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TMI Blog2020 (7) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial failure, question mark is raised on the status of a business entity - The company was incorporated way back in 1920 for the manufacture of various kinds of electrical cables, wires and conductors, radio frequency cables, equipment wires, high temperature cables for domestic and industrial use and for sophisticated applications in defence, electric, electronic and space research in India. Commercial production was started in 1923. Expansions also took place from time to time and in 1970, a factory was acquired in Pune. In fact, upto a certain period, corporate debtor was the only private sector unit which used to manufacture almost all the cables at its Jamshedpur and Pune factories. It is also noted that besides the conventional type of cable accessories and specialised materials related thereto for jointing and terminating the cables were also manufactured. The company was profitable till 1991. Subsequently, it started incurring losses and during 1993-1996, there was a virtual stalemate in the company s operations. Jamshedpur plant was closed down completely for 34 months. The corporate debtor is not a going concern, particularly when vast technological changes have taken pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of IBC, 2016 giving extensive jurisdiction to CoC in respect of all crucial decisions. As far as taking care of interest of workmen/employees being operational creditors, no doubt, liquidator is supposed to dispose of the assets as a package, in terms of provisions of Regulation 32 and 32A of IBBI (Liquidation Process) Regulations 2016 read with Regulation 39C of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016, keeping in mind such objective along with maximisation of value for all stakeholders. Having said so, we are of the view that commercial wisdom of CoC cannot be challenged as it is basic instinct of the Code and this has been held so in the case of K. Sashidhar and aforesaid decision also. Whether the process of passing such resolution can be said to be fair and reasonable? - HELD THAT:- In the present case, it is not in dispute that financial statements have not been prepared after the year 1999. The statutory records and other accounting records at different locations are not available to the extent to enable the resolution professional to prepare the accounts for which efforts had been done as mentioned in the various progress reports filed aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquirer that would be the deciding factor for disposal of the corporate debtor or its assets as a going concern. This business paradigm needs to be passed through the legal mechanism prescribed under the IBC, 2016. Though we have already held that it is not a going concern, hence, it cannot be run as a going concern by RP and liquidator is required to run the unit only for its beneficial liquidation but there is no bar also if somebody comes and wants to start an industrial activity with the help of the assets of the corporate debtor or in the name and style of the corporate debtor as well. Validity of assignment - HELD THAT:- The fact which is noticeable even in petition filed under section 9 on 28-11-2018 and no aggrieved party filed any interlocutory application to raise this issue as it would have an impact on the composition of CoC if the corporate debtor was admitted into CIRP. Thus, prima facie, this issue has been closed by the parties by their own conduct and cannot be raised now. All pleas of all parties regarding validity of assignment are rejected and dismissed, both on the ground of maintainability as well as on merits - Corporate Debtor is liquidated - moratorium sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ober, 1919. Thereafter, he drew our attention to clause 3 of the agreement to show that said land was vested absolutely in the Tata Steel Ltd. subject to conditions mentioned in such agreement and, as per such conditions, such land could be used only for the purposes mentioned in the preamble thereto. It was also submitted that if the land was not directly utilised for the purposes of manufacturing or works of the company, then, such land (part or parts of land) had to be transferred back to the Government. He specifically drew our attention to clause 6 of the said agreement to show that company was entitled to sell or assign its interest subject to the condition that first right, in this regard, was with the local government i.e. right of first renewal had been kept by the government. This clause did not contain any right with Tata Steel Ltd. to lease it out and therefore, such action of Tata Steel Ltd. was against the provisions of such agreement. He also drew our attention to para 10 of the reply by the Tata Steel Ltd. to show that even Tata Steel Ltd. had stated that as a result of promulgation of Bihar Land Reforms Act, 1950 and other Acts related thereto, it was a case of dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preamble of the said agreement, it was clear and nowhere there was any reference to Government Grants Act, 1895, hence, reliance thereon was wrongly placed. Thereafter, he drew our attention to various clauses of the said agreement and in particular, clause 4 wherein it had been stated that land could be utilised by the company or any of the other