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2019 (10) TMI 965 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate debtor -step to be taken by the Liquidator during the Liquidation . The two impugned orders both dated 11.01.2018 have been challenged on the ground that the order of liquidation was passed by Adjudicating Authority without taking into consideration provisions of law and the procedure for Corporate Insolvency Resolution Process was not followed in all the cases. HELD THAT - In both the cases, we find that the applications under Section 10 were admitted on 14.06.2017, therefore, we are not inclined to grant any further time for successful resolution and thereby not inclined to interfere with any of the orders of the liquidation. However, we are of the view that the Liquidator in both the cases required to follow the decision of this Appellate Tribunal in Y. SHIVRAM PRASAD AND ASSET RECONSTRUCTION COMPANY (INDIA) LTD. VERSUS S. DHANAPAL ORS. AND SERVALAKSHMI PAPER LTD. ORS 2019 (5) TMI 386 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI wherein this Appellate Tribunal observed, held and directed that As the liquidation so taken up under the I B Code , the arrangement of scheme should be in consonance with the statement and object of the I B Code . Meaning thereby, the scheme must ensure maximisation of the assets of the Corporate Debtor and balance the stakeholders such as, the Financial Creditors , Operational Creditors , Secured Creditors and Unsecured Creditors without any discrimination. We vacate the Interim order passed in both the appeals and allow/ direct Resolution Professional/ Liquidator to act in terms with the direction of the aforesaid decision - appeal disposed off.
Issues Involved:
1. Whether the liquidation order passed by the Adjudicating Authority was in accordance with the provisions of law. 2. Whether the Corporate Insolvency Resolution Process (CIRP) procedure was followed correctly. 3. Whether the Adjudicating Authority should have granted additional time for the resolution process. 4. Whether the Liquidator is required to follow specific steps for the revival of the Corporate Debtor during the liquidation stage. Issue-wise Detailed Analysis: 1. Whether the liquidation order passed by the Adjudicating Authority was in accordance with the provisions of law: The Corporate Insolvency Resolution Process (CIRP) was initiated based on applications under Section 10 filed by the Corporate Debtor. The Adjudicating Authority (National Company Law Tribunal, Chennai Bench) ordered liquidation on 11.01.2018. The orders were challenged on the grounds that the liquidation was ordered without adhering to the provisions of law. The appellants argued that the Adjudicating Authority did not consider the necessary legal provisions and procedures required for CIRP before passing the liquidation orders. 2. Whether the Corporate Insolvency Resolution Process (CIRP) procedure was followed correctly: It was contended that the CIRP procedure was not followed correctly as no Information Memorandum was prepared, leading to the non-filing of any resolution plans. The appellants submitted that the Adjudicating Authority only allowed an additional 30 days beyond the initial 180 days, and if more time (270 days) had been granted and a fresh Information Memorandum issued, there could have been a successful resolution. 3. Whether the Adjudicating Authority should have granted additional time for the resolution process: The appellants argued that the Adjudicating Authority should have granted more time for the resolution process. They claimed that if the Adjudicating Authority had allowed up to 270 days and issued a fresh Information Memorandum, there could have been a better chance of receiving a resolution plan. However, the Tribunal found that since the applications were admitted on 14.06.2017, there was no inclination to grant further time for successful resolution and thus, did not interfere with the liquidation orders. 4. Whether the Liquidator is required to follow specific steps for the revival of the Corporate Debtor during the liquidation stage: The Tribunal emphasized that during the liquidation stage, the Liquidator must ensure that the company remains a going concern and take steps for the revival of the Corporate Debtor. The Liquidator is required to follow the decision in "Y. Shivram Prasad Vs. S. Dhanapal & Ors." and other relevant cases. The Tribunal outlined that the Liquidator should: - Ensure the company remains a going concern. - Attempt revival through compromise or arrangement with creditors or members under Section 230 of the Companies Act, 2013. - Sell the business as a going concern if revival fails. - Only proceed with liquidation as a last resort. The Tribunal directed the Liquidator to act in accordance with these guidelines and take steps under Section 230 of the Companies Act, 2013. The appeals were disposed of with these directions, and the interim orders were vacated.
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