2018 (10) TMI 1522 - Tri - Insolvency and Bankruptcy

Suspension of the voluntary liquidation process initiated by the company - Held that - What is provided under section 271(a) of the Companies Act is not compulsory liquidation but winding up. It appears to me that in the given set of facts of the case in hand compulsory liquidation or winding up order cannot be passed. Both proceedings are different and the requirements to be meted out are also different. The resolution passed by the members in the EOGM produced is for passing voluntary liquidation. Being satisfied that voluntary liquidation cannot be passed in this case the prayer for suspension of voluntary liquidation can be allowed so that the Company can take steps to have recourse s under section 271 of the companies Act, 2013 or can take steps for compulsory liquidation by filing an application under section 10 of I & B Code. This application cannot be converted as prayed for. In view of the above said discussion the application is liable to be allowed limiting the prayer for suspension of the voluntary liquidation. In the result the voluntary liquidation of the Applicant Company namely Central Inland Water Transport Corporation Ltd. is hereby suspended as per Reg.40(2) of Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017. The prayer for conversion to an application under section 271 of the Companies Act, 2013 for winding up and for compulsory Liquidation is rejected.

Issues:
Application for suspension of voluntary liquidation process under Regulation 40(2) of the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 and Section 59 of the Insolvency and Bankruptcy Code, 2016.

Analysis:
The application was filed by the Liquidator of the corporate debtor, Central Inland Water Transport Corporation Ltd., seeking suspension of the voluntary liquidation process initiated by the company. The Liquidator highlighted that the corporate debtor had several pending litigations, and the claims against the company exceeded the value of its assets, indicating insolvency. The Liquidator argued that the company did not meet the solvency requirement for voluntary liquidation as mandated by the law. The Liquidator also emphasized that the assets of the company had not been disposed of to satisfy the creditors, and there were unresolved litigations against the company, which are essential conditions for voluntary liquidation under the regulations.

The Liquidator pointed out that despite efforts to realize dues from debtors and dispose of assets, certain debts remained unpaid and disputed by debtors. The Liquidator obtained consent letters from major creditors, Kolkata Port Trust and Garden Reach Shipbuilders and Engineers Ltd., indicating significant outstanding amounts owed to them. The Liquidator contended that the company failed to obtain the necessary consent from creditors representing at least 66% of the total claims, as required by the Voluntary Liquidation Regulations.

The Liquidator proposed the suspension of the voluntary liquidation process and suggested either initiating winding up proceedings under Section 271 of the Companies Act, 2013 or converting the application for compulsory liquidation under the Insolvency and Bankruptcy Code, 2016. The Liquidator highlighted the discrepancies in the solvency declaration provided by the directors and the actual financial position of the company, leading to the conclusion that voluntary liquidation could not proceed due to insolvency and pending litigations.

After considering the arguments presented by the Liquidator, the Tribunal found merit in the concerns raised regarding the solvency status of the company and the inability to meet the conditions for voluntary liquidation. The Tribunal agreed that the voluntary liquidation process should be suspended as per Regulation 40(2) of the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017. However, the Tribunal rejected the plea for conversion to an application under Section 271 of the Companies Act, 2013 for winding up and compulsory liquidation. The Tribunal emphasized the distinction between voluntary liquidation and compulsory winding up, stating that the resolution passed by the members for voluntary liquidation could not be converted into compulsory liquidation. Therefore, the Tribunal granted the suspension of voluntary liquidation while dismissing the request for conversion to winding up proceedings.

In conclusion, the Tribunal allowed the application for the suspension of voluntary liquidation of Central Inland Water Transport Corporation Ltd., highlighting the insolvency issues and pending litigations that rendered the company ineligible for voluntary liquidation, as per the regulatory requirements.

← Previous Next →