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2022 (2) TMI 675 - AT - Insolvency and BankruptcyLiquidation of Corporate Debtor - Appellant contends that the Adjudicating Authority had failed to appreciate that the Corporate Applicant should have remained as a Going Concern under the I B Code with a view to arrive at a suitable Resolution Plan - section 33 of IBC - HELD THAT - The Liquidation Process will be triggered as per Section 33 of the Code, if (a) either no Resolution Plan is filed within the time prescribed under Section 12 of the Code or a Resolution Plan was rejected by the Adjudicating Authority; (b) where the Resolution Professional, before affirmation of the Resolution Plan, informs the Adjudicating Authority of the decision of the Committee of Creditors to liquidate the Corporate Debtor or (c) where the Resolution Plan approved by an Adjudicating Authority is violated by the concerned Corporate Debtor. The reality of the matter is anyone, other than the Corporate Debtor, whose interest are vitally affected by such breach may apply to the Adjudicating Authority, who may then pass a liquidation order, on such application. Section 65 of the I B Code, 2016 mentions penalty for fraudulent or malicious initiations of proceedings, which can be levied by the Adjudicating Authority if a person initiates the IRP or liquidation proceedings either fraudulently or with malicious intent or for any other aim other than the resolution of insolvency or liquidation - To impose a penalty, under Section 65 of the Code, an adjudicating authority is to arrive at an ex facie opinion in the subject in issue. No such penalty under sub-section (1) or sub-section (2) of Section 65 can be saddled upon a person, by an adjudicating authority without recording an opinion for arriving at an conclusion that the prime facie case is made out to suggest that the person fraudulently or with malicious intent for the purpose, other than the resolution insolvency or liquidation or with the intent to defraud any person has filed the application. It is pertinently pointed out that Section 424 of the Companies Act, 2013 is applicable to the proceedings under the I B Code. To settle the Corporate Debtor /Company s Debts adequate opportunities were provided by the Adjudicating Authority and they proved Otiose . Undoubtedly, the 1st Respondent has right in law, qua the subject property as per the terms of mortgage, created by the Guarantor of the 3rd Respondent/Santosh Hospitals Pvt. Ltd. This Tribunal , considering the entire conspectus of the facts and circumstances of the instant case, in an encircling manner and also on going through the impugned order passed by the Adjudicating Authority (National Company Law Tribunal Division Bench, Chennai) and delivered on 17.12.2019 comes to a consequent conclusion that in view of the fact that the Committee of Creditors had already passed a Resolution for liquidation of the Corporate Debtor with 73.44% voting share on 18.10.2019 and in the teeth of the same, the order of liquidation of the Company passed by the Adjudicating Authority is free from legal infirmities. Resultantly the Appeal fails.
Issues Involved:
1. Validity of the impugned order dated 04.12.2019. 2. Whether the Corporate Applicant should remain as a 'Going Concern'. 3. Ownership and possession of the Hospital premises. 4. Compliance with the IBC provisions and extension of the CIRP period. 5. Liquidation of the Corporate Debtor. 6. Eligibility under Section 29A of the IBC. 7. Allegations of non-cooperation by the Suspended Directors. 8. Application of SARFAESI Act to the subject property. 9. Penalty under Section 65 of the IBC. 10. Jurisdiction and powers of the Adjudicating Authority and Appellate Tribunal. Detailed Analysis: Validity of the Impugned Order: The Appellant challenged the validity, legality, and correctness of the impugned order dated 04.12.2019, arguing that it was in complete negation to the provisions of the IBC, 2016. The Appellant contended that the Adjudicating Authority failed to appreciate that the Corporate Applicant should have remained as a 'Going Concern' to arrive at a suitable Resolution Plan and that without it, the pending debts could not be repaid, affecting all stakeholders. Going Concern: The Appellant argued that the Adjudicating Authority erred in not maintaining the Corporate Applicant as a 'Going Concern', which was crucial for repaying debts and protecting stakeholders' interests. The physical possession of the Hospital was with the 1st Respondent, which should have been under the custody of the Resolution Professional after the order of 'Moratorium' dated 04.04.2019. Ownership and Possession of Hospital Premises: The Appellant contended that the ownership of the Hospital premises was with the Corporate Applicant and not the Promotor, as alleged by the 1st Respondent. The Adjudicating Authority passed the liquidation order without ascertaining the ownership issue, which was pending in MA 363/2019. The Appellant argued that the Hospital premises should have been handed over to the Interim Resolution Professional. Compliance with IBC Provisions and CIRP Extension: The Appellant argued that the Adjudicating Authority failed to extend the CIRP period adequately, as only 15 days were granted instead of the available 90 days. The Appellant claimed that the actions of the Resolution Professional, influenced by the 1st Respondent, led to the locking up of valuable medical equipment and deprived the Corporate Applicant of potential earnings. Liquidation of Corporate Debtor: The Adjudicating Authority ordered the liquidation of the Corporate Debtor as the CoC passed a resolution for liquidation with a 73.44% voting share on 18.10.2019. The Appellant argued that the liquidation order was passed without providing an opportunity for the Corporate Applicant to undergo CIRP and without inviting Expressions of Interest and Resolution Plans from prospective applicants. Eligibility under Section 29A: The Appellant argued that the Suspended Directors were not eligible to participate in the Resolution Process due to their classification as Non-Performing Assets (NPA) and their inability to repay debts for at least one year before the CIRP commencement. Non-Cooperation by Suspended Directors: The Adjudicating Authority noted that the Suspended Directors failed to provide necessary information and funds, which delayed the CIRP process. Despite repeated assurances, no funds were forthcoming, leading to the CoC's decision to liquidate the Corporate Debtor. Application of SARFAESI Act: The 1st Respondent argued that the moratorium under Section 14 of the IBC does not apply to the property of the Guarantor/Surety and that the property being reflected in the Balance Sheet does not confer any title or ownership in law. The 1st Respondent proceeded under the SARFAESI Act to enforce its charge on the property. Penalty under Section 65: The Appellant requested a penalty against the 1st Respondent under Section 65 of the IBC for allegedly violating the Tribunal's order and taking steps against the Corporate Debtor's assets. The Tribunal noted that penalties under Section 65 require an ex-facie opinion of fraudulent or malicious intent. Jurisdiction and Powers: The Tribunal emphasized that the Adjudicating Authority and Appellate Tribunal are creatures of statute with jurisdiction conferred by the IBC. They cannot act as courts of equity and must abide by the statutory framework. The Tribunal upheld the liquidation order, noting that the CoC's commercial wisdom is paramount and binding. Conclusion: The Tribunal dismissed the appeals, upholding the liquidation order and the possession of the Hospital premises by the 1st Respondent until the adjudication of ownership issues. The Tribunal emphasized the importance of adhering to the statutory provisions of the IBC and the commercial decisions of the CoC.
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