2020 (9) TMI 994 - Tri - Insolvency and Bankruptcy

Approval of resolution passed by the Committee of Creditors for initiation of Liquidation process - appointment of Liquidator for initiation of liquidation process for the Corporate Debtor - section 33(2) of the IBC, 2016 - HELD THAT - This Tribunal is of the view that, since the Corporate Debtor is an MSME, even if the promoters- directors have been declared as 'wilful defaulters', they can apply under the provisions of Section 230 of the Companies Act, 2013 as they are exempted from Section 29A of IBC, 2016. Even after the declaration of initiation of liquidation proceedings, the promoters- directors still have a chance to tender definite plan for taking over the company as a going concern or under the provisions of Section 230 of the Companies Act, 2013. The Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 contemplates that a period of 90 days has to be provided for completion of a Scheme of compromise or arrangement from the date of the order of liquidation, during which period the prospective Resolution Applicant can very well submit his Scheme under Section 230 of the Companies Act, 2013 - In terms of Section 240-A(l) notwithstanding anything to the contrary contained in this Code, the provisions of Clause (c) and (h) of Section 240-A shall not apply to the Resolution Applicant in respect of CIRP of any Micro, Small and Medium Enterprises (MSME) . It is seen that in the Review Committee for wilful defaulters held on 12.03.2018, the sole member of CoC (Financial Creditor - Indian Overseas Bank) has declared the promoter-director as 'wilful defaulter'. This Tribunal is of the opinion that there is no need to interfere with the decision of the CoC as communicated by the Resolution Professional and hence proceeds to consider the application made under Section 33 for liquidation of the Corporate Debtor. Therefore, application filed by the Promoter-Director is liable to be dismissed . Application filed by the Promoter Director stands dismissed - application filed for initiation of Liquidation process of the Corporate Debtor is hereby allowed.

Summary

Issues:
1. Application under Section 33(2) of the IBC, 2016 seeking approval for liquidation process and appointment of Liquidator.
2. Application for Intervention challenging rejection of Expression of Interest (EoI) by the Resolution Professional.

Analysis:
1. The Resolution Professional filed an application under Section 33(2) of the IBC, 2016 seeking approval for the initiation of the liquidation process for the Corporate Debtor. The Corporate Insolvency Resolution Process (CIRP) was initiated, and the Resolution Professional appointed after due procedures. Valuation of the Corporate Debtor's assets was conducted, revealing fair and liquidation values. The Committee of Creditors (CoC) decided to liquidate the Corporate Debtor due to the failure of resolution applicants to submit plans, absence of viable business, and lack of fixed assets.

2. An Intervention Application was filed by the Promoter and Director of the Corporate Debtor challenging the rejection of their EoI. The applicant contended that despite being classified as 'wilful defaulters', they could still apply under Section 230 of the Companies Act, 2013 as they were exempted from Section 29A of the IBC, 2016. The Tribunal noted that the promoters-directors had the opportunity to submit a plan even after the initiation of liquidation proceedings. The Tribunal found no grounds to interfere with the CoC's decision to reject the EoI and proceeded to consider the liquidation application.

3. The Tribunal appointed the Resolution Professional as the Liquidator for the Corporate Debtor, subject to specific terms and directions. The Liquidator was directed to comply with the provisions of the IBC, issue public announcements, investigate financial affairs, inform regulatory authorities, and proceed with the liquidation process as per the Code. Various timelines and reporting requirements were specified for the Liquidator to follow during the liquidation process.

4. Ultimately, the Tribunal dismissed the Intervention Application filed by the Promoter Director and allowed the Resolution Professional's application for the initiation of the liquidation process of the Corporate Debtor with the prescribed terms and directions. The detailed analysis of the facts, legal provisions, and decisions taken by the Tribunal ensures a comprehensive understanding of the judgment.