Tribunal Upholds Creditors' Liquidation Decision: CoC's Powers, Debtor's Viability, Judicial Review

The Tribunal upheld the Committee of Creditors' decision for liquidation of the Corporate Debtor, emphasizing the CoC's wide powers under the Insolvency and Bankruptcy Code. The decision was based on the Corporate Debtor's non-functionality for 19 years, dilapidated assets, and lack of future viability. The Tribunal dismissed the appeal, stating that the CoC's unanimous decision for liquidation, approved by the Adjudicating Authority, was within the legislative scheme's framework. Additionally, the Tribunal clarified that the CoC's decision for liquidation, made before plan confirmation, was in line with Section 33(2) of the I&B Code and subject to judicial review based on individual case facts and code compliance.

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Issues:
1. Challenge to the decision of the Committee of Creditors (CoC) for liquidation of the Corporate Debtor.
2. Interpretation of Section 33(2) of the Insolvency and Bankruptcy Code, 2016 regarding initiation of liquidation.

Analysis:

Issue 1:
The Appellant challenged the CoC's decision for liquidation, arguing that the decision was arbitrary and not based on commercial wisdom. The CoC initially considered withdrawal under Section 12A but later decided on liquidation due to the non-functionality of the Corporate Debtor for 19 years, dilapidated assets, and the lack of future viability as a going concern. The Appellant contended that the CoC's decision was not permissible under Section 10 since it was based on the Corporate Debtor's own application. However, the CoC's decision for liquidation was unanimously passed with 100% voting share. The Tribunal noted that the CoC's decision for liquidation, approved by the Adjudicating Authority, was within its wide powers granted by the legislative scheme. The Tribunal dismissed the appeal, emphasizing that each case's liquidation decision's judicial review depends on compliance with the I&B Code.

Issue 2:
The Tribunal referred to Section 33(2) of the I&B Code, which allows the resolution professional to intimate the Adjudicating Authority of the CoC's decision to liquidate the Corporate Debtor before the confirmation of a resolution plan. The legislative intent, as per the Explanation under Section 33(2), empowers the CoC to decide on liquidation after its constitution and before plan confirmation. The Tribunal highlighted that the CoC's decision for liquidation in this case, based on the Corporate Debtor's non-functionality and high costs involved in the CIRP, was within the statutory framework. The Tribunal emphasized that the CoC's decision for liquidation is subject to judicial review based on individual case facts and I&B Code compliance.

In conclusion, the Tribunal upheld the CoC's decision for liquidation, emphasizing the wide powers granted to the CoC under the I&B Code and the need for compliance with the statutory scheme in each case.

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