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TMI Blog2024 (1) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be against the spirit of Section 33(2) and explanation appended to it wherein the legislature has used the word any time twice i.e., firstly, in Section 33(2) and secondly, in the explanation of Section 33(2) of the Code that the CoC has the jurisdiction to pass the order of liquidation of the CD, approving it by not less than sixty six per cent of the voting share, but it should be before the confirmation of the resolution plan. In the case of Sunil S. Kakkad [ 2020 (8) TMI 392 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] , this Court has categorically framed a question as to whether the RP, with the approval of the CoC with sixty six per cent vote share, directly proceed for the liquidation of CD without taking any steps for resolution of the CD. In the said case, there were three meetings of CoC in which without making endeavour for inviting EOI, the CoC unanimously resolved to liquidate the CD and that issue came for adjudication before this Court in which while referring to Section 33(2) and the explanation appended thereto it has been ordered that the CoC has the power to liquidate the CD before confirmation of the resolution plan. The Adjudicating Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the Corporate Debtor had resigned before the commencement of the CIRP, last audited financial statements of the Corporate Debtor filed with the ROC were for the year ending March 31, 2017 and the secured financial creditors of the Corporate Debtor had initiated enforcement action under SARFAESI Act, 2002 and taken over possession of the project assets. One of the authorized representatives of CoC members, India Real Estate 2021 Trust and ACRE-81 Trust, proposed the liquidation of the Corporate Debtor. 3. Second meeting of the CoC was held on 27.05.2021 in which liquidation of the Corporate Debtor was proposed and publication of Form G was deferred till the CoC take the decision on the issue of early liquidation. The 3rd meeting of the CoC held on 23.06.2021 in which the members of the CoC again discussed the early liquidation of the Corporate Debtor. The IRP also highlighted the high cost involved in the continuation of CIRP. The 4th CoC meeting was held on 27.07.2021 in which members of the CoC proposed to take the issue of liquidation of the CD before other agenda items. The CoC had a detailed deliberation on the issue of liquidation including powers of the CoC to recomm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the scheme of IBC. With these observations, the Adjudicating Authority has further observed that it was prima facie of the opinion that the application for liquidation of CD has been filed with malicious intent and therefore, it was found as a fit case for issuance of show cause notice to the assenting CoC members jointly who voted in favour of the liquidation of the CD without even exploring the possibility of resolution of the Corporate Debtor. The Appellants herein have thus been asked to show as to why penalty stipulated under Section 65 of the Code should not be imposed on them. 5. Although, the Adjudicating Authority has asked the present Appellants to file a joint reply to the show cause notice and had also observed that it has not finally adjudicated upon the liquidation application, the fate of which would depend upon the outcome of Section 65 proceedings initiated against the assenting CoC members but aggrieved against the aforesaid impugned order dated 16.03.2023, the present appeal has been filed in which on the date of preliminary hearing held on 13.04.2023, this Court passed the order of stay in the meantime, issuance of notice under Section 65 in the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in time to the amended Section 33(2) of the Code which clearly empowers the CoC to liquidate the CD at any time after the constitution of the CoC and prior to the approval of the resolution plan. 7. As regards the issuance of show cause notice under Section 65 of the Code is concerned, it is argued that the said provision has been invoked without application of mind because it provides that it can be invoked if the proceedings have been initiated with malicious intent for any purpose other than for the liquidation. Whereas in the present case, the proceedings have been initiated for the liquidation, therefore, the said provision would not apply and has been wrongly invoked for the purpose of issuance of show cause notice and in this regard, reliance has been placed upon the orders passed in Unigreen Global Pvt. Ltd. Vs. Punjab National Bank CA (AT) (Ins) No. 81 of 2017 in which it has been held that no such penalty under sub- Section (1) or (2) of Section 65 can be imposed by the Adjudicating Authority without recording opinion for coming to the conclusion that a prima facie case is made out to suggest that the person fraudulently or with malicious intent for the purpose other ..... X X X X Extracts X X X X X X X X Extracts X X X X
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