2022 (2) TMI 964 - Tri - Insolvency and Bankruptcy

Liquidation of the Corporate Debtor - section 33(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The submission by the applicant that the Statutory filing had not been done since 2014 and that the previous filings had been done using illegible copies and that the physical records of the Corporate Debtor were still lying with the Directors of the suspended Board which they are not providing after repeated directions were the reasons why the COC had decided to liquidate the Corporate Debtor as well the realization by the COC that the suspended directors were only making submissions for OTS to gain time and delay the CIR Process are sufficient grounds for commencing liquidation proceedings against the Corporate Debtor. The sub-section (2) of section 33 of the Insolvency Bankruptcy Code, 2016 is clear in that the COC is fully empowered to decide on liquidation at any stage of CIRP, (however before the confirmation of the Resolution Plan), therefore in the present case the COC which consisted of a sole COC member, in its 6th COC meeting held on 21.06.2021 with 100% vote share approved the liquidation of the Corporate Debtor after having explored all the possibilities of reviving the Corporate Debtor. This Tribunal under the circumstances, taking into consideration the provisions of law and since the Insolvency Resolution Process Period has expired, passes an order for liquidation of the corporate debtor 'M/s. Paramex Transformers Limited', and the incidence of liquidation will follow from the date of this order in terms of the provisions of the IBC, 2016 and more particularly as given in Chapter - III of IBC, 2016 - application allowed.

Issues Involved:
1. Application for liquidation under Section 33(2) of the Insolvency and Bankruptcy Code (IBC), 2016.
2. Appointment of the Resolution Professional as Liquidator under Section 34(1) of the IBC, 2016.
3. Non-cooperation and non-compliance by the suspended directors of the Corporate Debtor.
4. Failure to submit a viable One Time Settlement (OTS) proposal by the suspended directors.
5. Expiry of the Corporate Insolvency Resolution Process (CIRP) period.

Issue-wise Detailed Analysis:

1. Application for Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code (IBC), 2016:
The application was filed by the Resolution Professional (RP) of the Corporate Debtor seeking liquidation under Section 33(2) of the IBC, 2016. The Tribunal noted that the Committee of Creditors (COC) had approved the liquidation with a 100% vote share during the 6th COC meeting held on 21.06.2021. The COC had exhausted all possibilities of reviving the Corporate Debtor, which had been defunct since 2014. The Tribunal emphasized that the COC is empowered to decide on liquidation at any stage of the CIRP before the confirmation of the Resolution Plan.

2. Appointment of the Resolution Professional as Liquidator under Section 34(1) of the IBC, 2016:
The Tribunal appointed Mr. Sumit Shukla as the Liquidator for the Corporate Debtor under Section 34(1) of the IBC, 2016. The Liquidator was directed to issue a public announcement stating that the Corporate Debtor is in liquidation, as per Regulation 12 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. The Liquidator was also instructed to proceed with the liquidation process in accordance with Chapter III of Part II of the IBC, 2016 and relevant regulations.

3. Non-cooperation and Non-compliance by the Suspended Directors of the Corporate Debtor:
The Tribunal observed that the suspended directors of the Corporate Debtor had not cooperated with the RP. The directors had filed illegible and unclear copies of audited financial statements for four consecutive years and failed to attend COC meetings. Despite repeated directions, the directors did not hand over the physical records of the Corporate Debtor to the RP. The non-cooperation hindered the RP from performing duties such as preparing the Information Memorandum, appointing valuers, and complying with statutory requirements.

4. Failure to Submit a Viable One Time Settlement (OTS) Proposal by the Suspended Directors:
The suspended directors, through their counsel, had assured the COC that they would submit an OTS proposal. However, they failed to provide a viable and defect-free OTS proposal within the stipulated time. The COC noted that the directors were only making submissions to gain time and delay the CIRP. Consequently, the COC decided to proceed with the liquidation of the Corporate Debtor.

5. Expiry of the Corporate Insolvency Resolution Process (CIRP) Period:
The CIRP period had expired on 29.06.2021. Despite this, the COC had granted excessive time to the suspended directors to keep the Corporate Debtor as a going concern. However, the directors' continued non-cooperation and failure to submit a viable resolution plan led the COC to approve the liquidation.

Conclusion:
The Tribunal, after considering the provisions of the IBC, 2016 and the circumstances of the case, ordered the liquidation of the Corporate Debtor 'M/s. Paramex Transformers Limited'. The Liquidator was directed to follow the process laid down in Chapter III of Part II of the IBC, 2016 and the Insolvency and Bankruptcy (Liquidation Process) Regulations, 2017. The Tribunal also issued specific directions regarding public announcements, communication with regulatory authorities, and submission of a Preliminary Report by the Liquidator.

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