Creditors Reject Plan, Liquidation Initiated: Appoints Liquidator, Issues Directions

The Committee of Creditors rejected the resolution plan for the Corporate Debtor, leading to the initiation of the liquidation process under Sections 33 and 34 of the Insolvency & Bankruptcy Code. Mr. Ashwani Kumar Gupta was appointed as the Liquidator to oversee the liquidation proceedings, investigate financial affairs, and comply with IBC provisions. Specific directions were issued for the Liquidator to manage the process efficiently, including ceasing the Moratorium under Section 14 and commencing a fresh Moratorium under Section 33(5) of IBC. The application was disposed of with directives to facilitate the liquidation process effectively.

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Issues:
Liquidation of Corporate Debtor under Sec. 33 read with Sec. 34 of IBC 2016.

Detailed Analysis:
The Resolution Professional (RP) sought liquidation of the Corporate Debtor (CD) under Sec. 33 and Sec. 34 of the Insolvency & Bankruptcy Code (IBC) 2016. The Corporate Insolvency Resolution Process (CIRP) was initiated following the admission of the main company petition by an Operational Creditor (OC). The Interim Resolution Professional (IRP) was initially appointed, followed by the present RP, who filed the application for liquidation. The Committee of Creditors (COC) was constituted, comprising various Financial Creditors with different voting shares. Despite efforts to resolve insolvency, no acceptable resolution plan was approved by the COC, leading to the expiration of the CIRP period. The RP submitted status reports on the progress made during the CIRP, highlighting various developments and actions taken.

The COC made attempts to prevent liquidation by revising net worth criteria and allowing the submission of revised Resolution Plans by the promoters of the CD. However, the resolution plans submitted did not meet the expectations of the COC, offering only a fraction of the total amount claimed by creditors. The rejection of the resolution plan by the COC, with a significant majority, necessitated the initiation of the liquidation process as per Sec. 33 of IBC. The decision was based on commercial considerations and the overall interest of the creditors, following the principles established by the Hon'ble Supreme Court.

The RP reported that applications related to undervalued and fraudulent transactions were pending, as the former Board and personnel of the CD did not cooperate during the CIRP. With the rejection of the resolution plan and the expiry of the CIRP period, the Tribunal was compelled to initiate liquidation. Mr. Ashwani Kumar Gupta was appointed as the Liquidator based on the COC's proposal and his consent. The Liquidator was directed to comply with IBC provisions, investigate financial affairs, issue public announcements, communicate with regulatory bodies, and proceed with the liquidation process as per the prescribed regulations.

The order issued specific directions for the Liquidator, including investigating financial affairs, intimating relevant authorities, ceasing the Moratorium under Sec. 14, and commencing a fresh Moratorium under Sec. 33(5) of IBC. The Liquidator was instructed to submit a preliminary report within a specified timeline, handle pending Company Applications, and manage liquidation expenses as per IBBI regulations. The application was disposed of with the outlined directives to facilitate the liquidation process effectively.

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