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TMI Blog2020 (11) TMI 439X X X X Extracts X X X X X X X X Extracts X X X X ..... nd taken from Adjudicating Authority. The record shows that in spite of giving opportunities to the Consortium (which included Appellant) no resolution plan was submitted and consequently in the fifth CoC meeting, CoC decided to move for liquidation. The Respondent No.1 filed CA No. 452 of 2019 under Section 33 (2) on 01st July 2019 (Annexure A-11). The Liquidation order came to be passed on 06th January, 2020 by when time stated even in Second Proviso of Section 12 (3) of IBC was already over - there are no error in the conclusion of Adjudicating Authority that the liquidation order was required to be passed as no resolution plan was submitted even in the extended period of time. Whether Resolution Professional/Prospective Liquidator should have been charged? - HELD THAT:- In the present matter, the Resolution Professional had already given the written consent and sub-clause a and b of Sub-Section 4 of Section 34 did not arise - The Application filed by CoC Annexure A-12 was under Section 60 (5) of IBC read with rule 11 of National Company Law Tribunal Rules, 2016. The Resolution Professional/Liquidator act in trust of CoC and Creditors. Under Section 10 (3) (b) of IBC nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Adjudicating Authority rejected the C.A. No. 962/C-III/ND/2019 filed by Oriental Bank of Commerce (Now, Punjab National Bank) and Others against Respondent No. 1, Amit Kumar (Resolution Professional), (Now, Liquidator). 3. By the same order, the Adjudicating Authority accepted C.A. No. 452/C-III/ND/2019 filed by the Resolution Professional (Now, Liquidator) seeking order of liquidation of the Corporate Debtor. 4. The Present Appeal has been filed by the Appellant Director of the Suspended Board of the Corporate Debtor seeking direction to set aside the impugned order and prays that the Resolution Plan, copy of which has been filed with Appeal should be considered and accepted by the CoC. Case of Appellant in short 5. In short the Appeal claims that the Corporate Debtor was engaged in exporting of products which deal with the manufacture of plastic products; the Company got best MSME awards. On 19.11.2018, Application under Section 9 of Insolvency and Bankruptcy Code, 2016 (in short IBC) filed by M/s. Dynamics Star Security Allied Services against the Corporate Debtor was admitted. Earlier, one IRP Mr. Rajesh Parekh was appointed and subsequently the CoC appoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... member of CoC to submit that Respondent No. 4 has supported the CoC for removal of Respondent No.1. 9. The Appellant has argued that the Appellant can still give Resolution Plan for revival of Corporate Debtor and has given a settlement proposal under Section 230 of the Companies Act, 2013 to the members of CoC as presently the Company is under Liquidation. The Appellant wants liquidation order to be set aside. The Appellant has referred section 27 of IBC and argued that CoC decided that the RP should be replaced. RP is required to be replaced. Case of Respondent No. 1 (then R.P.-now Liquidator) in short 10. Against this, the Respondent No.1 then RP (now Liquidator) has referred to Reply filed and the case put up before the Adjudicating Authority to submit that the Respondent No. 1 had faced non-cooperation from the Appellant who made efforts to sabotage the entire Resolution Process. The Counsel for Respondent No. 1 referred to Reply to show that the Corporate Debtor was in bad financial position and Respondent No. 1 took all necessary steps under provisions of law to try to keep the Corporate Debtor as a going concern. It is argued that the working capital of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other Respondents (Members of CoC) 13. The Respondent No. 2 OBC Bank (Now PNB) having 66.79 % voting share in the Committee of Creditor has filed written submissions and argued that the Corporate Debtor was a loss making entity and accumulated ever increasing losses since 2015-2016. It is argued that no Resolution Plan was received by CoC within stipulated time of 180 days which ended on 17th May, 2019. However, the consortium of two directors of the Corporate Debtor which included the Appellant along with a third party, assured CoC to grant sometime to submit Resolution Plan. As such CoC decided to grant further time to Consortium including Appellant and sought extension of time for CIRP before the Adjudicating Authority. The Adjudicating Authority by order dated 23rd May 2019 granted extension of 90 days which was ending on 16th August, 2019. Respondent No. 2/PNB has argued that several opportunities were granted for submission of Resolution Plan but no Resolution Plan was submitted and therefore CoC in the 5th meeting held on 19th June 2019 resolved: (a) by way of last opportunity, the consortium of two directors of the Corporate Debtor along with a third party was gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019 was discussed. CoC was not inclined to grant extension but on persistent demand, CoC agreed to grant extension of time till 21st June 2019 to submit a Resolution Plan. Till the stipulated time, no Resolution Plan was received. As there was no resolution plan, CoC opined to initiate liquidation process of the Corporate Debtor and CoC passed Resolution dated 19th June, 2020 to take Corporate Debtor into Liquidation. The RP was directed to submit an appropriate Application for seeking liquidation of the Corporate Debtor. The Respondent No. 3 submitted that at the request of members e-Voting was conducted on 22nd June, 2019 and 24th June, 2019. However, Respondent No. 3 further argued that subsequently Joint Lenders Meeting took place on 25th November, 2019 and Financial Creditors noted the losses caused to the Financial Creditors as a result of CIRP costs and sought replacement of the Resolution Professional. The Application filed in this regard on 16th December, 2019 came to be rejected by Impugned Order. This Respondent No. 3 also agrees that as in requisite time, no Resolution was received, the liquidation Order was required to be passed. However, this Respondent also (like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant i.e. consortium of directors of CD and M/s. Air Touch Technologies Pvt. Ltd. sought extension for submitting their resolution plans. 