2019 (12) TMI 1524 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor Approved, Liquidator Appointed

The Adjudicating Authority approved the liquidation of the Corporate Debtor based on the Committee of Creditors' resolution and the Resolution ... Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Committee of Creditors' decision to liquidate approved by requisite voting share - Waiver of FORM G and valuation by the Committee of Creditors - Effect of the IBC Amendment Act, 2019 on the decision-making power under Section 33(2) - Right of erstwhile directors to submit a resolution plan and applicability of Section 29ALiquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Effect of the IBC Amendment Act, 2019 on the decision-making power under Section 33(2) - Committee of Creditors' decision to liquidate approved by requisite voting share - Order for liquidation of the Corporate Debtor was validly passed under Section 33(2) of the IBC, 2016 following CoC's decision to liquidate with the required majority. - HELD THAT: - The Adjudicating Authority recorded that no resolution plan was received under Section 30(6) and that the Committee of Creditors resolved to liquidate the corporate debtor with the required majority. The amended provision of Section 33(2) (post IBC Amendment Act, 2019) permits the resolution professional to intimate the Adjudicating Authority of the CoC's decision to liquidate, any time after constitution of the CoC and before confirmation of a resolution plan. Having regard to the facts recorded by the resolution professional and the CoC's decision taken with the requisite voting share, the Adjudicating Authority proceeded to pass the liquidation order and appointed a liquidator to conduct liquidation in accordance with the Code and applicable regulations. [Paras 13, 14, 15]Liquidation of M/s. Sristek Clinical Research Solutions Ltd. ordered under Section 33(2); liquidator appointed and consequential directions issued.Waiver of FORM G and valuation by the Committee of Creditors - Right of erstwhile directors to submit a resolution plan and applicability of Section 29A - The contentions of the suspended director challenging CoC's waiver of FORM G/valuation and claiming denial of opportunity to submit a resolution plan were not accepted in view of the statutory scheme under the amended Section 33(2). - HELD THAT: - The suspended director contended that the CoC directed liquidation without issuing FORM G (expression of interest) and that erstwhile directors were thereby deprived of the opportunity to submit a resolution plan, asserting they were not within the purview of Section 29A. The Adjudicating Authority noted the resolution professional's record that no resolution plan had been received and that CoC had considered waiving FORM G and valuation. In light of the amended Section 33(2), which allows the CoC to decide liquidation at any time after its constitution and before confirmation of a plan, the authority held that the suspended director's objections could not prevent liquidation where the CoC had resolved to liquidate with the required majority and no plan was before the Adjudicating Authority. [Paras 6, 8, 11, 14, 15]Objections of the suspended director regarding waiver of FORM G, valuation and alleged denial of opportunity to submit a resolution plan are not tenable in view of the amended statutory provision and the CoC's decision; they do not preclude passing the liquidation order.Final Conclusion: The Adjudicating Authority, applying the amended Section 33(2) of the IBC, 2016, ordered liquidation of the Corporate Debtor on the ground that no resolution plan was received and the Committee of Creditors resolved to liquidate with the requisite majority; a liquidator was appointed and consequential directions were issued. Issues:Liquidation order sought by Resolution Professional under section 33(2) of I & B code, 2016.Analysis:The Resolution Professional (RP) filed an application seeking a liquidation order for the Corporate Debtor under section 33(2) of the Insolvency and Bankruptcy Code, 2016. The Corporate Debtor was admitted for commencement of Corporate Insolvency Resolution Process (CIRP) and Mr. Subba Rao Gonuguntla was appointed as the Insolvency Resolution Professional (IRP) by the Adjudicating Authority. Subsequently, Mr. Subba Rao Gonuguntla was appointed as the Resolution Professional (RP) during the first Committee of Creditors (CoC) meeting. The RP informed the CoC that the Corporate Debtor had no assets, no physical assets, no business activity, and was a Micro, Small and Medium Enterprises (MSME) unit. The RP suggested waiving the valuation and Form G issuance based on judicial pronouncements. The CoC resolved to waive the valuation and Form G issuance temporarily, allowing the Corporate Debtor to file a resolution plan to continue as a going concern. The CoC provided an opportunity for the Ex-management to submit compromise proposals or resolution plans, receiving six proposals until August 11, 2019. However, as the Suspended Director failed to fulfill commitments, the CoC decided on liquidation.The Suspended Director opposed the liquidation decision, claiming to be a first-generation entrepreneur with plans to establish a clinical research company. The Respondent argued that the CoC's decision to proceed with liquidation without following due process, including issuing Form G, was illegal and deprived the Erstwhile Directors of their rights to submit a resolution plan. The Respondent contended that the Petition filed by the RP without issuing Form G was illegal and should be dismissed. After hearing both sides and examining the records, the Adjudicating Authority noted that no resolution plan was received under Section 30(6). The Authority referred to the amended Section 33(2) of the IBC, 2019, allowing liquidation upon CoC's decision approved by the required majority. Therefore, the Adjudicating Authority ordered the liquidation of the Corporate Debtor, appointed a Liquidator, and outlined the process to be followed under the I&B Code.In conclusion, the Adjudicating Authority approved the liquidation of the Corporate Debtor based on the CoC's resolution and the RP's application, in accordance with the relevant provisions of the Insolvency and Bankruptcy Code, 2016. The Liquidator was appointed to oversee the liquidation process, with specific instructions regarding the management of assets, legal proceedings, and fees. The order was issued to cease the moratorium, transfer powers to the Liquidator, and ensure compliance with regulations governing the liquidation process. The decision was communicated to relevant stakeholders, and the RP's application for liquidation proceedings against the Corporate Debtor was disposed of.