Tribunal orders liquidation of Corporate Debtor after CoC rejects resolution plan

The Tribunal ordered the liquidation of the Corporate Debtor (CD) due to the rejection of the resolution plan by the Committee of Creditors (CoC) and in accordance with the Insolvency and Bankruptcy Code. The Liquidator was appointed to oversee the liquidation process, investigate financial affairs, issue public announcements, and comply with regulatory requirements. This decision aligns with commercial considerations and legal precedents, leading to the initiation of the liquidation process under Section 33(1)(a) of the IBC.

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Issues Involved:
1. Initiation of the liquidation process under Section 33(1)(a) of IBC
2. Expiry of the Corporate Insolvency Resolution Process (CIRP)
3. Rejection of the resolution plan by the Committee of Creditors (CoC)
4. Appointment and actions of the Resolution Professional (RP)
5. Financial affairs and transactions of the Corporate Debtor (CD)
6. Appointment of the Liquidator and subsequent actions

Issue-wise Detailed Analysis:

1. Initiation of the Liquidation Process:
The application for initiating the liquidation process of the Corporate Debtor (CD) was filed under Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 (IBC), due to the expiry of the Corporate Insolvency Resolution Process (CIRP) on 16.2.2019 and the rejection of the resolution plan by the Committee of Creditors (CoC) on 12.02.2019.

2. Expiry of the CIRP:
The CIRP commenced on 2.5.2018 based on a petition by the CD itself under Section 10 of IBC. The process included the appointment of Mr. Arun Chadha as the Interim Resolution Professional (IRP) and subsequent steps such as publication for claims, constitution of CoC, and meetings. The CIRP period was extended up to 16.2.2019 as per Section 12 of IBC, but no successful resolution plan was finalized within this period.

3. Rejection of the Resolution Plan by the CoC:
The CoC rejected the sole resolution plan presented by Designers Point (India) Pvt. Ltd. (DPIPL) on 12.2.2019 with a voting share of 58.18% against the plan. The reasons for rejection included:
- The resolution plan was below the liquidation value of the CD.
- The amount offered was lower than that offered by another resolution applicant.
- The plan scored lower marks in quantitative and qualitative aspects as per the evaluation matrix approved by the CoC.

4. Appointment and Actions of the Resolution Professional (RP):
Mr. S.K. Mathur was appointed as the RP after the initial IRP, Mr. Arun Chadha, was not confirmed by the CoC. Subsequent actions by the RP included appointing valuers, publishing Expression of Interest (EoI), and extending deadlines to maximize resolution applicants. The RP also filed various applications regarding the surrender of vehicles, preferential transactions, fraudulent trading, and fraudulent sale of property.

5. Financial Affairs and Transactions of the CD:
The financial affairs of the CD revealed claims amounting to Rs. 38,59,98,147.08 against available assets valued at Rs. 10.71 crore. The RP highlighted transactions by the CD's management that appeared to be detrimental and prejudicial to the interests of creditors, including allegations of fraudulent sale of property. The Tribunal noted that these transactions seemed to have been arranged to secrete away assets from creditors.

6. Appointment of the Liquidator and Subsequent Actions:
The Tribunal appointed Mr. S.K. Mathur as the Liquidator, as proposed by the CoC, and in view of his consent to act as such. The Liquidator is directed to:
- Issue a public announcement of the CD's liquidation.
- Investigate the financial affairs of the CD, particularly in relation to preferential and undervalued transactions.
- Communicate the order to the Registrar of Companies and the Insolvency and Bankruptcy Board of India.
- Intimate the Income Tax Department and other regulatory authorities about the liquidation order.
- Proceed with the liquidation process as per Chapter III of Part II of IBC.
- Submit a preliminary report to the Tribunal within seventy-five days from the liquidation commencement date.

The Tribunal ordered the liquidation of the CD, taking into account the rejection of the resolution plan by the CoC based on commercial decisions, and in line with the provisions of IBC and the Supreme Court's decision in K. Sashidhar vs. Indian Overseas Bank & Ors.

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