2019 (7) TMI 509 - AT - Insolvency and Bankruptcy

Appointment of Liquidator - claim of Appellant as a Financial Creditor not admitted - Section 35(1)(a) of the Insolvency Bankruptcy Code 2016 - HELD THAT - We have noticed that the Resolution Professional is no more functioning and another person is appointed as liquidator. Therefore there is no question of bias with the present liquidator. Appeal disposed off.

Issues Involved:
1. Challenge against the liquidation orders.
2. Appointment and replacement of the liquidator.
3. Claims of the Financial Creditor and their non-admission by the Interim Resolution Professional.
4. Procedure during liquidation under the Insolvency & Bankruptcy Code, 2016.
5. Revival and continuation of the Corporate Debtor during liquidation.

Detailed Analysis:

1. Challenge against the liquidation orders:
The Appellant challenged the orders dated 8th January 2019 and 23rd January 2019 passed by the National Company Law Tribunal (NCLT), Kolkata Bench. The first order appointed Shri Kailash Kumar Rathi as the liquidator, and the second order replaced him with Mr. Chaitanya Kumar Ray due to Mr. Rathi's unwillingness to act as liquidator.

2. Appointment and replacement of the liquidator:
The NCLT initially appointed Shri Kailash Kumar Rathi as the liquidator. However, upon his refusal, Mr. Chaitanya Kumar Ray was appointed as the new liquidator. The Tribunal emphasized that there is no question of bias with the new liquidator, as the previous Resolution Professional is no longer functioning.

3. Claims of the Financial Creditor and their non-admission by the Interim Resolution Professional:
The Appellant, a Financial Creditor, filed a claim before the Interim Resolution Professional, which was not admitted. The Appellant alleged procedural lapses by the Interim Resolution Professional leading to liquidation. However, the Tribunal noted that the Appellant did not file an application under Section 60(5) against the decision of the Interim Resolution Professional. Therefore, at the stage of liquidation, such claims cannot be raised.

4. Procedure during liquidation under the Insolvency & Bankruptcy Code, 2016:
During liquidation, the liquidator must verify all claims of the creditors as per Section 35(1)(a) of the Insolvency & Bankruptcy Code, 2016 (I&B Code). The liquidator is required to access information under Section 37, consolidate claims under Section 38, and after verification under Section 39, either admit or reject the claims under Section 40. If the claim is not accepted, the liquidator must record the decision and communicate it to the creditor, who can then file an appeal under Section 42 of the I&B Code.

5. Revival and continuation of the Corporate Debtor during liquidation:
The Tribunal highlighted that liquidation is a last resort and the primary focus of the legislation is to ensure the revival and continuation of the Corporate Debtor. The liquidator should take steps for revival through compromise or arrangement with creditors under Section 230 of the Companies Act, 2013. If such efforts fail, the liquidator should attempt to sell the business of the Corporate Debtor as a going concern. Only if these steps fail should the liquidation process proceed to the sale of the company's assets.

The Tribunal referenced the Supreme Court's judgment in "Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors." and "Meghal Homes Pvt. Ltd. vs. Shree Niwas Girni K.K. Samiti & Ors." to emphasize that the Code aims to protect the Corporate Debtor from liquidation and ensure its revival.

The appeal was disposed of with the direction that the liquidator must act in accordance with the Tribunal's observations, taking steps under Section 230 of the Companies Act, 2013, and ensuring the maximization of the Corporate Debtor's assets while balancing the interests of all stakeholders. The liquidator is also required to consider any scheme proposed by the Appellant within 15 days and communicate the decision uninfluenced by the Interim Resolution Professional's previous decisions.

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