2019 (5) TMI 1668 - Tri - Insolvency and Bankruptcy

Tribunal rulings on insolvency code, jurisdiction, claim adjudication, and bank guarantee forfeiture

The tribunal in this case addressed issues related to jurisdiction, application filings under the insolvency code, claim adjudication grievances, and ... Commencement of liquidation under Section 33 - confirmation of liquidator upon consent - committee of creditors' resolution to appoint liquidator - jurisdiction to redress employee salary claims - adjudication of claims by the resolution professional - forfeiture of bank guarantee by a prospective resolution applicantCommencement of liquidation under Section 33 - committee of creditors' resolution to appoint liquidator - confirmation of liquidator upon consent - Initiation of liquidation and appointment of liquidator in view of expiry of the CIR process without a resolution plan and COC's resolution. - HELD THAT: - The Tribunal noted that no expression of interest or resolution plan was received and that 270 days of the corporate insolvency resolution process had expired. The Committee of Creditors passed a resolution directing the resolution professional to file an application under Section 33. Having regard to these facts and the COC's recommendation approving the name of the resolution professional to act as liquidator, the application for initiation of liquidation merits consideration. Upon the resolution professional's consent being placed on record, he shall be confirmed as the liquidator. No further directions were considered necessary by the Tribunal.Application under Section 33 is maintainable; the RP is approved by the COC to act as liquidator and shall be confirmed as liquidator upon filing his consent.Jurisdiction to redress employee salary claims - Whether the Tribunal can entertain and redress the employees' grievance regarding unpaid salaries during the CIR process/liquidation proceedings. - HELD THAT: - The Tribunal observed that although a proposal for salary distribution from the Consolidated Fund had been made, the budgetary sanction was not granted and employees remained unpaid and aggrieved. The Tribunal found that it was not vested with jurisdiction to redress those grievances in the present proceedings, particularly in light of the matter proceeding to liquidation, and indicated that the employees' remedy, if any, lies before another forum.Tribunal lacks jurisdiction to redress the employees' salary grievance in these insolvency/liquidation proceedings; employees must seek remedy before the appropriate forum.Adjudication of claims by the resolution professional - Adjudication of a specific creditor's claim where only a portion of the claimed amount was admitted by the RP. - HELD THAT: - An application filed by a member of the COC complained that their claim was not properly adjudicated - out of a claimed amount only a smaller sum was admitted. The Tribunal accepted notice of the application and directed the resolution professional to look into the matter, thereby leaving the adjudication/reconsideration to the RP's examination.Matter directed to the resolution professional for examination; adjudication of the disputed claim to be looked into by the RP.Forfeiture of bank guarantee by a prospective resolution applicant - Dispute over COC's decision to forfeit the bank guarantee of a prospective resolution applicant who did not submit a resolution plan. - HELD THAT: - A prospective resolution applicant challenged the COC's decision to forfeit his bank guarantee after he failed to submit a resolution plan. The Tribunal recorded that a reply has been filed in the proceedings and the matter (CA 484/2019) remains pending for consideration.Challenge to forfeiture of bank guarantee is pending consideration; no final adjudication recorded in this order.Final Conclusion: In view of expiry of the CIR period without a resolution plan and the COC's resolution, liquidation proceedings are to be proceeded with; the RP recommended by the COC shall be confirmed as liquidator upon filing his consent. The Tribunal declined jurisdiction to entertain employees' salary grievances in these proceedings. Other contested matters - adjudication of a creditor's claim and challenge to forfeiture of a bank guarantee - remain to be examined as directed. Issues involved:1. Jurisdiction of the tribunal to address employee salary distribution issue.2. Filing of application under Section 33 of the Code due to lack of resolution plan.3. Grievance of a COC member regarding claim adjudication.4. Forfeiture of bank guarantee of a prospective Resolution Applicant.Analysis:1. The tribunal, in this judgment, addressed the issue of jurisdiction concerning the distribution of employee salaries. The Union of India proposed salary distribution for employees, but the budgetary allocation was not sanctioned, leaving employees unpaid for several months. The tribunal noted its lack of jurisdiction to redress the employees' grievances, especially in the context of the ongoing liquidation proceedings, directing the employees to seek remedy from another forum.2. The judgment also discussed the filing of an application under Section 33 of the Code due to the absence of a resolution plan and the expiration of 270 days in the Corporate Insolvency Resolution (CIR) process. The Committee of Creditors (COC) directed the Resolution Professional (RP) to file the application, considering the absence of any resolution plan and the financial figures involved, leading to the recommendation of the RP as the liquidator.3. Another issue addressed in the judgment was the grievance raised by a member of the COC regarding claim adjudication. The member's claim of over Rs. 45 lakhs had only Rs. 2 lakhs admitted, prompting the tribunal to accept the notice of the application and instructing the RP to investigate the matter further.4. Lastly, the judgment discussed the forfeiture of a bank guarantee of a prospective Resolution Applicant who failed to submit a resolution plan. The COC decided to forfeit the bank guarantee, and the tribunal noted the filing of a reply to this application, along with the pendency of another related application for disposal at a later date.In conclusion, the tribunal's judgment delved into various issues, including jurisdictional limitations, application filings under the insolvency code, claim adjudication grievances, and consequences for prospective Resolution Applicants, providing detailed analysis and directions for further consideration of the pending applications.