companies as aforesaid for the purposes as specified in the preamble to the memorandum of agreement. It was also contended that land comprises of different parcels of lands and different uses were prescribed. It was also contended that this was a case of perpetual lease renewable by every 30 years; the lease renewal had been done on 20th August, 2005, effective from 1st January 1996 which was valid till 2026. In support of his various contentions, the Ld. Sr. Counsel drew our attention to page nos. 30 to 44 of his reply dated 14-11-2019. He specifically drew our attention to the nomenclature of this agreement which was termed and styled as "Indenture of Lease" and Tata Steel Ltd. had been referred to as 'the Lessee". He thereafter drew our attention to the clauses at page nos. 33 and 34 wherein it had been mentioned th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Suresh Narayan Singh v. Tayo Rolls Ltd., the question of jurisdiction was left open in spite of issue of notice. In our view, we do not find any necessity to issue notice even. Thus, considering overall facts of the case and applicable legal position, it is concluded that the corporate debtor is not a going concern, particularly when vast technological changes have taken place over a period of last 25 years and the plant and technology in possession of the corporate debtor are obsolete, out-dated and beyond repair/renovations due to depletion thereof. 7. Our view is further supported by the decision of the Hon'ble Supreme Court in the case of Embassy Property . . . . . . . (supra), wherein the boundary lines of jurisdiction of NCLT under section 60(5) of IBC, 2016 have been clearly defined. Further, having regard to the provisions of section 238 read with other provisions of the Code, we are further of the view that for the present purpose, there is no scope for us to intervene. Accordingly, we reject this contention of the applicant. 8. Having decided so, now, we proceed to discuss the matter on merits as well. For this purpose, we consider it necessary to reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order under section 40 of the said Act that the said acquisition is necessary for the construction of the said works and that such works are likely to prove useful to the public have consented to the said acquisition pursuant to the provisions of the said Act on condition of the Company entering into such Agreement as is hereinafter contained NOW THESE PRESENTS WITNESS and it is hereby agreed and declared as follows:- 1. . . . . . . . . .(not relevant) 2. . . . . . . . . . (not relevant) 3. . . . . . . . . The said land shall be transferred by the Secretary of State so as to vest absolutely in the Company subject to the conditions hereinafter contained. 4. The said land shall not be used by the company or any of the other companies as aforesaid for any purposes other than those specified in the preamble. 5. If at any time or times any part or parts of the said land not directly utilized for the purposes of the manufacturing or works of the company or of the other companies as aforesaid shall be necessary to be possessed by Government for purposes of revenue administration or for purposes connected with public health safety or necessity (of which matters the Local Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the provisions of the Government Grants Act, 1895 as claimed by the applicant/petitioner. Accordingly, at the very outset, we reject this plea of the applicant. As per clause 3, this land has been vested in Tata Steel Ltd. absolutely subject to the terms and conditions contained therein. In the preamble, it has been mentioned that the lands were given for works and purposes in connection with the undertaking or business of the company and the establishment by the company or by other companies formed or hereafter to be formed, of industrial undertakings or business subsidiary to the undertaking or business of the company. The said preamble has been referred to in clause 3 wherein reference to other companies is also mentioned. Similarly, in clause 5, reference to other companies has been given. Thus, on the basis of conjoint reading of these two clauses with the preamble, it is absolutely clear that Tata Steel Ltd. is in full control with all rights subject to the specified uses by it or any other entity. Thus, the plea of the applicant that it could not be leased out to other company is also rejected when such other company i.e. corporate debtor also had an industrial undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so proves the bona fide of the claim made by Tata Steel Ltd.. 11. In the result, this application stands rejected and dismissed in terms indicated above. CA(IB) No. 1740/KB/2019 12. In this appeal, the appellant/petitioner sought following reliefs:- (a) The Resolution Professional be directed to act in accordance with the Insolvency and Bankruptcy Code, 2016 read with the Rule and Regulations laid down thereunder; (b) Stay of operation of the purported Resolution that may have been passed pursuant to e-voting being conducted arbitrarily by the Resolution Professional pursuant to the Fifth Meeting of the Committee of Creditors dated 5th December 2019; (c) The Resolution Professional be directed to amend the minutes of the meeting of the Fifth Meeting of the Committee of Creditors dated 5th December 2019 in as much since it gives an impression that