2020 (10) TMI 1306 - AT - Insolvency and Bankruptcy

Tribunal Upholds Liquidation Order, Emphasizes Non-Justiciability of Creditor Decisions

The Tribunal upheld the order of liquidation of a Corporate Debtor, emphasizing the non-justiciability of the Committee of Creditors' commercial decisions ... Liquidation of corporate Debtor - allegation is that sole creditor constitutes the Committee of Creditors and the decision taken to liquidate the Corporate Debtor is vindictive and malafide - HELD THAT:- Keeping the fact that the Corporate Debtor intends to settle with the Creditors, the instant appeal is dismissed with observation that the dismissal this appeal shall not preclude the Corporate Debtor from advancing proposal or floating a scheme/ settlement in terms of aforesaid provision. The appeal is dismissed. Issues:Appeal against order of liquidation due to Committee of Creditors decision and alleged malafide intentions.Analysis:The judgment deals with an appeal against the order of liquidation of a Corporate Debtor passed by the Adjudicating Authority. The main issue raised in the appeal is the composition of the Committee of Creditors and the decision to liquidate the Corporate Debtor being considered vindictive and malafide. The Tribunal emphasized the principle that the commercial wisdom of the Committee of Creditors in approving a Resolution Plan or opting for liquidation is not subject to judicial review. The decision of the Committee of Creditors, especially with 100% voting share, is considered beyond challenge unless there is a material irregularity in the Corporate Insolvency Resolution Process. The Tribunal highlighted that the domain of commercial wisdom lies with the Committee of Creditors, and interference is not warranted in the absence of irregularities.The Appellant, through their counsel, expressed the Corporate Debtor's willingness to settle the claims of the Creditors. The Tribunal acknowledged this submission and pointed out that the Corporate Debtor has the option to settle with the Creditors even during the liquidation stage by utilizing the provisions of Section 230 of the Companies Act, 2013. In light of this representation and the Corporate Debtor's intention to settle, the Tribunal dismissed the appeal. However, the dismissal of the appeal was accompanied by an observation that it does not prevent the Corporate Debtor from proposing a settlement or scheme under the aforementioned provision. This indicates that the Corporate Debtor can still pursue settlement options despite the appeal being dismissed by the Tribunal.