2023 (1) TMI 550 - AT - Insolvency and Bankruptcy

Liquidation of the Corporate Debtor / Company - Aggrieved Person - Section 60 (5) of the I B Code, 2016, read with Rule 11 of NCLT Rules, 2016 - Appellant / Petitioner submits that the Appellant / Petitioner and the other Members of the suspended Board of Directors , are the most affected party and the severe hardship and prejudice, will be caused to them, in case of Liquidation of the Corporate Debtor . - HELD THAT - Before the Adjudicating Authority in Ivn.P(IBC)/1(CHE)/2022 in IA/(IBC)/1213/CHE/2021 in IBA/883/2019, the Appellant / Petitioner / Proposed Respondent, had averred that the Claim, of the State Bank of India, was assigned in favour of an Asset Reconstruction Company Viz. Prudent ARC Limited, for a sum of Rs.154.30 Crores, by virtue of an Assignment Agreement dated 30.09.2021, and hence, there is a scope of Restructuring and Revival. Also, the Appellant / Petitioner, had averred that he can always submit a Scheme of Arrangement / Settlement, despite, the fact that there is a prohibition for him to be ineligible to act as a Resolution Professional, as per Section 29A of the I B Code, 2016. The well accepted principle is that, an Adjudicating Authority (Tribunal) and the Appellate Tribunal are not to displace the cementing principles of the I B Code, 2016. The inbuilt framework, provided under I B Code, 2016, is not to be tinkered and tampered with, either by the Adjudicating Authority or by an Appellate Tribunal. No wonder, all, the basic tenets of the ingredients and the aim and objective of the Code, are to be preserved and maintained, by an Adjudicating Authority, as well as by the National Company Law Tribunal. Considering the fact that the Appellant / Petitioner who was a Promoter / Shareholder, invested in the Equity Shares at Rs.10/- each of the Corporate Debtor / Company (431840 Equity Shares), he is not an Aggrieved Person, in stricto sensu under Section 61 of the I B Code, 2016, especially, in the light of Committee of Creditors, having passed a Resolution for Liquidation of the Corporate Debtor, and keeping in mind that the Adjudicating Authority, had ordered for Liquidation of the Corporate Debtor, he is not entitled to get himself impleaded, in a Creditor s Regime, under the Code, as held by this Tribunal (not withstanding the fact that although the Appellant, is not a Member of Committee of Creditors, and no Right, to Vote, yet, he is entitled to take part in each and every meeting, held by the Committee of Creditors, and to discuss with the other Members of the Committee of Creditors, in respect of the Resolutions projected, in terms of the ingredients of Section 25 (2) (i) of the Code). Appeal dismissed.

Issues Involved:
1. Liquidation of Corporate Debtor
2. Appellant's Aggrieved Status and Right to File Application
3. Commercial Wisdom of Committee of Creditors (CoC)
4. Pending Appeal and its Impact on Liquidation
5. Applicability of Section 29A of the IBC
6. Interpretation of Section 230 of the Companies Act, 2013
7. Jurisdiction of Adjudicating Authority under Section 60(5) of the IBC
8. Role of Adjudicating Authority and Appellate Tribunal under IBC

Detailed Analysis:

1. Liquidation of Corporate Debtor:
The primary issue at hand was whether the liquidation of the Corporate Debtor should be ordered. The Adjudicating Authority noted that the CoC, using its commercial wisdom, unanimously decided to liquidate the Corporate Debtor after rejecting two Resolution Plans. The Tribunal affirmed that the decision of the CoC could not be questioned by the Adjudicating Authority, citing the precedent set in the case of Rakshit Dhirajlal Doshi vs IDBI Bank Limited.

2. Appellant's Aggrieved Status and Right to File Application:
The Appellant, a Promoter/Shareholder of the Corporate Debtor, argued that he was an aggrieved person under Section 230(12) of the Companies Act, 2013, and thus entitled to file an application before the Tribunal. However, the Tribunal concluded that the Appellant, despite holding equity shares, was not an aggrieved person in the strict sense under Section 61 of the IBC. The Tribunal emphasized that the Appellant could not intervene in the liquidation process as the CoC had already resolved to liquidate the Corporate Debtor.

3. Commercial Wisdom of Committee of Creditors (CoC):
The Tribunal upheld the CoC's decision to liquidate the Corporate Debtor, emphasizing that such decisions, made using commercial wisdom, are beyond the scope of judicial review. The Tribunal reiterated that the CoC's recommendation for liquidation, based on the rejection of resolution plans, was not to be interfered with.

4. Pending Appeal and its Impact on Liquidation:
The Appellant contended that an appeal challenging the initiation of the Corporate Insolvency Resolution Process (CIRP) was pending before the Appellate Tribunal, and thus the liquidation process should be stayed. However, the Tribunal dismissed this argument, noting that the pending appeal did not preclude the CoC from deciding to liquidate the Corporate Debtor.

5. Applicability of Section 29A of the IBC:
The Appellant argued that despite the prohibition under Section 29A of the IBC, he could still submit a scheme of arrangement or settlement. The Tribunal, however, highlighted the Supreme Court's stance in Arun Kumar Jagatramka v. Jindal Steel and Power Limited, which clarified that individuals ineligible under Section 29A could not propose a compromise or arrangement under Section 230 of the Companies Act, 2013.

6. Interpretation of Section 230 of the Companies Act, 2013:
The Tribunal referred to the Supreme Court's judgment in Meghal Homes Pvt. Ltd. v. Shree Niwas Girni K.K. Samiti, which allows for the revival of a company even if it is being wound up. However, the Tribunal emphasized that the Appellant, being ineligible under Section 29A of the IBC, could not benefit from this provision to propose a scheme of arrangement.

7. Jurisdiction of Adjudicating Authority under Section 60(5) of the IBC:
The Tribunal clarified that the jurisdiction under Section 60(5) of the IBC is not all-encompassing and does not extend to deciding any question pertaining to the Corporate Debtor. The Appellant could not rely on this section to challenge the CoC's decision to liquidate the Corporate Debtor.

8. Role of Adjudicating Authority and Appellate Tribunal under IBC:
The Tribunal emphasized that both the Adjudicating Authority and the Appellate Tribunal should not interfere with the foundational principles of the IBC. The Tribunal's role is to ensure adherence to the process and compliance with applicable laws, not to question the commercial decisions of the CoC.

Conclusion:
The Tribunal dismissed the Appellant's contentions and upheld the Adjudicating Authority's order for the liquidation of the Corporate Debtor. The Tribunal concluded that the Appellant, despite being a promoter and shareholder, was not entitled to intervene in the liquidation process and that the CoC's decision, based on commercial wisdom, was final and binding. The appeal was dismissed, and the application for stay was closed.

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