2022 (9) TMI 910 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Corporate Person - existence of debt and dispute or not - HELD THAT - As the Corporate Debtor is not carrying any business and has huge losses also, therefore, the Adjudicating Authority has rightly passed the impugned order in admitting the Application filed by Bihar State Construction Corporation Limited- the Corporate Person under Section 10 of the IBC. Also keeping in view of the facts that the seventh meeting held on 30.10.2021, the CoC rejected to reissue Form G again as no EOI had been received till date, the Corporate Debtor is not carrying any business and huge losses also. Hence, CoC decided to liquidate the Corporate Debtor. In the same meeting, the resolution for filing of liquidation application and confirming the Resolution Professional as Liquidator was approved by the CoC with 100% voting and as such the liquidation application was filed before the Adjudicating Authority on 01.11.2021. Appeal dismissed.

Summary

Issues:
1. Adjudicating Authority's order allowing the Application under Section 10 of the IBC.
2. Compliance with mandatory provisions under Section 395 of the Companies Act, 2013.
3. Jurisdictional error in passing the impugned order.
4. Failure to comply with mandatory requirements under the articles of association.
5. Non-inclusion of necessary party State of Jharkhand.
6. Premature application due to State of Bihar's agreement to take over liabilities.
7. Liquidation decision by CoC due to lack of business activity and huge losses.

Analysis:

Issue 1:
The Appellant, Bihar State Construction Corporation Limited Employee Union, challenged the Adjudicating Authority's order allowing the Application under Section 10 of the IBC. The Respondent, Bihar State Construction Corporation Limited, initiated Corporate Insolvency Resolution Process due to inability to pay debts, leading to the appointment of an IRP. The facts surrounding the company's financial distress and winding-up resolutions were presented.

Issue 2:
The Appellant argued non-compliance with Section 395 of the Companies Act, 2013, as a ground for dismissal. They contended that failure to lay the Annual Report before the state legislature renders the Section 10 petition liable to be dismissed.

Issue 3:
The Appellant claimed a jurisdictional error by the Adjudicating Authority, stating that the facts pleaded in the company petition were related to voluntary winding-up, not covered under Section 10 of the IBC. They also highlighted non-compliance with mandatory legal provisions and articles of association.

Issue 4:
The Appellant raised concerns about the non-inclusion of the State of Jharkhand as a necessary party, emphasizing its shareholder status and the need for its involvement in the proceedings for legal validity.

Issue 5:
The Appellant argued that the application was premature due to the State of Bihar's commitment to assume liabilities, as per an undertaking before the Supreme Court. They contended that the application should be dismissed based on this agreement.

Issue 6:
The Respondent presented arguments supporting the Adjudicating Authority's decision, highlighting the State of Bihar's agreement to handle the Corporate Debtor's liabilities. They referenced previous legal proceedings and notifications related to the liability transfer.

Issue 7:
The Resolution Professional's report indicated the CoC's decision to liquidate the Corporate Debtor due to lack of business activity, substantial losses, and the rejection of Form G reissue. The CoC approved the liquidation application with 100% voting.

In conclusion, the Appellate Tribunal affirmed the Adjudicating Authority's decision, dismissing the Appeal. The CoC's decision to liquidate the Corporate Debtor was upheld due to the absence of business operations and significant losses. The judgment was to be uploaded on the Tribunal's website and shared with the Adjudicating Authority promptly.