2021 (1) TMI 807 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues to Financial Creditors - existence of debt and dispute or not - HELD THAT - It is apparent that no resolution has been passed as regard to proceeding with the liquidation of Corporate Debtor which is required in terms of Regulation 39C of Corporate Insolvency Resolution Process Regulations, 2016. Even percentage of voting has not been mentioned though this may not be of much significance as there is a sole Financial Creditor but still it is a requirement of law. It is apparent that no efforts at all have been made to find resolution Applicant as within period of less than two months from the insolvency commencement date, the application for liquidation of the Corporate Debtor has been filed and that too without bringing any material on record in support of its claims. Even from other business conducted in the said meeting of COC, nothing appears which could throw light for necessity of liquidation at first meeting of Committee of Creditors (COC) itself. Further, as per the explanation of Section 33(2) of Insolvency and Bankruptcy Code, 2016, Committee of Creditors (COC) is empowered to take decision to liquidate the Corporate Debtor at any time after its constitution but the relevant material and resolution is required in that regard - application dimissed.

Summary

Issues:
1. Admission of Corporate Debtor into Corporate Insolvency Resolution Process.
2. Decision of Committee of Creditors (COC) to go for liquidation.
3. Compliance with regulations for liquidation proceedings.
4. Appointment of liquidator and fee structure.

Analysis:
1. The Corporate Debtor was admitted into Corporate Insolvency Resolution Process based on an application by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority directed the disposal of the application.

2. The Committee of Creditors (COC) decided to go for liquidation of the Corporate Debtor in its first meeting after considering the condition of plant and machinery, which were not in a position to restart due to long-term closure and corrosion. The application for liquidation lacked supporting evidence and was dismissed, allowing the filing of a fresh application with relevant material.

3. The decision for liquidation lacked compliance with Regulation 39C of Corporate Insolvency Resolution Process Regulations, 2016, as no resolution was passed regarding the liquidation proceedings. The application for liquidation was filed within a short period without presenting material supporting the claims, indicating a lack of effort to explore resolution options.

4. The appointment of a liquidator was discussed, with Mr. Shyam Sundar Rathi confirmed for the role. The fee structure for the liquidator was detailed, specifying the percentage of realization to be paid over specific periods and the exclusion of certain fees from the net realization amount. The application was dismissed with the liberty to file a new application with proper supporting material for a considered decision.

In conclusion, the judgment highlighted the importance of following regulatory procedures, providing substantial evidence to support decisions, and ensuring compliance with the Insolvency and Bankruptcy Code. The dismissal of the application emphasized the need for due diligence and adherence to legal requirements in insolvency proceedings.