Resolution Plans Rejected, Liquidation Ordered under Insolvency Law

The National Company Law Tribunal rejected the resolution plans and ordered the liquidation of the corporate debtor. The resolution plan submitted was found ineligible, leading to the appointment of a liquidator to oversee the liquidation process in accordance with the Insolvency and Bankruptcy Code. The rejection of the plans resulted in the cessation of powers of the board of directors and key managerial personnel, with instructions for cooperation with the liquidator in the liquidation proceedings.

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Issues Involved:
1. Extension of Corporate Insolvency Resolution Process (CIRP) period.
2. Approval of resolution plans.
3. Eligibility under Section 29A of the Insolvency and Bankruptcy Code (IBC).
4. Settlement agreement under Section 12A of the IBC.
5. Role and powers of the Committee of Creditors (CoC).
6. Liquidation of the corporate debtor.

Issue-Wise Detailed Analysis:

1. Extension of Corporate Insolvency Resolution Process (CIRP) Period:
The initial CIRP period was extended multiple times due to various circumstances, including the need for further negotiations and the impact of the COVID-19 pandemic. The extensions were granted by the National Company Law Tribunal (NCLT) through orders dated August 26, 2019, October 31, 2019, January 24, 2020, and February 12, 2020, extending the CIRP period up to May 3, 2020.

2. Approval of Resolution Plans:
Two prospective resolution applicants, M/s. Orion Ferro Alloys P. Ltd., and Mr. Madhusudhan Raju Chintalapati, submitted resolution plans. The CoC authorized the resolution professional to negotiate with the applicants to improve their offers. Despite negotiations, no better resolution plans were submitted. The CoC eventually approved a restructuring plan submitted by Mr. Madhusudhan, which was later contested.

3. Eligibility under Section 29A of the Insolvency and Bankruptcy Code (IBC):
Mr. Madhusudhan submitted an affidavit confirming his eligibility under Section 29A of the IBC, supported by a certificate from K. K. M. K. and Associates, chartered accountants. However, the restructuring plan involved the former managing director, Mr. P. Vijay Kumar, who continued to hold a substantial stake, which contravened Section 29A's intent to prevent former promoters from regaining control.

4. Settlement Agreement under Section 12A of the IBC:
A settlement agreement was entered into between Mr. P. Vijay Kumar, Mr. Madhusudhan, and the operational creditor, M/s. Priya Trading Co., for withdrawal of the application. This agreement was placed before the CoC but was not considered in terms of Section 12A, which allows withdrawal of the application with the CoC's approval.

5. Role and Powers of the Committee of Creditors (CoC):
The CoC's decision to approve the restructuring plan was influenced by an order dated February 4, 2020, which directed the RP to place the restructuring plan before the CoC. The CoC approved the plan with a 96.39% voting share. However, the restructuring plan was found to be ineligible as it provided a backdoor entry to the former managing director, violating Section 29A.

6. Liquidation of the Corporate Debtor:
The NCLT rejected the resolution plan submitted by Mr. Madhusudhan under Section 31(2) of the IBC, as it did not meet the requirements of Section 30(2). Consequently, the NCLT ordered the liquidation of the corporate debtor under Section 33(1)(b) of the IBC. The current resolution professional, Mr. Sisir Kumar Appikatla, was appointed as the liquidator, and the corporate debtor was to be liquidated as per Chapter III of the IBC.

Conclusion:
The applications in I.A. No. 64 of 2020, I.A. No. 66 of 2020, I.A. No. 67 of 2020, and I.A. No. 68 of 2020 were rejected. The resolution plan submitted in I.A. No. 64 of 2020 was rejected under Section 31(2) of the IBC. The NCLT ordered the liquidation of the corporate debtor, with the liquidator to manage the liquidation process and issue a public announcement. The order also outlined the cessation of powers of the board of directors and key managerial personnel, and the requirement for all personnel to cooperate with the liquidator.

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