Resolution Professional acted on creditors' instructions to assess Section 29A eligibility, liquidation order upheld

The NCLAT dismissed appeals challenging a liquidation order under IBC. Appellants contended the Resolution Professional (RP) exceeded jurisdiction by unilaterally rejecting their resolution plan for Section 29A non-compliance, causing material irregularity in CIRP. The NCLAT held the Committee of Creditors (CoC) had directed the RP to assess Section 29A eligibility, and the RP acted on CoC's specific instructions, not unilaterally. The CoC unanimously approved liquidation with 100% votes after three years of resolution attempts. The NCLAT found no illegality in the CIRP process and upheld the Adjudicating Authority's liquidation order.

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Issues Involved:
1. Material irregularities in the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor.
2. Whether the liquidation order passed by the Adjudicating Authority should continue to be implemented or be stayed.

Summary:

Issue 1: Material Irregularities in CIRP
- Appellant's Contention: Epitome Components Pvt. Ltd. argued that the Resolution Professional (RP) unilaterally rejected their resolution plan by wrongly declaring them ineligible under Section 29A of the Insolvency and Bankruptcy Code (IBC). They claimed that Sushma and Nalini, who were classified as promoters of Videocon Industries Limited (VIL), had negligible shareholding and should not have been considered related parties. The RP's failure to place their resolution plan before the Committee of Creditors (CoC) was a material irregularity.

- Respondent's Rebuttal: The CoC and RP contended that Sushma and Nalini were indeed promoters of VIL and thus, Epitome was ineligible under Section 29A. The RP had sought clarifications and legal opinions, which were discussed in the 29th CoC meeting. The CoC, in its commercial wisdom, decided not to place Epitome's resolution plan for voting.

- Tribunal's Findings: The Tribunal found that the RP had acted within his jurisdiction and had transparently placed all relevant information before the CoC. The CoC, after due deliberation, decided that only Section 29A compliant plans should be considered. The RP's actions were not unilateral but were based on the CoC's directions. There was no material irregularity in the CIRP process.

Issue 2: Liquidation Order
- Appellant's Contention: Both Epitome and Marathwada Audogik and General Kamgar Sanghatan argued that the liquidation order should be set aside. Epitome claimed they were still interested in reviving the Corporate Debtor and that the liquidation process lacked foundation. Sanghatan contended that the CoC failed to consider the interests of all stakeholders, especially the livelihood of 134 families dependent on the Corporate Debtor.

- Respondent's Rebuttal: The CoC argued that the liquidation decision was taken after exhaustive efforts to resolve the insolvency. The CoC had unanimously approved the liquidation with 100% votes. The liquidation process was near completion, and a successful bidder had been declared. The commercial wisdom of the CoC is paramount and cannot be challenged.

- Tribunal's Findings: The Tribunal upheld the liquidation order, noting that the CoC had made all efforts for resolution before deciding on liquidation. The decision was taken in the CoC's commercial wisdom and was not influenced by any ulterior motives. The Adjudicating Authority had passed a speaking order, and the liquidation process was conducted transparently. The Tribunal found no merit in the appeals and dismissed them, allowing the liquidation process to proceed.

Conclusion:
The Tribunal dismissed both appeals, finding no material irregularity in the CIRP and upholding the liquidation order passed by the Adjudicating Authority. The commercial wisdom of the CoC was deemed paramount, and the liquidation process was allowed to continue.

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