2022 (9) TMI 1347 - AT - Insolvency and Bankruptcy

Seeking liquidation of the Corporate Debtor - Section 33(1) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The CoC having rejected the Resolution Plan submitted by the Resolution Applicant after due deliberation and discussion, the decision taken by the CoC is a decision taken in the commercial wisdom of the CoC which cannot be interfered with in exercise of jurisdiction by the Adjudicating Authority or by this Tribunal. The submission of Learned Counsel for the Appellant that no reasons have been given by the CoC for rejecting the plan has also no legs to stand when a decision is taken after due deliberation. The decision of the CoC is reflected in the result of the voting which cannot be questioned. In so far as reliance on 14th CoC meeting dated 22.07.2021 is concerned, the Resolution Professional has brought into notice of CoC about the e-mail send by Resolution Applicant revisiting his offer, which fact although was noticed but no decision was taken by CoC to consider the e-mail by reversing its earlier decision of rejection of plan. Thus, the minutes of 14th CoC in no manner helps the Appellants. Thus, no error has been committed by Adjudicating Authority in directing for liquidation of the Corporate Debtor. No grounds have been made out to interfere with the Impugned Order dated 26th October, 2021 passed by the Adjudicating Authority - appeal dismissed.

Summary

Issues Involved:
1. Approval of the Resolution Plan submitted by the Resolution Applicant.
2. Decision of the Committee of Creditors (CoC) to liquidate the Corporate Debtor.
3. Adequacy of reasons provided by the CoC for rejecting the Resolution Plan.
4. Conduct of the Liquidation Process by the Liquidator.

Issue-wise Detailed Analysis:

1. Approval of the Resolution Plan submitted by the Resolution Applicant:
The Resolution Applicant submitted a Resolution Plan with the support of the Corporate Debtor's employees, proposing an amount of Rs. 17 Crores. The plan stipulated that 25% of the amount would be paid within 30 days from the receipt of the Adjudicating Authority's order, and the balance within six months. Despite the plan's value being more than the liquidation value, the CoC did not approve it. The Resolution Applicant's plan was presented in the 12th CoC Meeting, and after discussions and addressing certain shortcomings, it was put to e-vote in the 13th CoC Meeting, where it was ultimately rejected by 71.44% of the votes.

2. Decision of the Committee of Creditors (CoC) to liquidate the Corporate Debtor:
The CoC decided to liquidate the Corporate Debtor in its 11th CoC Meeting, and an application for liquidation was filed by the Resolution Professional. The CoC's decision was based on the Resolution Applicant's failure to provide satisfactory details regarding the sources of funds and the performance guarantee. The CoC's decision was upheld by the Adjudicating Authority, which directed the liquidation of the Corporate Debtor.

3. Adequacy of reasons provided by the CoC for rejecting the Resolution Plan:
The Resolution Applicant argued that the CoC did not provide valid reasons for rejecting the plan. However, the minutes of the 12th and 13th CoC Meetings showed detailed discussions and interactions with the Resolution Applicant. The CoC members raised concerns about the sources of funds, the performance guarantee, and the net worth criteria. The CoC's decision to reject the plan was based on the Resolution Applicant's failure to satisfy these concerns. The Supreme Court in "K. Sashidhar Vs. Indian Overseas Bank and Ors" emphasized the paramount status of the CoC's commercial wisdom, which is non-justiciable and cannot be interfered with by the judiciary.

4. Conduct of the Liquidation Process by the Liquidator:
The Liquidator proceeded with the liquidation process in accordance with the Liquidation Regulations, issuing publications inviting claims and publishing sale notices. The Liquidator issued a 'Letter of Intent' for accepting the sale of the Corporate Debtor's assets as a going concern to the highest bidder for Rs. 41.05 Crores. An interim order by the court prevented the confirmation of the auction until further decision.

Conclusion:
The Adjudicating Authority's decision to direct the liquidation of the Corporate Debtor was upheld. The CoC's rejection of the Resolution Plan was based on detailed deliberations and the Resolution Applicant's failure to meet the required criteria. The CoC's commercial wisdom was given paramount status, and no grounds were found to interfere with the Impugned Order. Both appeals were dismissed, and the interim order was discharged.