2020 (3) TMI 1396 - Tri - Insolvency and Bankruptcy

Tribunal Orders Liquidation of Company for Failure to Approve Resolution Plan

The Tribunal ordered the liquidation of a Corporate Debtor, M/s. Samruddhi Realty Ltd., due to the absence of an approved resolution plan within the ... Liquidation of Corporate Debtor - section 33(1) of the IBC, 2016 R/w Rule 11 of the NCLT Rules, 2016 - HELD THAT:- The Resolution Professional has made his best efforts to revive the Company by exploring the possibility to find a suitable Resolution Plan of the Corporate Debtor. The Committee of Creditors has also considered the lone Resolution Plan in question, and found it is not in compliance with extant provisions of Code and rules made thereunder and thus it was not approved with requisite majority as extant provisions of Code. The instant Application is filed strictly in accordance with law. Since the Applicant/existing RP was not recommended to appoint him as Liquidator by the COC, and time for CIRP is over, having no Resolution Plan accepted by the COC, it is necessary to appoint eligible Resolution Professional as Liquidator from the Panel forwarded by IBBI for Bangalore Bench, in order to further delay to initiate liquidation process as it against the object of Code. It is found that he is eligible to be appointed as Liquidator for the Corporate Debtor. Since several home buyers are involved in the issue and majority of them are not interested to participate in the process of CIRP by participating in voting of respective resolutions placed for voting, an experienced Resolution Professional is required to be appointed. Therefore, it is a fit case to initiate Liquidation in respect of the Corporate Debtor by appointing the said Liquidator. M/s. Samruddhi Realty Ltd. Respondent/Corporate Debtor to be liquidated in the manner as laid down in Chapter III (Liquidation process) Part II of the Code - application allowed. Issues Involved:1. Application for liquidation of the Corporate Debtor.2. Appointment of a Liquidator for the Corporate Debtor.3. Compliance with the Insolvency and Bankruptcy Code (IBC) and related regulations.4. Conduct and decisions of the Committee of Creditors (CoC).5. Resolution Professional's efforts and actions during the Corporate Insolvency Resolution Process (CIRP).6. Voting outcomes and participation of CoC members.Detailed Analysis:1. Application for Liquidation of the Corporate Debtor:The application, I.A. No. 116/2020, was filed by the Resolution Professional (RP) under Section 33(1) of the IBC, 2016, seeking to liquidate the Corporate Debtor, M/s. Samruddhi Realty Ltd., due to the absence of an approved resolution plan within the stipulated CIRP period. The RP highlighted that the maximum period for completing the CIRP had expired on 17.02.2020, and no resolution plan was approved by the CoC, necessitating the liquidation to secure creditors' interests.2. Appointment of a Liquidator for the Corporate Debtor:The Tribunal appointed Mr. Pankaj Srivastava as the Liquidator for the Corporate Debtor, as the existing RP was not recommended by the CoC for this role. Mr. Srivastava provided a written consent to act as the Liquidator, declaring his eligibility and current engagements. The Tribunal found him suitable given his experience and the complexity involving multiple home buyers.3. Compliance with the Insolvency and Bankruptcy Code (IBC) and Related Regulations:The RP and the CoC followed the provisions of the IBC and the IBBI regulations throughout the CIRP. Public announcements, meetings, and the process of inviting Expressions of Interest (EOI) and Resolution Plans were conducted in compliance with the regulations. Despite these efforts, the lone resolution plan received was non-compliant with the Code and was rejected by the CoC.4. Conduct and Decisions of the Committee of Creditors (CoC):The CoC held multiple meetings to discuss and decide on various aspects of the CIRP, including the appointment of the RP, raising interim finance, and evaluating EOIs and resolution plans. The CoC's decision to reject the lone resolution plan was based on its non-compliance with the Code. The CoC also failed to pass the resolution for filing the liquidation application and appointing the RP as the Liquidator, indicating a lack of consensus among its members.5. Resolution Professional's Efforts and Actions During the Corporate Insolvency Resolution Process (CIRP):The RP made significant efforts to revive the Corporate Debtor by inviting EOIs, conducting CoC meetings, and negotiating with prospective resolution applicants. Despite these efforts, only one resolution plan was received, which was ultimately rejected by the CoC. The RP's actions were in accordance with the IBC and the IBBI regulations, aiming to find a suitable resolution plan for the Corporate Debtor.6. Voting Outcomes and Participation of CoC Members:The CoC's voting on various resolutions, including the liquidation application and the appointment of the Liquidator, reflected a lack of majority support. The resolution for filing the liquidation application received only 39.52% votes in favor, while the appointment of the RP as Liquidator received 38.33%. The only resolution that passed was the contribution of liquidation costs, with 58.67% votes in favor. The low participation and abstention by CoC members indicated challenges in reaching a consensus.Conclusion:The Tribunal ordered the liquidation of M/s. Samruddhi Realty Ltd. and appointed Mr. Pankaj Srivastava as the Liquidator. The Liquidator was directed to issue a public announcement and adhere to the IBC and IBBI regulations. The Tribunal emphasized the need for an experienced professional to manage the liquidation process, given the involvement of several home buyers and the lack of active participation by CoC members. The case was posted for a report from the Liquidator on 15th June 2020.