2019 (10) TMI 542 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor committed default in paying the operational debt - section 9 of the Insolvency Bankruptcy Code, 2016 - HELD THAT - The Liquidator pointed out the valuation report of the assets of the corporate debtor. It is seen that except these equity shares standing in the name of the promoters of the corporate debtor, corporate debtor does not have any assets. Hence, there was no question of sale of their assets to recover and pay the dues of the claimant or the creditor. Section 54 of I B Code allows this authority to pass order of dissolution of corporate debtor, if the authority comes to the conclusion that the corporate debtor does not own any assets which can be sold for resolving debt. The corporate debtor does not have the assets which could be sold for resolving its debts. Hence, the order of dissolution of the corporate debtor has to be passed - M/s. Upadan Commodities Private Ltd., the Corporate Debtor is dissolved from the date of this order.

Summary

Issues Involved:
Application under section 9 of the Insolvency & Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process (CIRP) due to default in payment of operational debt. Appointment of Insolvency Resolution Professional (IRP) and subsequent resignation. Formation of Committee of Creditors (CoC) and confirmation of IRP as Resolution Professional (RP). Efforts to collect information about assets, non-cooperation from directors, inability to prepare information memorandum, and failure to find assets. Decision to apply for liquidation under section 33 of I&B Code. Appointment of Liquidator and collection of asset information. Application for dissolution under section 54 of I&B Code based on lack of assets for debt resolution.

Analysis:
The case involved an operational creditor filing an application under section 9 of the Insolvency & Bankruptcy Code, 2016 against the Corporate Debtor for defaulting on an operational debt. The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (CIRP) with an Insolvency Resolution Professional (IRP) appointed to manage its affairs. However, the initial IRP resigned without notice or approval, leading to the appointment of a new IRP by the Insolvency and Bankruptcy Board of India (IBBI).

During the CIRP, the IRP faced challenges in collecting information about the Corporate Debtor's assets due to non-cooperation from its directors. Despite efforts, the IRP could not prepare an information memorandum or solicit Expression of Interest (EoI) for a resolution plan. With no assets found, the Committee of Creditors (CoC) decided to apply for liquidation under section 33 of the I&B Code.

Following the order of liquidation, a Liquidator was appointed to oversee the process. The Liquidator discovered that besides shares, the Corporate Debtor had no significant assets, making it impractical to sell the shares due to lack of buyers or sufficient funds in bank accounts. As a result, the Liquidator applied for dissolution under section 54 of the I&B Code, supported by a valuation report confirming the absence of assets for debt resolution.

After considering the evidence, the authority concluded that the Corporate Debtor lacked assets for debt resolution and ordered its dissolution. The order stated the dissolution of the Corporate Debtor, forwarding of the order to the relevant authority, disposal of pending applications, and issuance of a certified copy of the order upon compliance. The decision was based on the inability to recover and pay off debts due to the absence of saleable assets, leading to the dissolution of the Corporate Debtor.