2019 (2) TMI 2005 - Tri - Insolvency and Bankruptcy

Tribunal Upholds CoC's Decision on Resolution Plans, Orders Liquidation

Mr. Avasarala Venkateswara Rao Versus Mr. G. Madhusudhan Rao, State Bank of India, Indian Overseas Bank, Kotak Mahindra Bank, L&T Finance Ltd. And Mr. Avasarala Venkateswara Rao Versus Mr. G. Madhusudhan Rao, State Bank of India, Indian Overseas Bank, Kotak Mahindra Bank, L&T Finance Ltd. And Mr. G Madhusudhan Rao Versus M/s Murali Krishna Power Controls Private Limited, M/s Servomax India Private Limited, Mr Avasarala Venkateswara Rao

The Tribunal dismissed the Applicant's requests to reconsider the Resolution Plan and extend the CIRP period. It upheld the CoC's decision to reject ... Seeking direction to COC members to reconsider the Resolution plan - seeking extension of CIRP period and not to consider the request for liquidation filed by Resolution Professional - HELD THAT:- This is an Application filed by Promoter / Director of the Suspended Board of Corporate Debtor M/s Servomax India Private Limited under Section 60 (5) of Insolvency & Bankruptcy Code, 2016 praying for extension of CIRP period for further 122 days stating that the said period was not utilized for CIRP on account of replacement of Resolution Professionals. As many as 09 CoC meetings were held and meetings were being held regularly since the day of constitution of CoC. No Resolution Plan was approved by the CoC. In fact, on the Application filed by Resolution Professional on the direction of CoC, CIRP was extended by 90 days beyond 180 days. CIRP continued for about 270 days, the maximum period allowed. The CoC has not approved any Resolution Plan. CoC decided before conclusion of CIRP period for liquidation of Corporate Debtor which is also made clear by the Resolution Professional that he would file a separate Application for passing order of liquidation under Section 33 of IBC. The Applicant being Director has no locus standi to seek exclusion of time. Decision is to be taken by CoC with majority if any. The Applicant is only a Director (Suspended Board) - the present Application does not survive. Even otherwise the allegations made by Applicant are found not to be true and correct as Resolution Professional filed sufficient proof that during entire period of CIRP, the proceedings are conducted in accordance with the provisions of IBC, 2016 and Regulations thereunder. The present Application is filed with a view to prolong the CIRP and it is nothing but misuse of the process, Therefore, the present Application deserves to be dismissed. Seeking directions to pass Liquidation Order against Corporate Debtor - seeking direction to appoint Resolution Professional as Liquidator - Section 33 (1) (a) and 34 (1) of Insolvency & Bankruptcy Code, 2016 - HELD THAT:- Since no resolution plan is received by the Adjudicating Authority under Section 30 (6) of IBC, 2016, therefore. Tribunal has to pass an order of Liquidation against Corporate Debtor - The Application is allowed and Corporate Debtor M/s Servomax India Private Limited is ordered to be liquidated. Issues Involved:1. Reconsideration of the Resolution Plan by CoC.2. Extension of CIRP period.3. Request for liquidation by the Resolution Professional.4. Locus standi of the Applicant (Director of Suspended Board).Detailed Analysis:1. Reconsideration of the Resolution Plan by CoC:The Applicant, a Director of the Suspended Board of Corporate Debtor, requested the Tribunal to direct the CoC members to reconsider his Resolution Plan. The Applicant argued that his plan was rejected without due justification and that his plan offered a total payment of Rs. 16,405.91 Lacs against the liquidation value of Rs. 5000 Lacs. However, the CoC, exercising its commercial wisdom, did not approve any Resolution Plan, including the Applicant's. The Tribunal held that it cannot sit in appeal over the decision of the CoC, which is the competent body to decide the feasibility and viability of any Resolution Plan.2. Extension of CIRP period:The Applicant sought an extension of the CIRP period by 122 days, arguing that this period was not utilized due to the replacement of Resolution Professionals. The Tribunal noted that the CIRP period had already been extended by 90 days beyond the initial 180 days and that the maximum period allowed (270 days) had elapsed. The Tribunal found that the IRP and subsequent Resolution Professionals had performed their duties as per the IBC, 2016, and that the Applicant had no locus standi to seek such an extension being a member of the suspended Board of Directors. The Tribunal dismissed the Applicant's request for an extension.3. Request for liquidation by the Resolution Professional:The Resolution Professional filed an application under Section 33(1)(a) and 34(1) of the IBC, 2016, seeking directions to pass a liquidation order against the Corporate Debtor and to appoint the Resolution Professional as the Liquidator. The CoC had not approved any Resolution Plan, and the CIRP period had ended. The Tribunal, therefore, passed an order of liquidation against the Corporate Debtor, appointing the Resolution Professional as the Liquidator and directing the initiation of the liquidation process as per the IBC regulations.4. Locus standi of the Applicant:The Tribunal questioned the locus standi of the Applicant, who is a Director of the Suspended Board of the Corporate Debtor, to file an application for the exclusion of time from the CIRP period. The Tribunal found that the Applicant did not have the standing to seek such relief, as the decision to exclude time or extend the CIRP period must be taken by the CoC with a majority. The Tribunal dismissed the Applicant's application on these grounds.Conclusion:The Tribunal dismissed the Applicant's requests to reconsider the Resolution Plan, extend the CIRP period, and prevent the liquidation of the Corporate Debtor. The Tribunal upheld the CoC's decision to reject the Resolution Plans and ordered the liquidation of the Corporate Debtor, appointing the Resolution Professional as the Liquidator. The Tribunal emphasized that the CoC's commercial wisdom in evaluating the feasibility and viability of Resolution Plans cannot be challenged by the Adjudicating Authority.