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TMI Blog2024 (2) TMI 1187X X X X Extracts X X X X X X X X Extracts X X X X ..... spite of filing SARFAESI proceedings. It was also pointed out that though the IRP had sent several mails to the suspended management to be present and assist in the handover of the assets of the Corporate Debtor no such assistance was given in handing over the assets of the Corporate Debtor. Therefore, the CoC in the exercise of its powers endowed upon it by Section 33(2) of the IBC was entitled to liquidate the Corporate Debtor. Whether in the present facts of the case there were good reasons for the CoC to initiate liquidation of the Corporate Debtor in the exercise of its commercial wisdom? - whether there existed any cogent ground for the Adjudicating Authority to reject the recommendation made by the CoC to initiate liquidation of the present Corporate Debtor? - HELD THAT:- From the CoC minutes it is also clear that the RP had noticed that Corporate Debtor is not a going concern for 3 years prior to CIRP. This fact has not been contested by the Appellants either. In the present case, when the Corporate Debtor has not been functioning for three years prior to admission into CIRP, the objection raised by the Appellant to the decision of the CoC to liquidate the Corporate De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals - appeal dismissed. - [ Justice Ashok Bhushan ] Chairperson And [ Barun Mitra ] Member ( Technical ) For the Appellant : Mr. Krishnendu Datta, Sr. Advocate with Mr. Ravi Raghunath, Mr. Aniruth Purusothaman, Ms. Varsha Himatsingka and Mr. Utkarsh Kumar, Advocates For the Respondents: Mr. Asav Rajan and Ms. Charu Trivedi, Advocates for R-1. Mr. Arvind Nayar, Sr. Advocate with Mr. Mayank Biyani, Advocate For the Appellant : Mr. Dhruv Gupta, Advocate For the Respondents : Mr. Asav Rajan and Ms. Charu Trivedi, Advocates for R-1. Mr. Arvind Nayar, Sr. Advocate with Mr. Mayank Biyani, Advocate JUDGMENT [ Per : Barun Mitra, Member ( Technical ) ] Present is a set of two appeals filed under Section 61 of Insolvency and Bankruptcy Code, 2016 ( IBC in short) arising out of the common order dated 04.12.2023 (hereinafter referred to as Impugned Order ) passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court-II) in CP (IB)4058(MB)2019. By the impugned order, the Adjudicating Authority allowed I.A. No. 2947 0f 2023 filed by the Resolution Professional for initiating the liquidation of the Corporate Debtor under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the DM of Palghar had allowed SBI on 19.08.2015 to take possession of land of the Corporate Debtor in Wada, Palghar. These directions of the DM regarding possession of land to be given to SBI had been complied with and SBI had already taken possession of the land of the Corporate Debtor in 2016. On 23.04.2016, the SBI had also appointed valuers who submitted their report on the valuation and plant and machinery as well as the plot of land. It was further submitted that the immovable property of the Corporate Debtor which had been mortgaged in favour of SBI had already been handed over to the IRP. Even the plant machinery and equipment of the Corporate Debtor had been handed over to the IRP on 29.03.2016. 4. Submission was made that the RP misrepresented before the Adjudicating Authority that SBI could not take possession of the land of the Corporate Debtor. The Adjudicating Authority had erred in passing the impugned order by relying on such wrong and misleading submissions made by the RP. It was also submitted that the RP created a wrong impression that the suspended management of the Corporate Debtor did not provide information with respect to the assets of the Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgements of this Tribunal including Air Travel Enterprises India Ltd. Ors. V. Lukose Joseph, Liquidator of Green Gateway Leisure Limited Ors. in CA (AT) (CH) (Ins) No. 464/2023; Rakshit Dhirajlal Doshi Anr. V. Sumedha Management Solutions Pvt. Ltd. Anr. in CA(AT) (Ins) No. 29 of 2024; ACRE-81 Trust through its trustee Assets Care Reconstruction Enterprise Ltd. Ors. V. Pawan Kumar Goyal IRP of SARE Realty Projects Pvt. Ltd. in CA(AT) (Ins) No. 447 of 2023. 7. It was vehemently argued that in the present facts of the case, there existed sufficient grounds for the CoC to liquidate the Corporate Debtor. The Corporate Debtor had stopped functioning as a going concern for 3 years even prior to the commencement of the CIRP. Further given that the assets of the Corporate Debtor were neither in possession of the Respondent No. 2 nor its custody with the RP and had been moved away by the suspended management, the Corporate Debtor was not capable of revival and hence CoC had rightly decided on its liquidation. Furthermore, since tracing the assets of the Corporate Debtor would have been a long-drawn process which would have entailed enhanced CIRP cost, the CoC was well justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Adjudicating Authority of the decision of the committee of creditors 1[approved by not less than sixty-six per cent. of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) 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.] 12. A plain reading of the aforementioned sub section (2) of Section 33 of the IBC unambiguously shows that it is not incumbent upon the CoC to complete the steps for resolution of the Corporate Debtor before exercise of its jurisdiction to pass an order of liquidation of the Corporate Debtor. Such a decision can be taken any time during the corporate insolvency resolution process as long as it is before confirmation of resolution plan. The very fact that the words any time has again been used in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This therefore brings us to the contention of the Appellants that it is a well settled proposition of law as laid down in Swiss Ribbons (P) Ltd Vs Union of India (2019) 4 SCC17 that IBC is first and foremost a code for reorganisation and insolvency resolution of Corporate Debtors and liquidation should be the last resort. Attention was also adverted to paras 27 and 28 of the said judgement where it has been held that: 27 .. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. 28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation 17. It is also the case of the Appellants that the decision of the CoC for liquidation of the Corporate Debtor was unsustainable in law since the there were no good reasons for initiating li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/02/2023 Item No. 8 To take note of the opinion of the Resolution Professional regarding the transactions covered under Sec. 43, 45, 50 and 66. The IRP has examined the past Annual Reports of the Corporate Debtor available on the BSE stock exchange and has found that the Corporate Debtor has reported write-offs, impairment of assets and provisions for bad debts, which are abnormal and may fall under the provisions of the avoidance transactions u/sec.43,45,50 66 of IBC, 2016. The IRP asked the Suspended Director regarding any clarifications that he could provide regarding the above. The suspended Director responded that he is not aware about the same and does not remember anything about these transactions. He further informed that the Managing Director, Mr. Lalit Laxmiram Agarwal (deceased) was looking into the affairs of the CD and therefore he does not have any information on the same. The IRP further informed that the records and books of accounts of the CD have not been handed over and that the same were also not available at the registered office of the CD located at Malad (west), Mumbai. IRP informed that he will be appointing of a transaction auditor fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pended Directors have expressed opinion that there are no assets available to be handed over to the IRP. 4th CoC meeting held on 04/05/2023 Item No. 3: To Discuss Such Other Matters With The Permission Of Majority Of Members Of The Committee Of Creditors As May Be Deemed Necessary For The Smooth Functioning Of The Corporate Insolvency Resolution Process. 2. SBI Officials informed that land at Wada and Plant and Machineries at Wada have been mortgaged to the bank (SBI) and SBI never taken Physical possession of the same due to demarcation issue inpite of DM/CMM Order received in the year 2016 and not permitted any entry into factory. Resolution Professional informed that the IRP also not taken the possession of the factory, Land and Plant and Machineries as per the Minutes of the 1st, 2nd and 3rd COC Meetings as the suspended management not cooperated to the IRP. All the COC members discussed on the need for taking over of the factory, Land, Plant and Machineries and decided that to file an application with Hon ble NCLT, Mumbai at the earliest and Resolution Professional agreed for the same. 4. SBI officials informed that the CD created security Interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % E Voting results. RP noted the same. (Emphasis supplied) 21. Against this backdrop of the minutes recorded in the CoC deliberations, we now take notice of the findings recorded by the Adjudicating Authority while validating the CoCs approval of the liquidation of the Corporate Debtor. The relevant excerpt of the impugned order is as extracted below: 9. In the present case, it is observed that the Corporate Debtor was into the business of manufacturing transformers for electricity production. But the Corporate Debtor had not been doing business since 2020 i.e. 19.12.2022. The only traceable assets of the Corporate Debtor is the factory premises, that is in the possession of Aesthetic as there was no clear demarcation of the factory premises of the Corporate Debtor. The registered office of the Corporate Debtor is situate on rented premises as observed from the 7/12 extracts. The machinery owned by the Corporate Debtor appears to have been sold by the suspended management of the Corporate Debtor in 2015. The erstwhile management of the Corporate Debtor had not handed over any assets or accounts or other information relating to the Corporate Debtor nor is co-oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellants either. In the present case, when the Corporate Debtor has not been functioning for three years prior to admission into CIRP, the objection raised by the Appellant to the decision of the CoC to liquidate the Corporate Debtor as arbitrary therefore lacks merit. Moreover, the IRP did not have requisite and certain information to draw up proper information memorandum. The CoC had also noted that the IRP had not provided requisite documents like Information Memorandum, Evaluation Matrix, RFRP to the PRAs to facilitate submission of plans. Hence the CoC rightly felt that in the given circumstances it was unlikely that a viable and feasible resolution plan would come around. Continuation of CIRP would only have enhanced the CIRP cost without corresponding advantage. 24. The reliance placed by the Learned Counsel for the Appellants upon the judgment of this Tribunal in the matter of Nikhil Tandon Vs. Sanjeev Bindal Liquidator in CA (AT) (Ins.) No. 13 of 2022 also cannot come to the aid of the Appellant since the facts are clearly distinguishable. In that case, resolution plan had been received from the Corporate Debtor which was a MSME but the plan was refused on the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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