2021 (6) TMI 598 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - It is evident, that the Financial Creditors in the CoC are Punjab National Bank with 80% of voting share and Canara Bank with 15% voting share. It appears that the Corporate Debtor is owed to pay ₹ 246.93 Crores to these Claimants. Out of which, the Promoter-Directors have come forward with a Plan valuing ₹ 12.75 Crores to pay within 22 months, however, considering all the materials available before the CoC, it has in its wisdom taken a decision to proceed for liquidation of the Company, instead of approving the Resolution Plan submitted by the Promoter-Directors. As to the approval of the Plan is concerned, as long as the procedure is complied with, the CoC can take commercial decision in the interest of the Creditors which this Bench cannot turn down on hearing the submissions of the Promoter-Directors unless it is hit by procedural compliance laid under the IBC. This application is allowed by ordering liquidation of the corporate debtor.

Issues:
1. Application for issuance of directions for liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016.
2. Discrepancy between the liquidation value and plan value of the Company.
3. Arbitration proceeding pending with a claim of ?280 Crores.
4. Decision-making process of the Committee of Creditors (CoC) regarding liquidation.
5. Compliance with procedural requirements under the Insolvency and Bankruptcy Code.
6. Interference with the decision of the CoC by the Tribunal.
7. Possibility of submitting a Scheme application post liquidation initiation.
8. Evaluation of resolution plans and decision to file a liquidation application.
9. Appointment of the Liquidator and directions for the liquidation process.

Analysis:
1. The application was filed by the Resolution Professional under Section 33(2) of the Insolvency and Bankruptcy Code, seeking directions for the liquidation of the Corporate Debtor, M/s. KMG ATOZ Systems Private Limited. The Tribunal considered the facts related to the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor and the appointment of an Interim Resolution Professional (IRP).

2. A discrepancy arose between the liquidation value and the plan value of the Company, with the Promoter-Directors arguing for a higher plan value compared to the liquidation value. The Tribunal noted the difference in values and the arguments presented by both sides regarding the Company's financial status.

3. The existence of an arbitration proceeding with a substantial claim of ?280 Crores by the Corporate Debtor was highlighted. The possibility of receiving funds through the arbitration proceeding was discussed as a factor impacting the decision on whether to proceed with liquidation.

4. The decision-making process of the Committee of Creditors (CoC) was analyzed, focusing on the voting shares of the Financial Creditors, the outstanding amount owed by the Corporate Debtor, and the rejection of the Resolution Plan in favor of liquidation.

5. The Tribunal emphasized the importance of procedural compliance under the Insolvency and Bankruptcy Code, stating that as long as the CoC complies with the procedure, it can make commercial decisions in the interest of creditors, which cannot be overturned unless there is a procedural violation.

6. It was concluded that the Tribunal would not interfere with the decision of the CoC unless there was a procedural non-compliance or a valid reason presented by the Promoter-Directors. The lack of effort by the Promoter-Directors to convene a CoC meeting further supported the decision not to interfere.

7. The Tribunal mentioned that the Promoter-Directors still had the option to submit a Scheme application even after the initiation of liquidation proceedings against the Corporate Debtor, providing a potential avenue for reconsideration.

8. The evaluation of resolution plans and the subsequent decision by the CoC to file a liquidation application were discussed, including the appointment of the Liquidator and the resolutions passed during the CoC meetings leading to the decision for liquidation.

9. Finally, the Tribunal allowed the application for liquidation of the Corporate Debtor, appointed a Liquidator, and issued detailed directions for the liquidation process, including communication with relevant authorities, investigation of financial affairs, submission of reports, and follow-up on pending applications and recovery of dues in accordance with the law.

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