2022 (12) TMI 145 - AT - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - section 33 of IBC - HELD THAT - This Appellate Tribunal notes that from the reading of the Impugned Order dated 02.06.2022, it is quite evident that the Adjudicating Authority did everything under its command and available options within its purview under I B Code, 2016 and Insolvency Bankruptcy Board of India (Corporate Insolvency Resolution Process) Regulations, 2016 to avoid Liquidation of the Corporate Debtor. The Adjudicating Authority gave fair and equal chances to both the Resolution Applicants to the extent that a Resolution Plan in tandem and in co-operation of both the Parties could be submitted, however both the Parties could not do so. Towards the end of the Corporate Insolvency Resolution Process, a Resolution Applicant proposes a Resolution Plan which is placed before the Committee of Creditors by the Resolution Professional and upon several deliberations by Committee of Creditors, the crucial decision pertaining to the approval or rejection of a Resolution Plan is taken. Thereafter, if a rejected plan is placed before the Adjudicating Authority, the Adjudicating Authority is expected to do nothing more, but to initiate the Liquidation process under section 33(1) of I B Code, 2016, but if the plan is approved by at least 66% Voting Share of Committee of Creditors and is placed before the Adjudicating Authority for its approval, the Adjudicating Authority has to look into two basic check boxes, only then the Plan stands approved and binding on all the Stakeholders. This Appellate Tribunal is very conscious of the fact that Liquidation should be the last resort as this virtually tantamount to death knell of the Corporate Debtor, However, it is also to be considered that the Corporate Insolvency Resolution Process proceedings are required to be completed within stipulated period as stipulated in Insolvency Bankruptcy Board of India (Corporate Insolvency Resolution Process) Regulations, 2016, herein this case the Adjudicating Authority has taken all the precaution and action to ensure that the Corporate Debtor is kept as a going concern - the Adjudicating Authority has no jurisdiction and/ or authority to analyse or evaluate the decision of the Committee of Creditors to enquire into the justness of the rejection of the Resolution Plan by the dissenting Financial Creditors. The Adjudicating Authority was right in ordering Liquidation of the company, as per Section 33(1) of the I B Code, 2016 - Appeal dismissed.

Issues Involved:

1. Dismissal of the Petition under the Insolvency & Bankruptcy Code, 2016.
2. Failure to furnish Performance Bank Guarantee by the Appellant.
3. Submission of Resolution Plan by the 1st Respondent after the due date.
4. Appointment and actions of the Resolution Professional.
5. Formation and decisions of the Committee of Creditors (CoC).
6. Replacement of co-applicants in the Resolution Plan.
7. Submission of multiple Interlocutory Applications.
8. Approval and rejection of Resolution Plans by CoC.
9. Initiation of Liquidation Process.

Detailed Analysis:

1. Dismissal of the Petition under the Insolvency & Bankruptcy Code, 2016:

The appeal was filed against the order dated 02.06.2022, where the Adjudicating Authority (National Company Law Tribunal, Kochi Bench) dismissed the petition filed under the Insolvency & Bankruptcy Code, 2016.

2. Failure to furnish Performance Bank Guarantee by the Appellant:

The Corporate Debtor, Trivandrum International Health Services Ltd., was admitted into the Corporate Insolvency Resolution Process (CIRP) on 07.02.2020. The Appellant, who was the Promoter and Erstwhile Director, failed to furnish the Performance Bank Guarantee, a pre-requisite for the Resolution Plan.

3. Submission of Resolution Plan by the 1st Respondent after the due date:

Ms. Sabine Hospital and Research Centre Pvt. Ltd., the 1st Respondent, applied to submit a Resolution Plan after the due date. Their name was not included in the Provisional or Final List of Prospective Resolution Applicants.

4. Appointment and actions of the Resolution Professional:

Raju Palanikkunathil Kesavan, the 2nd Respondent, was appointed as the Resolution Professional and later as the Liquidator of the Corporate Debtor. He published a Public Announcement in Newspapers and verified the Claims received, forming the Committee of Creditors (CoC).

5. Formation and decisions of the Committee of Creditors (CoC):

The CoC consisted of Kerala State Financial Corporation, State Bank of India, and Dhanlaxmi Bank Ltd., holding 48.11%, 35.87%, and 16.02% of the Voting Share, respectively. The Appellant's Resolution Plan was initially approved by the CoC but later deemed ineligible under Section 29A of the I & B Code, 2016.

6. Replacement of co-applicants in the Resolution Plan:

The Appellant sought permission to replace the original co-applicants with new ones. The CoC held several meetings and granted opportunities to submit a modified plan. However, the Appellant failed to furnish the Performance Bank Guarantee within the stipulated time.

7. Submission of multiple Interlocutory Applications:

Three Interlocutory Applications were filed before the Adjudicating Authority: one by the Resolution Professional for Liquidation, one by the Appellant for replacing co-applicants, and one by the 1st Respondent for submitting an EoI and Resolution Plan.

8. Approval and rejection of Resolution Plans by CoC:

The CoC evaluated the Resolution Plans of both parties but neither received the required 66% minimum votes. The CoC passed a resolution rejecting both plans and recommended Liquidation of the Corporate Debtor.

9. Initiation of Liquidation Process:

The Resolution Professional filed an application for Liquidation, and the Adjudicating Authority directed the CoC to re-vote on the plan with the highest votes. However, the CoC remained divided, leading to the initiation of the Liquidation Process.

Conclusion:

The Appellate Tribunal noted that the Adjudicating Authority took all necessary actions to avoid Liquidation, including giving fair chances to both Resolution Applicants. However, due to the failure to submit an acceptable Resolution Plan and the lack of required votes from the CoC, the Liquidation process was initiated. The Tribunal emphasized the primacy of the CoC's commercial wisdom and upheld the Adjudicating Authority's order for Liquidation, dismissing the appeal.

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