden Owners Association' and submitted a Resolution Plan. The Tribunal referred to Section 30(5) of the I&B Code, which allows the resolution applicant to attend CoC meetings but not vote unless they are also financial creditors. The Tribunal permitted the association to submit the Resolution Plan for CoC's consideration but did not direct the CoC to accept or reject it. The RP was instructed to follow Sections 30 and 31 of the I&B Code and comply with Regulations 38 and 39.

Conclusion:
The Tribunal disposed of IA/225/KOB/2020 with specific directions:
- Extension of CIRP period for 90 days.
- Submission of an affidavit regarding the status of accounts.
- Approval of CoC's resolution not to conduct a forensic audit.
- Permission for the Home Buyers' Association to submit a Resolution Plan, leaving the decision to the CoC.

Order Date:
Dated the 19th day of January, 2021