2021 (8) TMI 943 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - Section 33 of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the NCLT Rules, 2016 - HELD THAT - It is clear that when a Resolution Professional at any time during the CIRP but before confirmation of Resolution Plan approaches the Adjudicating Authority with the decision of the COC approved by not less than sixty six percent of the voting share, the Adjudicating Authority shall pass a liquation order. In this case the CoC with 100% voting right approved the resolution for liquidation of the Corporate Debtor. Hence, this is a fit case to order liquidation under Section 33(2) of the IBC, 2016. The Corporate Debtor, M/s Nova Steels (India) Limited is ordered to be liquidated with immediate effect under Section 33(2) of IBC, 2016 - Application allowed.

Summary

Issues: Liquidation process under Section 33 of the Insolvency and Bankruptcy Code, appointment of Liquidator, approval for liquidation by Committee of Creditors (CoC), powers and duties of Liquidator, cessation of powers of Board of Directors, legal proceedings during liquidation, discharge of officers and employees, filing of order with Registrar of Companies, further proceedings in the case.

1. Liquidation Process under Section 33 of the Insolvency and Bankruptcy Code:
The judgment pertains to an application filed under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 seeking commencement of the liquidation process for a corporate debtor. The Resolution Professional approached the Adjudicating Authority with a decision approved by the Committee of Creditors (CoC) for liquidation. The CoC, with 100% voting rights, passed a resolution for liquidation as the corporate debtor had no value in its books, no assets, and no ongoing business activities. The Adjudicating Authority ordered the immediate liquidation of the corporate debtor under Section 33(2) of the IBC, 2016.

2. Appointment of Liquidator:
The judgment appointed the Resolution Professional, who was also the applicant, as the Liquidator for the corporate debtor. The Resolution Professional, having consented to the appointment, was directed to adhere to the powers and duties specified under Sections 33(1)(ii) & (iii) and Sections 35 to 41 of the IBC, 2016. The Liquidator was further instructed to follow the Rules and Regulations issued by the Insolvency and Bankruptcy Board of India (IBBI) from time to time.

3. Approval for Liquidation by Committee of Creditors (CoC):
The CoC, in its third meeting, unanimously approved the resolution for liquidation of the corporate debtor with 100% votes. It was noted that the corporate debtor had no value in its accounts, no assets, and had defaulted in making payments to operational creditors. The CoC decided that the initiation of the liquidation process without going through the Corporate Insolvency Resolution Process (CIRP) was appropriate given the circumstances.

4. Powers and Duties of Liquidator:
The Liquidator was directed to take over all powers of the Board of Directors and key managerial personnel of the corporate debtor, in accordance with Section 34(2) of the IBC. The Liquidator was required to issue public notices as per Section 33(1) of the Code, and all personnel of the corporate debtor were instructed to cooperate with the Liquidator during the liquidation process.

5. Cessation of Powers of Board of Directors and Legal Proceedings during Liquidation:
The judgment specified that all powers of the Board of Directors and key managerial personnel of the corporate debtor would cease to exist, transferring to the Liquidator. It was further stated that no legal proceedings could be initiated against the corporate debtor once the liquidation process commenced, except with the prior approval of the Adjudicating Authority.

6. Discharge of Officers and Employees and Filing of Order with Registrar of Companies:
The liquidation order served as a notice of discharge to the officers, employees, and workmen of the corporate debtor, except for those involved in continuing the business during liquidation. The Liquidator was mandated to file a copy of the order with the Registrar of Companies and the Registry was directed to forward the order to the relevant authorities.

7. Further Proceedings in the Case:
The judgment concluded by disposing of the application in accordance with the directions provided, setting a date for the filing of a periodical report by the Liquidator, and instructing the Registry to notify all parties involved. Certified copies of the order were to be issued upon completion of formalities.

This detailed analysis of the judgment highlights the key aspects of the decision regarding the commencement of the liquidation process, appointment of the Liquidator, approval by the CoC, powers and duties of the Liquidator, legal proceedings, and further proceedings in the case.