2018 (3) TMI 572 - Tri - Insolvency and Bankruptcy

Corporate Debtor Faces Liquidation Order: Key Points on Liquidator's Powers and Creditor Rights

Hero Steels Ltd. Versus Rolex Cycles (P.) Ltd.

The National Company Law Tribunal, Chandigarh, ordered the liquidation of the Corporate Debtor after the expiry of the resolution period without receiving ... Order of liquidation - period of 180 days for completion of the resolution process as provided under Section 12 (1) of IBC expired - Held that:- Admittedly the period of 180 days for completion of the resolution process as provided under Section 12 (1) of the Insolvency and Bankruptcy Code, 2016 expired on 08.01.2018. While monitoring the progress reports submitted by the Resolution Professional, Registrar of this Tribunal put up a note that the period of 180 days has expired and the Resolution Professional informed that the application for liquidation proceedings would be filed. The matter was directed to be listed on the judicial side with notice to the Resolution Professional. In view of the mandate of Section 33 (1) of I & B Code there is no other alternative except to pass an order of liquidation. It was found fit to appoint a Liquidator from the panel of Liquidators/Insolvency Resolution Professionals circulated by Insolvency and Bankruptcy Board of India vide letter dated 10.01.2018 instead of Mr. Nipan Bansal who was appointed as the Resolution Professional, for the reasons stated in the order dated 31.01.2018. Accordingly, an order is passed in accordance with Section 33 of the Code for liquidation of the Corporate Debtor appointing Mr. Dinesh Kumar Seth as the Liquidator. The Liquidator shall issue public announcement to the effect that the Corporate Debtor is in liquidation and to intimate the same to Registrar of Companies, Punjab about this order. Issues involved:- Appointment of Resolution Professional- Expiry of resolution process period- Liquidation order- Appointment of Liquidator- Public announcement and submission of claims- Legal proceedings during liquidation- Duties and powers of Liquidator- Reimbursement of expenses- Filing of reports by Liquidator- Financial Creditors' rights- Handover of records to LiquidatorAppointment of Resolution Professional:The case involved the initial appointment of an Interim Resolution Professional under Section 9 of the Insolvency and Bankruptcy Code, 2016. Subsequently, an application was filed to replace the Interim Resolution Professional with a new Resolution Professional, which was granted by the Tribunal after receiving confirmation from the Insolvency and Bankruptcy Board of India (IBBI).Expiry of resolution process period:After the expiry of the 180-day period for completing the resolution process as per Section 12(1) of the Code, no resolution plan was received within the stipulated time frame. The Resolution Professional indicated the intention to file for liquidation proceedings. Due to the absence of a resolution plan and no application for an extension, the Tribunal deemed it necessary to pass an order of liquidation under Section 33(1) of the Code.Liquidation order:Following the expiration of the resolution period without a viable plan, the Tribunal ordered the liquidation of the Corporate Debtor. A Liquidator was appointed from the panel circulated by the IBBI, replacing the previous Resolution Professional. The Liquidator was tasked with issuing a public announcement and notifying the Registrar of Companies about the liquidation order.Appointment of Liquidator:Mr. Dinesh Kumar Seth was appointed as the Liquidator for the Corporate Debtor. He was required to follow the regulations and guidelines set forth by the IBBI, including submitting declarations and disclosures as mandated. The Liquidator was directed to publish a public announcement within five days, inviting stakeholders to submit their claims.Public announcement and submission of claims:The Liquidator was instructed to publish a public announcement in accordance with the IBBI regulations, calling for stakeholders to submit their claims within 30 days from the liquidation commencement date. The announcement had to be made in newspapers, on the corporate debtor's website, and on a designated website.Legal proceedings during liquidation:The judgment outlined the restrictions on legal proceedings once a liquidation order is passed under Section 33 of the Code. It specified that suits or legal proceedings against the Corporate Debtor could not be initiated, except by the Liquidator with prior approval. Certain transactions exempted from this restriction were also mentioned.Duties and powers of Liquidator:The Liquidator was granted the powers and duties prescribed under the Code, Regulations, and applicable Rules. The judgment highlighted the cessation of powers of the Board of Directors and other key personnel, transferring them to the Liquidator. The personnel of the Corporate Debtor were required to assist the Liquidator as needed.Reimbursement of expenses:The expenses incurred by the Liquidator, including fees, public announcement costs, and service expenses, were to be reimbursed and considered part of the liquidation costs. The Liquidator's fee was to be determined in accordance with the relevant regulations.Filing of reports by Liquidator:The Liquidator was mandated to submit a preliminary report within 75 days and regular progress reports every fortnight thereafter, as per the Liquidation Process Regulations. Compliance with reporting requirements was essential to monitor the liquidation process effectively.Financial Creditors' rights:Financial Creditors were assured that they were not prohibited from enforcing personal guarantees or taking necessary steps in that regard, despite the liquidation order. This provision safeguarded the rights of Financial Creditors to pursue their claims through legal means.Handover of records to Liquidator:The Resolution Professional was directed to hand over all records, assets, information memoranda, progress reports, and meeting minutes of the Corporate Debtor to the appointed Liquidator promptly. This transfer of information was crucial for the seamless continuation of the liquidation process under the new leadership.This detailed analysis of the judgment from the National Company Law Tribunal, Chandigarh, provides a comprehensive overview of the issues addressed, the legal decisions made, and the implications for the parties involved in the insolvency and liquidation proceedings.