it is the members of the Committee of Creditors who are the ones suggesting liquidation, which, in essence is incorrect; (d) Pass such further order or orders, direction or directions as this Hon'ble Bench may deem fit and proper. CA(IB) NO.56/KB/2020 13. In this application, the applicant/petitioner sought following relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account were available. The applicant tried to get the information and records from the suspended directors. It was submitted that the application under section 19(2) of IBC, 2016 had also been filed before this Authority wherein one of the alleged directors Mr. Ramesh G. Govani pleaded that he was not a director of the company and had narrated basic facts in relation thereto and the Tribunal also agreed to that vide its order dated 19-11-2019. It was further contended that five CoC meetings were held on different dates, the details of which are as under:- 1st CoC meeting 6th September 2019 2nd CoC meeting 26th September 2019 3rd CoC meeting 18th October 2019 4th CoC meeting 11th November 2019 5th CoC meeting 5th December 2019 18. It was submitted that whatever information was available, the Information Memorandum was prepared to that extent, though it was incomplete, which could be provided to the applicant, if any, on execution of a non-disclosure agreement. In the 4th CoC meeting, this was provided to CoC and proposal for appointment of valuer was also made. Three quotations were received from the registered valuers; however, no valuer was appointed by CoC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCO (vii) application filed by around 200 workers relating to Jamshedpur land with a prayer that land to belong to Government of Jharkhand not TISCO (viii) due to absence of records whereas the corporate debtor is not a going concern as there is no production from a long time and (ix) directors of suspended boards are not available to co-operate in CIRP (x) Corporate debtor was sick company and was referred to BIFR and the said was pending before BIFR from very long time." 19. The Ld. Counsel for the Pegasus Asset Reconstruction Private Limited after not pressing the appeals did not oppose the contentions made on behalf of CoC/Resolution Professional. 20. The Ld. Sr. Counsel concluded his arguments by stating that as per the provisions of IBC, 2016, early liquidation was possible and during the course of liquidation, a corporate debtor could be sold as a going concern also though, in the facts and circumstances of the present case, it did not appear to be a possibility, hence, any opposition to the proposal was not having substance both in law and in facts. CA(IB) NO.46/KB/2020 21. In opposition to Application CA(IB) No. 1748/KB/2019, CA(IB) No. 46/KB/2020 has been filed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, they could not be member of CoC or have any voting rights. Thereafter, he referred to provisions of section 21(5) to contend that only an operational creditor could assign the debt and not a financial creditor. Hence, in the present case, assignment of debt by financial creditor was against the provisions of law. He further contended that even otherwise, as per RBI guidelines, vide circular dated 13th July 2005, in respect of purchase/sale of non-performing assets, authorised banks to purchase and sell non-performing financial assets from/to other banks only. In this case, Kamala Mills Ltd. was neither a NBFC which was included in the definition of banks as per the circular, nor a bank, hence, for this reason also, the assignment of debt was not legally tenable. He also emphasised on the fact that RBI was a sectoral regulator and its directions were mandatorily to be applied by banks. In this regard, he placed strong reliance on the decision of the Hon'ble Supreme Court in the case of ICICI Bank Ltd. v. Official Liquidator of APS Star Industries Ltd. [2010] 7 taxmann.com 72/104 SCL 37 wherein it had been held that RBI guidelines dated 13-7-2005 issued under section 35- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was required and further it reflected on the manner in which RP was conducting the CIRP proceedings, though, simultaneously he submitted that he was not pleading for change in RP as that will further delay in the process of resolution. 25. As regards the management of the corporate debtor and issues related to director, he contended that four additional directors including Mr. Ramesh G. Govani were appointed at the instance of BIFR. He further contended that Companies Act did not discriminate any director so appointed and directors appointed by the shareholders/directors as per the provisions of MOU/AOA read with relevant provisions of Companies Act, 1956. He contended that as per provisions of section 260 of the Companies Act 1956, such directors could hold office only till the conclusion of AGM which would have been held upto 30thSeptember 1999 and in case no meeting was held on that date or thereafter, such directors would deemed to have vacated the office thereafter. He also drew our attention to the clarification issued by MCA in regard to the provisions of section 260 of the Companies Act, 1956. In this regard, he also placed reliance on the decision of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n behalf of all of them. 28. The Ld. Senior Counsel for the RP/CoC submitted that Factoring Regulation Act came into operation in 