2021 (6) TMI 787 - Tri - Insolvency and Bankruptcy

Liquidation of the Corporate Debtor - section 33 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - Though initially some of the prospective Resolution Applicants shown interest, however, the same could not fructify and no formal Resolution Plan is in the hands of CoC to decide on the same - the Liquidation of the CD is by virtue of natural consequence of operation of law as the COC could not gather requisite voting 66% for extension and hence the application is allowed. The application of Corporate Debtor for liquidation is admitted - application allowed.

Issues:
1. Liquidation of the Corporate Debtor under Section 33 of the Insolvency and Bankruptcy Code, 2016.
2. Appointment of the Resolution Professional as the Liquidator.
3. Unpaid CIRP costs and expenses.
4. Failure to gather requisite voting percentage for CIRP extension.
5. Initiation of liquidation proceedings.
6. Advertisement and notice requirements for liquidation.
7. Payment of fees to the Liquidator.
8. Progress reporting and seeking directions during the liquidation process.

Issue 1: Liquidation of the Corporate Debtor
The Resolution Professional (RP) filed IA 2749 of 2019 seeking liquidation of the Corporate Debtor, Forever Entertainment Private Limited, under Section 33 of the Insolvency and Bankruptcy Code, 2016. The COC failed to gather the required 66% voting percentage for CIRP extension, leading to the natural consequence of liquidation. The RP was appointed as the Liquidator, and the liquidation process was ordered to commence as per the provisions of the Code. The RP was directed to act in the best interest of the Corporate Debtor and comply with the relevant regulations.

Issue 2: Appointment of the Resolution Professional as the Liquidator
The RP, Mr. Jitendra Palande, expressed his interest in acting as the Liquidator, and the COC in its 5th meeting proposed his appointment as per Section 34 of the I&B Code. The Adjudicating Authority appointed the RP as the Liquidator, emphasizing the importance of acting in the Corporate Debtor's best interest and in accordance with the Code and regulations. The Liquidator was authorized to represent the Corporate Debtor before Government Authorities if necessary.

Issue 3: Unpaid CIRP Costs and Expenses
The RP detailed the unpaid CIRP costs amounting to ?60 lakh, encompassing various expenses such as professional fees, security, public announcements, valuer fees, meeting expenses, legal costs, and maintenance work. Despite initial interest from prospective Resolution Applicants, no formal resolution plan materialized, leading to the liquidation decision due to the failure to extend the CIRP.

Issue 4: Failure to Gather Requisite Voting Percentage for CIRP Extension
The COC, comprising Secured and Unsecured Financial Creditors, voted on the matter of CIRP extension during the 5th meeting. While Secured Creditors voted in favor, Unsecured Financial Creditors voted against the extension, resulting in the inability to achieve the mandated 66% voting percentage for the extension. Consequently, the RP filed for liquidation as per the operation of law.

Issue 5: Initiation of Liquidation Proceedings
In light of the circumstances and the failure to extend the CIRP, the Adjudicating Authority deemed it necessary to admit the Corporate Debtor for liquidation and initiate the liquidation proceedings as per the law. The RP was tasked with advertising the liquidation in newspapers, forwarding the order to the concerned authority, and managing the liquidation process in compliance with regulations.

Issue 6: Advertisement and Notice Requirements for Liquidation
The Liquidator was directed to advertise the liquidation of the Corporate Debtor in two newspapers, one in English and one in a regional language, as per the provisions of the I&B Code. The order for liquidation served as a notice of discharge to the officers, employees, and workmen of the Corporate Debtor, except if the business continues during the liquidation process.

Issue 7: Payment of Fees to the Liquidator
Regulation 4 of the IBBI (Liquidation Process) Regulations, 2016 governed the fees payable to the Liquidator, ensuring compliance with the prescribed regulations. The Liquidator was required to submit progress reports as per Regulation 15 and seek directions from the Adjudicating Authority as needed during the liquidation process.

This judgment underscores the meticulous process and legal framework involved in the liquidation of a Corporate Debtor under the I&B Code, emphasizing the role of the Resolution Professional as the Liquidator and the adherence to regulatory requirements throughout the liquidation proceedings.

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