2020 (6) TMI 422 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - section 33(1) and (2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - In the instant case, the CoC has estimated the liquidation cost at ₹ 9,50,000/- (refer minutes of 7th CoC meeting dated 13-12-2019). However, the CoC has not estimated the value of the liquid assets under Regulation 39B(2) of the CIRP Regulations, 2016 and has not approved a plan providing for contribution for meeting the difference between the estimated value of the liquid assets and estimated liquidation costs. The Liquidator will, therefore, take necessary action under Regulation 2A of the Liquidation Process Regulations, 2016 - The CoC has not made any assessment of sale as a going concern under Regulation 39C of the CIRP Regulations, 2016. The Liquidator will, therefore, take necessary action under Regulation 32A(3) of the Liquidation Process Regulations, 2016. It is directed that all the directions/requirements and provisions of Chapter III of the Code and Liquidation Process Regulations, 2016 shall be strictly complied with.

Issues Involved:
1. Application for liquidation under Section 33(1) and (2) of the Insolvency and Bankruptcy Code, 2016.
2. Non-cooperation from the Corporate Debtor and its key managerial persons.
3. No Expression of Interest (EOI) received for resolution plan.
4. Financial position and assets of the Corporate Debtor.
5. Appointment of Liquidator.
6. Liquidation costs and sale as a going concern.
7. Directions for liquidation process.
8. Challenge to the decision of the Resolution Professional (RP) in rejecting a claim due to delay.

Issue-wise Detailed Analysis:

1. Application for Liquidation:
The application was filed under Section 33(1) and (2) of the Insolvency and Bankruptcy Code, 2016, seeking an order to liquidate M/s. Jai Bholenath Enterprises Private Limited (Corporate Debtor) in the manner prescribed by the Code. The Corporate Insolvency Resolution Process (CIRP) was initiated on 12-4-2019, and the Interim Resolution Professional (IRP) was appointed. The Committee of Creditors (CoC), consisting solely of Punjab National Bank, resolved to replace the IRP with a new Resolution Professional (RP).

2. Non-cooperation from Corporate Debtor:
The RP informed the CoC in the second meeting that the Corporate Debtor and its key managerial persons were not cooperating and not providing the required information to prepare the information memorandum. An application under Section 19(2) of the Code was moved before the Adjudicating Authority (AA).

3. No Expression of Interest (EOI) Received:
An advertisement for EOI was published in two newspapers on 18-7-2019, but no EOI was received. The AA extended the CIRP period by 90 days beyond 8-10-2019. Despite the extension, no resolution applicant came forward, leading the CoC to unanimously resolve to liquidate the Corporate Debtor.

4. Financial Position and Assets:
The CoC discussed the financial position of the Corporate Debtor, noting that there was no stock, plant and machinery, or immovable property as per the balance sheet on 31-3-2019 and 12-4-2019. The Corporate Debtor did not receive a liquor license for the years 2017-18 onwards, preventing it from continuing business activities. Outstanding trade debtors amounted to ?10.6 crores, mostly from group entities/individuals, with no recovery made.

5. Appointment of Liquidator:
The RP expressed unwillingness to continue as Liquidator. The CoC proposed Shri Suresh Kumar Bansal as Liquidator, but the replacement had to follow the procedure under Section 34(5) to (7) of the Code. The AA directed the Board to propose another insolvency professional, and Mr. Vikas Rai Berry was appointed as Liquidator after checking his credentials.

6. Liquidation Costs and Sale as a Going Concern:
The CoC estimated the liquidation cost at ?9,50,000 but did not estimate the value of liquid assets or approve a plan for meeting the difference between estimated liquidation costs and liquid assets. The Liquidator was directed to take necessary action under Regulation 2A of the Liquidation Process Regulations, 2016. The CoC did not assess the sale as a going concern, and the Liquidator was instructed to act under Regulation 32A(3).

7. Directions for Liquidation Process:
The AA provided specific directions for the liquidation process, including:
- No suits or legal proceedings against the Corporate Debtor, except with prior approval.
- The liquidation order as a notice of discharge to officers, employees, and workmen.
- All powers of the Board of Directors and key managerial personnel to vest in the Liquidator.
- Personnel of the Corporate Debtor to assist the Liquidator.
- Public announcement within five days calling stakeholders to submit claims.
- Filing of preliminary and regular progress reports by the Liquidator.
- Financial Creditors may enforce personal guarantees.

8. Challenge to RP's Decision:
Beam Global Spirits & Wine (India) Private Limited filed an application challenging the RP's decision to reject its claim due to delay. With the liquidation proceedings initiated, this application became infructuous, but liberty was granted to the applicant to furnish its claim before the Liquidator.

The judgment concluded with the disposal of both applications, CA No. 34/2020 and CA No. 24/2020, and instructions for the Registry to send copies of the order to relevant parties.

← Previous Next →