2011 and had no retrospective application and for this reason, this Act could not be any hold to the cause of the petitioners. He vehemently argued that deed of assignment derived its source from the provisions of section 130 of the Transfer of Property Act, 1882 and deed of assignments in the present case were executed in compliance to such provisions. In this regard, he further submitted that there was no violation of provisions of section 5(7) of IBC, 2016, hence, such assignment was valid. He also submitted that the parties to the assignment had no claim against each other i.e. the assignors had not challenged this on any ground of fraud or other illegality committed by assignees under provisions of any law; hence, the petitioners could not have any locus. It was also contended that as per provisions of section 27 of Factoring Regulation Act 2011, provisions of Transfer of Property Act, 1882 would remain in operation in spite of provisions of Factoring Regulation, hence, for this reason also, such Act was not applicable. As far as the Factoring Regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of proposal of liquidation was concerned, that was in accordance with the provisions of law and in particular, explanation of section 33(2) of IBC, 2016. It was further contended that apart from assignees being part of CoC, other lenders like ICICI Bank and other banks had also approved this proposal, hence, no malafide could be attributed to the conduct of RP. It was further contended that as per provisions of section 53 of IBC, 2016, the interest of the workers for outstanding dues were secured and therefore, contention of the petitioners that in liquidation they will not get anything was without any legal basis and purely based on own imagination. CA(IB) NO.57/KB/2020 32. Now, we shall proceed with the arguments made by applicant/petitioner in CA(IB) No. 57/KB/2020. The Ld. Counsel appearing on behalf of the workers submitted that in the present case the relevant question to be asked was whether RP could prepare Information Memorandum, constitute CoC and determine who were the related parties. As regards the preparation of Information Memorandum was concerned, it was pleaded that for that purpose no permission of CoC was required as it was an obligation on the part of RP und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reliance on the decision of this Tribunal in the case of Esspee Sarees (P.) Ltd. v. Skipper Textiles (P.) Ltd. in CP(IB) No. 1702/KB/2018 order dated 28-6-2019 for the proposition that in case the RP was found to be biased or negligent, he could be replaced. In this regard, he further submitted that although it was more or less a settled decision that commercial wisdom of CoC was supreme but there could be a situation where such judicial discretion/intervention could be made particularly when the decision of the CoC was to go for liquidation instead of keeping the corporate debtor as a going concern and also to dispose of it as a going concern. For this proposition, he strongly placed reliance on the decision of the Hon'ble Supreme Court in the case of Committee of Creditros of Essar Steel India Ltd. (supra) and drew our attention to para 46 of the said order. As regards the validity of assignment, he also placed reliance on Factoring Regulation Act 2011 and contended that this Act was to govern the assignment of debt and as per the provisions of this Act, Kamala Mills Ltd. was not an eligible party, hence, the assignment in their favour was illegal and did not meet the condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egards the applicability of Factoring Regulation Act 2011, he reiterated his earlier submissions and also submitted that the substantive provisions of section 130 of Transfer of Property Act 1882 were to be taken into consideration. It was also argued that the CoC was correctly formed and decided for liquidation in accordance with the provisions of IBC, 2016, considering the ground realities and therefore, no malafide could be attributed either to CoC or to RP. He placed reliance on the decision of Hon'ble Supreme Court in the cases of K. Sashidhar v. Indian Overseas Bank and ors. and Committee of Creditros of Essar Steel.... supra, for the proposition that commercial wisdom of CoC was supreme and was to be respected. It was also pleaded that no circumstances existed for use of judicial intervention as observed by Hon'ble Supreme Court in para 46 of its order in the case of CoC of Essar Steel case. 36. As regards the status of Mr. Govani, it was contended that it was more or less stood on the footing of a special officer appointed by BIFR and he resigned in 2019 as a precautionary measure and to correct the MCA records which were not updated in view of no AGM or EGM being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round realities, it may not be possible or advisable to continue with such process just to complete empty formalities. In our opinion, this is not so even as per scheme of the Code as in a given situation liquidation only could be an inevitable outcome. 