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2020 (8) TMI 494 - AT - Insolvency and BankruptcyLiquidation of Corporate Debtor - no Resolution Plan , is approved by the Committee of Creditors - Section 33 of the I B Code - HELD THAT - It cannot be lost sight of that where no Resolution Plan , is approved by the Committee of Creditors , an Adjudicating Authority is bound to order Liquidation of a Company. If the time prescribed under Sec 12 of the I B Code had lapsed, an Adjudicating Authority will pass an Order of Liquidation against Corporate Debtor regardless of whether the management of Corporate Debtor or the Resolution Applicant had enough opportunity to come up with viable/suitable Plan, as the case may be. Notwithstanding the fact that Resolution of Corporate Insolvency is meant for survival of a Company as a Going Concern, it cannot be ignored that Timely Liquidation is a palatable/desirable one too over an Indefinite Resolution Proceedings . When the Committee of Creditors is of the view that no useful purpose will be served in continuing/elongating the Insolvency Resolution Process because of the fact that there was no Resolution Plan to the satisfaction of the Committee of Creditors , then an Adjudicating Authority is undoubtedly to pass necessary orders as per Sec 33(1)(a) and Sec 34(1) of the I B Code for announcement of Liquidation in respect of a Corporate Debtor . Section 240A of the Code to Micro, Small and Medium Enterprises - HELD THAT - Financial Creditor or an Operational Creditor has a right to file necessary application for Insolvency . The creditors of Micro, Small and Medium Enterprises can take it to Insolvency . In fact, Sec 240A (2) of the Code confers power on the Central Government to direct by notification in Public Interest that any of the provisions of I B Code shall not apply to MSMEs or apply to them with such variations as may be mentioned in the notification. Appeal dismissed.
Issues Involved:
1. Validity of the Liquidation Order under Section 33 of the I & B Code. 2. Reconsideration of the Resolution Plan by the Committee of Creditors. 3. Compliance with the Earnest Money Deposit requirements. 4. Timeliness and procedural aspects of the Corporate Insolvency Resolution Process (CIRP). 5. Applicability of the MSME status to the Corporate Debtor. 6. Voting and approval process within the Committee of Creditors. 7. Role and conduct of the Resolution Professional. 8. Legal precedents and interpretations relevant to the case. Detailed Analysis: 1. Validity of the Liquidation Order under Section 33 of the I & B Code: The Appellant challenged the order for liquidation of the Corporate Debtor passed by the Adjudicating Authority on 21.11.2019. The Tribunal upheld the liquidation order, stating that no Resolution Plan was received before the expiry of the CIRP period on 6.9.2019, and hence, the liquidation order was in accordance with Section 33(1) of the I & B Code. 2. Reconsideration of the Resolution Plan by the Committee of Creditors: The Appellant argued that the Adjudicating Authority failed to direct the Committee of Creditors (COC) to reconsider the Resolution Plan, especially since the Earnest Money Deposit was arranged. However, the Tribunal noted that the COC had already considered and rejected the Resolution Plan on 4.9.2019 and 28.9.2019, and the Adjudicating Authority had dismissed the Appellant’s request for reconsideration. 3. Compliance with the Earnest Money Deposit requirements: The Appellant contended that the Resolution Professional did not release the original title deeds, preventing the Resolution Applicant from raising funds to submit the balance of ?4.5 crores. The Tribunal found that the Appellant failed to comply with the Earnest Money Deposit requirements as stipulated by the COC, which was a significant factor in the rejection of the Resolution Plan. 4. Timeliness and procedural aspects of the Corporate Insolvency Resolution Process (CIRP): The Appellant argued that the CIRP process should have been extended beyond the initial period, citing amendments to the I & B Code and the need for additional time to examine the Resolution Plan. The Tribunal observed that the CIRP period had lapsed on 6.9.2019, and no application for exclusion of time was filed. Therefore, the liquidation order was justified. 5. Applicability of the MSME status to the Corporate Debtor: The Appellant claimed MSME status for the Corporate Debtor, arguing that this status should exempt them from certain requirements under Section 29A of the I & B Code. The Tribunal noted that the MSME certificate was obtained without the knowledge of the Resolution Professional and after the initiation of CIRP, implying an attempt to circumvent the provisions of Section 29A. 6. Voting and approval process within the Committee of Creditors: The Tribunal highlighted that the Resolution Plan required at least 66% approval from the COC, but the Appellant’s plan only secured 55.49% on 4.9.2019 and 20.54% on 28.9.2019. Consequently, the Resolution Plan was not approved, and the liquidation process was initiated as per the statutory requirements. 7. Role and conduct of the Resolution Professional: The Appellant accused the Resolution Professional of not complying with the directions of the COC and not presenting all relevant facts to the Adjudicating Authority. The Tribunal found that the Resolution Professional had acted within his duties and responsibilities, and the rejection of the Resolution Plan was due to non-compliance by the Appellant, not any fault of the Resolution Professional. 8. Legal precedents and interpretations relevant to the case: The Tribunal referred to several legal precedents, including the Supreme Court decisions in ESSAR Steel India Ltd. vs. Satish Kumar Gupta and Arcelor Mittal India Pvt. Limited vs. Satish Kumar Gupta, to emphasize the importance of adhering to the statutory timelines and requirements under the I & B Code. The Tribunal also noted that the I & B Code does not allow for liquidation on grounds other than those specified, reinforcing the validity of the liquidation order. Conclusion: The Tribunal dismissed the Appeal, upholding the liquidation order passed by the Adjudicating Authority. The Tribunal emphasized the importance of compliance with statutory requirements and timelines under the I & B Code and found no merit in the Appellant’s arguments. The liquidation process was deemed necessary due to the failure to secure an approved Resolution Plan within the prescribed period.
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