2018 (9) TMI 1043 - Tri - Insolvency and Bankruptcy

Corporate Debtor's Insolvency Resolution Ends in Liquidation: Importance of Compliance and Stakeholder Protection

Allahabad Bank Versus Supreme Tex Mart Limited And Bhupesh Gupta

The Corporate Debtor's insolvency resolution process culminated in the rejection of multiple resolution plans by the Committee of Creditors. Despite ... Initiating the insolvency resolution process against the Corporate Debtor - initiating the insolvency resolution process against the Corporate Debtor - Held that:- In view of the decision by the Committee of Creditors and no Resolution Plan having been put up for approval despite expiry of 270 days, we are satisfied that the provisions of Section 32(2) are complied with and we order that the Corporate Debtor be liquidated in the manner as laid down in Chapter III of the Code. Further directions are issued to the Liquidator to issue a public announcement, stating that the Corporate Debtor is in liquidation. We direct that copy of this order be sent to Registrar of companies, Punjab and Chandigarh, with which the Corporate Debtor is registered. Section 34 of the Code provides that where the Adjudicating Authority passed an order for liquidation of the Corporate Debtor under Section 33 the Resolution Professional appointed for the Corporate Insolvency Resolution Process, shall subject to submission of the written consent by the Resolution Professional to the Adjudicating Authority in specified form to act as a Liquidator for the purpose of liquidation. We therefore, while ordering liquidation of the Corporate Debtor, appoint Mr. Bhupesh Gupta, Resolution Professional, having Registration No. IBBI/IPA-002/IP-N00030/2016-17/10067, to act as Liquidator for the purpose of liquidation of the Corporate Debtor. His appointment shall take effect from the date of receipt of this order. All the directions/requirements and provisions of Chapter III of the Code and Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (hereinafter referred to as Liquidation Process Regulations, 2016) shall be strictly complied with. Issues Involved:1. Initiation and progress of the Corporate Insolvency Resolution Process (CIRP).2. Evaluation and rejection of Resolution Plans.3. Application for liquidation and its implications.4. Challenge to related party transactions.5. Consideration of liquidation as a going concern.6. Appointment and duties of the Liquidator.Detailed Analysis:1. Initiation and Progress of the Corporate Insolvency Resolution Process (CIRP):The Financial Creditor filed CP(IB) No.67/Chd/Pb/2017 against the Corporate Debtor under Section 7 of the Insolvency and Bankruptcy Code, 2016 (the 'Code') to initiate the insolvency resolution process. The petition was admitted on 29.09.2017, declaring a moratorium under Section 14 of the Code. Mr. Bhupesh Gupta was appointed as the Interim Resolution Professional (IRP) on 11.10.2017, who then constituted a Committee of Creditors (CoC) comprising 12 Financial Creditors. The IRP was confirmed as the Resolution Professional (RP) in the first CoC meeting held on 09.11.2017.2. Evaluation and Rejection of Resolution Plans:The RP made a public announcement on 13.10.2017 and evaluated claims from Financial Creditors, forming the CoC. The CoC finalized criteria for inviting Expressions of Interest (EOI) on 27.12.2017, and four entities submitted EOIs. After re-inviting EOIs and extending the submission deadline, two plans were received, one of which was rejected. Due to variations in initial valuations, a third valuation was obtained. The CoC advised the Resolution Applicant to improve the bids during meetings on 01.05.2018 and 21.05.2018. Ultimately, the CoC rejected the Resolution Plan offered by the Sole Resolution Applicant on 25.05.2018 and re-invited plans, but no fresh bids were received. The previous applicants presented a plan on 13.06.2018, which was also rejected due to insufficient upfront cash payment and unsecured deferred payment.3. Application for Liquidation and Its Implications:The Supreme Association of Employees filed CA No.265 of 2018, expressing concerns about the impact of liquidation on employees and urging the revival of the Corporate Debtor. The RP challenged the locus standi of the applicants, stating that no such Association of Employees existed. The Tribunal considered the expiry of the 270-day period for the CIRP and the CoC's decision to liquidate the Corporate Debtor if no better plan was received by 18.06.2018.4. Challenge to Related Party Transactions:CA No.180 of 2018 was filed, alleging illegal and deceitful transactions by the Corporate Debtor with related parties. The Tribunal noted that this issue, filed by a shareholder with 10.50% shareholding, is a separate subject to be decided after detailed hearings.5. Consideration of Liquidation as a Going Concern:The Tribunal considered whether the Corporate Debtor should undergo liquidation as a going concern, noting the presence of 1939 employees. It referred to Clause (e) of Section 35 of the Code and Regulation 32 of the Liquidation Process Regulations, 2016, allowing the liquidator to sell the Corporate Debtor as a going concern.6. Appointment and Duties of the Liquidator:The Tribunal ordered the liquidation of the Corporate Debtor under Chapter III of the Code and appointed Mr. Bhupesh Gupta as the Liquidator. The Liquidator is directed to issue a public announcement, manage the Corporate Debtor's affairs, and comply with all relevant provisions and regulations. The Liquidator must publish the announcement in specified newspapers and websites, file a preliminary report within 75 days, and submit regular progress reports quarterly. Financial Creditors are not barred from enforcing personal guarantees.The judgment concludes with directions to supply copies of the order to relevant parties and the Registrar of Companies, Punjab and Chandigarh. The application CA No.265 of 2018 stands disposed of.