41. Thus, if it is so, then, the question arises is at what stage and in what circumstances liquidation can be decided. As per section 5(14) of the Code, CIRP period means 180 days from the date of initiation and ending thereon. Time of CIRP can be extended if the circumstances warrant so. During this period, all possible efforts have to be made towards resolution of insolvency by change of management/ownership through resolution plan which needs to be prepared in accordance with the provisions of section 30 and requires approval of Adjudicating Authority under section 31 of IBC, 2016. In case no resolution plan comes or if a resolution plan is not in accordance with the statutory requirements of section 30(2) of IBC, 2016, then, the legal consequence is liquidation under section 33C of IBC, 2016. This is the normal course of action as contemplated under the IBC, 2016. During CIRP, another key obligation/feature is that corporate d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y viewed as a Going Concern, that is, as continuing in operation for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the operations and is also capable of meeting its financial obligations. 45. Ind AS-1 further prescribes following in this regard :- "25. When preparing financial statements, management shall make an assessment of an entity's ability to continue as a going concern. An entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern, the entity shall disclose those uncertainties. When an entity does not prepare financial statements on a going concern basis, it shall disclose that fact, together with the basis on which it prepared the financial statements and the reason why the entity is not regarded as a going concer." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and its business as a whole, hence, if a company closes a small business segment or discontinues one of its products and continues with others, it does not mean that the company is no longer a going concern because the going concern concept is applicable to the entity as a whole and not to the particular segment of business or product or location. Conversely, if any particular location or segment remains operational and that too, in a temporary manner or does not contribute significantly to the revenues or does not enable the company as a whole to meet its all financial obligations in respect of assets and liabilities as well as recurring expenses, then, closure of such unit cannot make the whole business not a going concern. 48. Based upon above discussion, it can be concluded that an organisation is normally viewed as a going concern when it will be running business or continuing operations for a foreseeable future and such organization has neither any intention nor any compulsion or necessity of shutting down or reducing the scale of operations in a substantial manner. Further, going concern also implies ability of a business to meet its financial obligations. Thus, in the even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation from the then promoter. Revised process continued but without much progress. Ultimately, as per the directions of the Hon'ble Delhi High Court, vide order dated 9-4-2009, and Hon'ble Supreme Court, vide order dated 14-5-2009, proposals of M/s. R.R. Cabel Ltd. (RRK), Tata Steel Ltd. (TSL) and Pegasus Asset Reconstruction Pvt. Ltd. (PARL) were considered for evaluation by BIFR. Final orders were passed by BIFR and AAIFR on 9-12-2009 and 30-6-2011 respectively. Proposal of TSL was considered as best and suitable. An appeal was filed against this order of BIFR before AAIFR which upheld the order of BIFR vide its order dated 9-12-2009. R.R. Cabels Ltd. and Pegasus Assets Reconstruction Pvt. Ltd. filed writ petitions before Hon'ble Delhi High Court. However, no stay was granted against such orders of BIFR and AAIFR. In the interim, the Hon'ble Supreme Court had also directed Hon'ble Delhi High Court to hear the petitions filed against the order of BIFR and AAIFR approving TCL as a proposed agency for revival of the company on merits as the company was sick since 1997 and issue of its revival was of paramount importance. It is also to be noted that Pegasus Asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made a going concern. It is an undisputed legal position that IRP is appointed when CIRP is initiated against the corporate debtor by the order of the Adjudicating authority and such IRP is made responsible to manage the operations of corporate debtor as a going concern, hence, what is most crucial is that as on the date of initiation of CIRP, corporate debtor should be a going concern. This is not the case here, hence, to say that it should be continued as a going concern when it is not so nor there appears to be any possibility of the (sic) due to reasons mentioned by CoC while passing the resolution for liquidation which have been listed in para 24 herein before. This view can further be fortified by the observations made in para 8.1 of the report of the Insolvency Law Committee dated 26-3-2018 while considering the aspect of responsibility of statutory compliances at various stages of CIRP which are reproduced hereunder:- "8.1 The provisions of the Code entrust the responsibility of managing the affairs of the corporate debtor as a going concern on the IRP and the RP. This involves meeting meeting various statutory compliance requirements for which the management of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tee report as to what was the intention as regards the role of CoC and supremacy. The relevant observations extracted from the said report are as under:- 55.1 The key economic question in the bankruptcy process 55.1.1 When a firm (referred to as the corporate debtor in the draft law) defaults, the question arises about what is to be done. Many possibilities can be envisioned. One possibility is to take the firm into liquidation. Another possibility is to negotiate a debt restructuring, where the creditors accept a reduction of debt on an NPV basis, and hope that the negotiated value exceeds the liquidation value. Another possibility is to sell the firm as a going concern and use the proceeds to pay creditors. Many hybrid structures of these broad categories can be envisioned. 