6. In 4th meeting of the COC held on 13.05.2019, again the sole consortium sought extension of time for submitting their resolution plan. The minutes of COC clearly indicate the non-cooperation on the part of the suspended board of directors. 7. On 25.05.2019, Mr. SK Singh (Director) the proposed Resolution applicant of the CD sent email to RP requesting to further extend the time period for submitting a resolution plan. 8. In 5th meeting of the COC held on 19.06.2019, the chairman shared the complete background giving trails of events as to haw the directors of the company have been accommodated by the COC to submit a resolution plan. Directors who were eligible and allowed to submit a Resolution Plan by 25.05.2019, were given an extension till 06.06.2019, were given an extension till 06.06.2019 for submission of resolution plan as requested. But no resolution plan has been submitted by the directors even after the extended period of time. Thus, Oriental Bank of Commerce, the key lender having 67% of the voting share declined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other promoters of the company regarding non-cooperation. The Appellant does not appear to have taken up these issues before the Adjudicating Authority when question of passing of liquidation order came up. In fifth CoC meeting dated 19.06.2019 (Page 340) these Minutes were approved. Once CIRP is initiated the management vests with the IRP/RP and under Section 20 the IRP/RP is to keep the company as a going concern. Thus, Appellant could not have acted in a manner not agreed to by the Resolution Professional and get Orders when Resolution Professional did not agree. Record shows non-cooperation by Directors Respondent No. 1 placed facts before CoC. If there was grievance, it should have been taken up with CoC by the Appellant. The arguments of the Respondent No 2 show that the Corporate Debtor was a loss making entity and had accumulated ever increasing losses since 2015 - 2016. For such reasons, we are not impressed by the arguments made by the Learned Counsel for the Appellant that Respondent No. 1 should have kept the Corporate Debtor as going concern even if it was incurring loss. 23. Minutes of 4th CoC dated 13.05.2019 (Appeal Page 300 @ page 303) has item No. A 5 relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As explained above, the Directors have not been able to provide the satisfactory explanation, records and document with regard to past transactions and current operations of the company. It was felt that restricting the rights of the directors might bring effective control expedite submission of information and documents. Accordingly, the RP has restricted the role of the Directors in running the day to day operations of the CD by asserting that all decisions of purchase and sales would be taken by RP based on the recommendations of directors along with facts and figures. . After due discussion on the steps taken by the RP and the challenges being faced by him in running the operations of the CD and conducting the instant CIRP, the members acknowledged the various points presented by him and took note of the same. Thus, Respondent No. 1 had updated CoC about the state of Accounts and non-co-operation and business decision to temporarily suspend operations and CoC took note of the same. Thus, losses were gradually coming down is poor reason to keep going. The Allegations not having been taken up by the Appellant before the CoC it would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not have idea about the procedure to be followed for conducting the CoC and the Resolution that came to be passed by CoC on 19 June, 2019 is based on the misrepresentation. Adjudicating Authority did not refer to the contents of Application or Minute. It would be appropriate to refer to Minutes of the Joint Lenders Meeting in which the Respondent No. 1 also appears to have been present for some time. We are not referring to the Application as Minutes and contents of Application are not carrying the same effect as seen in Minutes. It would be appropriate to photocopy the Minutes which are as under: 30. The Adjudicating Authority does not appear to have referred to contents of this meeting and rejected the CA No. 962 of 2019 because the Advocate could not convince that CoC was ignorant about procedure and law. The Joint Lenders Meeting did not seek to recall decision to go for liquidation. For reasons discussed they observed that entire CIRP process has not been conducted in desired way and Resolution Professional may be replaced. 31. The Respondent No.1 claims that such Joint Lenders Meeting was illegal. However, we are not going into that tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e doubts regarding the manner in which the Liquidator is conducting the process. We are not sitting in judgment on the question whether the averments made in the Joint Lenders Meeting by the Financial Creditors against the Respondent No. 1 are correct or not. We hold that though delayed, when CoC had conveyed that it wanted Resolution Professional changed and as Liquidation Order was yet not passed, Adjudicating Authority should have first replaced Resolution Professional and then passed Liquidation Order. For the above reasons, we pass the following orders: 1. The liquidation order passed by the Adjudicating Authority is maintained. 2. The Order passed by Adjudicating Authority dismissing C.A. (AT) No. 962/C-III/ND/2019 is set aside. 3. The matter is remitted back to appoint another Insolvency Professional as Liquidator replacing Respondent No. 1. 4. Adjudicating Authority may appoint Mr. Sandeep Kr. Bhat as proposed by CoC as Liquidator, or may call for name of any other Insolvency Professional from IBBI, if felt necessary by Adjudicating Authority. The Adjudicating Authority is requested to pass Orders for proper handing over of charge from Respondent No. 1 to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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