2023 (2) TMI 1035 - AT - Insolvency and Bankruptcy

Challenging the order for Liquidation of Corporate Debtor - HELD THAT - This Tribunal is of the earnest view that the Appellant has failed to meet the basic requirements for consolidation of CIRP Viz. that the Assets of a Corporate Debtor, cannot be sold as a standalone unit. The Committee of Creditors, in its 8th CoC Meeting, had resolved to recommend the Liquidation of the Corporate Debtor by 100% Voting Shares. Having regard to the fact that, the CIRP, was invoked under Section 10 of the Code way back in the year 2021, the Application for Consolidation, was filed belatedly after one year and also the fact that the Corporate Debtor, has failed to satisfy the requirements necessary for Consolidation, this Tribunal, does not see any illegality or infirmity in the Impugned Order of the Adjudicating Authority, (National Company Law Tribunal, Division Bench-I, Chennai), allowing Liquidation. Appeal dismissed.

Summary

Issues:
Challenge to Impugned Orders for Liquidation of Corporate Debtors under Section 61 of the Insolvency and Bankruptcy Code, 2016.

Analysis:
1. The Appeals challenged Impugned Orders dated 09.11.2022, ordering Liquidation of Corporate Debtors M/s. JKS the Banyaan Private Limited and M/s. Pondicherry Extraction Industries Private Limited. The Adjudicating Authority allowed the Applications filed by the Resolution Professional seeking Liquidation. The Appeals were disposed of by a Common Order due to common facts.

2. The Appellant, a Shareholder and Member of the suspended Board of Directors, argued for consolidation of Corporate Debtors' CIRP due to intertwined Assets and Liabilities. The Adjudicating Authority failed to consolidate despite guidelines from previous cases. The CoC rejected a Resolution Plan for all three Debtors and opted for Liquidation.

3. The Liquidator highlighted the lack of cooperation from the Appellant and ex-Directors, causing financial distress. The Adjudicating Authority directed Shareholders to cooperate. The CoC, comprising only Bank of Baroda, unanimously voted for Liquidation after rejecting consolidation proposals. The Appellant's actions were seen as delaying the Liquidation Process.

Assessment:
5. CIRP was initiated for all three Companies under Section 10 of the Code. The Appellant's shareholding status in the Principal Borrower Company was questioned. No evidence supported the necessity of consolidation due to common Assets. The timing of the consolidation request and the ongoing Liquidation process were deemed inappropriate.

6. The Tribunal found the Appellant failed to meet consolidation requirements, and the CoC's decision for Liquidation was lawful. The belated consolidation request, lack of Asset interdependence, and failure to satisfy consolidation prerequisites led to the dismissal of the Appeals.

7. The Appeals were dismissed with no costs, and any pending Interlocutory Applications were closed.