55.1.2 The Committee believes that there is only one correct forum for evaluating such possibilities, and making a decision: a creditors committee, where all financial creditors have votes in proportion to the magnitude of debt that they hold. In the past, laws in India have brought arms of the government (legislature, executive or judiciary) into this question. This has been strictly avoided by the Committ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of clause (b) of sub-section (1). Explanation-For the purposes of this sub-section, it is hereby declared that the committee of creditors may take the decision to liquidate the corporate debtor, any time after its constitution under sub-section (1) of section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum. 57. The purpose of inserting this explanation has been to declare that CoC may take the decision to liquidate the corporate debtor in accordance with the requirements provided in sub-section 2 of section 33 any time after the constitution of the CoC under sub-section 1 of section 21 until the confirmation of resolution plan, including at any time before the preparation of the information memorandum. As per statement of objects and reasons, this explanation is clarificatory in nature and it has been brought on statute to overcome the judicial rulings wherein it was held that the CoC could not opt for liquidating the corporate debtor without even trying for resolution. Thus, this amendment makes it clear in unambiguous terms that ultimate decision lies with the creditors as regards keeping the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59. The other aspect is whether the process of passing such resolution can be said to be fair and reasonable. In this regard it is to be noted that as per section 25(2)(g) read with section 29 of the IBC 2016, the resolution professional is required to prepare Information Memorandum in the manner and form as prescribed by IBBI. Regulation 36 of CIRP Regulations 2016 prescribes timeline for preparation of such Information Memorandum. The term resolution professional for this purpose includes both Interim Resolution Professional (IRP) appointed under section 16 and Resolution Professional (RP) appointed under section 22 of IBC 2016 as section 29 read with regulation 36 of CIRP Regulations 2016 refers to resolution professional which is defined in section 5(27) to include both IRP and RP as resolution professional for the purpose of Part II of the IBC, 2016. 60. In the present case, it is not in dispute that financial statements have not been prepared after the year 1999. The statutory records and other accounting records at different locations are not available to the extent to enable the resolution professional to prepare the accounts for which efforts had been done as mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then such action cannot be considered as a case of negligence or non-performance or acting in concert with CoC. Reliance has been placed on the provisions of section 28 of IBC which provides for mandatory approval of CoC in respect of certain actions, which, in our considered view, cannot be interpreted to mean that resolution professional cannot take a view or approval of CoC in respect of other matters, if he deems it necessary. Accordingly, we do not find any merit in contentions raised in this regard. 62. Thus, after taking into consideration the applicable legal position and carefully analysing the facts of conducting of CIR Process including meetings of CoC and the fact that progress reports of all minutes of such meetings have been filed with this Authority as per the relevant Regulation, we hold that there is no lacunae or non-compliance in regard to following of process. Further, all other lenders who are financial institutions and also have substantial stake by way of outstanding debts, have also consented to the proposal made by CoC. Thus, for this reason also, there remains no scope for us to have a limited judicial review of such actions. Consequence of order of liq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, two independent mechanisms through different routes exist which are materially different though the purpose is the same. This may pose several challenges, but, in spite of that,, it is pertinent to note that timeline for both the process to sell the corporate debtor as a going concern has been prescribed. Such timeline is of 90 days from the date of order of liquidation as mentioned in regulation 2B and Regulation 32A(4) of Liquidation Process Regulations. It is seen that as per regulation 39C of CIRP Regulation, CoC has been given an option while deciding to liquidate the corporate debtor under section 33 to recommend that the liquidator may first explore sale of corporate debtor or its business as a going concern under clause (e) and clause (f) of regulation 32 of Liquidation Process Regulations, if