2020 (12) TMI 243 - Tri - Insolvency and Bankruptcy

Liquidation of the Corporate Debtor - Section 33(2) of the IBC, 2016 - HELD THAT - It is found that CoC decided to send the company under liquidation as the company has no business and assets except loans, advances and bank balances. Under such circumstances, if expression of interest will be invited, in that event it will be extra burden on the CoC/RP. Hence, to minimise the cost, the CoC has taken decision to liquidate the Company. It is also to be noted that this Adjudicating Authority has no jurisdiction to interfere in the commercial wisdom of the CoC as observed in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS 2019 (11) TMI 731 - SUPREME COURT . The application filed by the RP under Section 33 of the IB Code, 2016 is allowed and the Adjudicating Authority passes an order for initiation of liquidation of the Corporate Debtor viz., Devansh International Private Limited.

Summary

Issues: Liquidation of Corporate Debtor under Section 33(2) of IBC, 2016

In this judgment, the National Company Law Tribunal, Ahmedabad Bench, dealt with an application filed under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 for the liquidation of a Corporate Debtor. The application stemmed from a previous case where an Operational Creditor had filed for the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor, which was admitted by the Adjudicating Authority. The Committee of Creditors (CoC) had decided to continue the Interim Resolution Professional (IRP) as the Resolution Professional (RP). Subsequently, in a meeting, the CoC unanimously resolved to opt for the liquidation of the Corporate Debtor due to the absence of tangible or intangible assets and the cessation of business operations. The CoC's decision was based on minimizing costs, as inviting expressions of interest would have imposed an additional burden. The Tribunal noted that it lacked jurisdiction to interfere with the commercial wisdom of the CoC, citing relevant case law and the Supreme Court's stance on the matter. Consequently, the Tribunal issued various orders, including the cessation of moratorium, public announcement of liquidation, and transfer of powers to the Liquidator. The Tribunal allowed the application for liquidation, appointing the IRP as the Liquidator for the Corporate Debtor.

The Tribunal's decision was based on a thorough examination of the facts and circumstances surrounding the case. The Tribunal highlighted the CoC's rationale for opting for liquidation, emphasizing the absence of business operations and assets, which would have made the liquidation process more cost-effective compared to pursuing resolution. The Tribunal underscored its limited power to intervene in the commercial decisions of the CoC, citing legal precedents and the Supreme Court's position on the matter. By allowing the application for liquidation and appointing the IRP as the Liquidator, the Tribunal ensured a smooth transition into the liquidation phase, outlining specific directives for the Liquidator to follow. The Tribunal's detailed orders covered various aspects, such as the cessation of moratorium, communication of the liquidation status, and the transfer of powers to the Liquidator, in line with the provisions of the Insolvency and Bankruptcy Code, 2016.

Overall, the Tribunal's judgment reflected a meticulous analysis of the case, focusing on the legal framework provided by the Insolvency and Bankruptcy Code, 2016. By upholding the CoC's decision for liquidation and clarifying its jurisdictional limitations in interfering with commercial decisions, the Tribunal ensured compliance with established legal principles and precedents. The comprehensive orders issued by the Tribunal aimed to facilitate a smooth transition into the liquidation process, safeguarding the interests of all stakeholders involved while adhering to the statutory provisions governing insolvency proceedings.