an order of liquidation is passed under section 33. However, in the present case, no such recommendation has been made by CoC. This is not mandatory also as Regulation 39C(2) starts from the word 'where'. Accordingly, the group of assets and liabilities have not been identified for sale as a going concern under Regulation 32(e) or 32(f). This leads to a situation where, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urial instincts coupled with a necessity to establish a unit suitable to his corporate requirements may come forward. Since it is very hard to conceive as to how the undertaking which comprises of only land and workers could be useful to him. Thus, it is the intention of the acquirer that would be the deciding factor for disposal of the corporate debtor or its assets as a going concern. This business paradigm needs to be passed through the legal mechanism prescribed under the IBC, 2016. Though we have already held that it is not a going concern, hence, it cannot be run as a going concern by RP and liquidator is required to run the unit only for its beneficial liquidation but there is no bar also if somebody comes and wants to start an industrial activity with the help of the assets of the corporate debtor or in the name and style of the corporate debtor as well. 66. Thus, considering both legal provisions as narrated in para 65 herein above and considering entrepreneurship spirits of Corporates In India, sale of the corporate debtor or its business or any part thereof as a going concern can still be a possibility. 67. Now, the question of validity of assignment is being dealt wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the provisions of IBC 2016, provisions of SARFAESI Act are at all not applicable as there is no such condition prescribed in IBC 2016 that an assignment could be made only to an Asset Reconstruction company, Banking Financial company or other Financial Institutions. As far as reliance placed on Factoring Regulation Act 2011 is concerned, that is also not applicable for the reason that it is not retrospective and in the present case assignment had happened much before the promulgation of this Act. Further, this Act is applicable to factors and to regulate the business of factoring in respect of receivables and for this reason also this Act is not applicable to assignments in question. Apart from this, section 27 of the said Act does not exclude the applicability of section 130 of Transfer of Property Act, 1882 which governs the provisions relating to execution of deed of assignments and which has been duly complied with in the present case. Reliance has also been placed on the circular dated 13-7-2005 of RBI, which, in our considered opinion, is applicable for governing the transactions between banks and financial institutions for purchase and sale of NPCs and it does not by any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with the provisions of section 33(7) of IBC 2016. 70. Thus, all pleas of all parties regarding validity of assignment are rejected and dismissed, both on the ground of maintainability as well as on merits. 71. The other challenge is that M/s. Kamala Mills Ltd. and M/s. Fasqua Investment Pvt. Ltd. were related parties of the corporate debtor because Mr. Ramesh G. Govani was a common director in all these entities. This plea is also devoid of merits for the reason that in our order dated 19-11-2019 it has been held that he has never been a director of the company and which order has been attained finality. In addition to that, section 260 of Companies Act, 1956 now cited by the applicants, in fact, further support our order. As per this provision, read with the circular issued by MCA, Mr. Ramesh G. Govani is deemed to have vacated the office on 29th September 1999, in the event he was found to be additional director validly appointed. Further, as far as the aspect of resignation on 20-11-2019 is concerned, in our considered view, it is of no consequence as it has already been established that he was never a director or be deemed to have vacated much before. We further fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, the liquidator is directed to act in accordance with the provisions of sections 35(l)(f), read with regulation 39C of IBBI Regulations 2016 and Regulations 23, 32 and 32A of IBBI (Liquidation Process) Regulations 2016. We also make it clear that interest of workers have to be taken into consideration as a priority, hence, if situation demands, the liquidator can approach us for suitable directions under section 60(5)(c) of IBC 2016 read with section 35(1) and section 35(l)(n). ORDER 1. By this order, Corporate Debtor - Incab Industries Limited is liquidated. 2. Mr. Shashi Agarwal, whose name has been proposed and approved by CoC for appointment as the Liquidator, is hereby appointed as such, having registration no. IBBI/IPA-001/IP-P00470/2017-2018/10813. 3. Mr. Shashi Agarwal is directed to issue Public Announcement stating that the Corporate Debtor is in liquidation, in terms of Regulation 12 of the IBBI (Liquidation Process) regulations, 2016. 4. The Registry is directed to communicate this order to the Registrar of Companies, West Bengal and to the Insolvency and Bankruptcy Board of India (IBBI), New Delhi. 5. The Order of Moratorium passed under section 14 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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