2019 (5) TMI 1046 - Tri - Insolvency and Bankruptcy

Corporate Debtor Faces Liquidation After Creditors Reject Resolution Plans

Anant Overseas Private Limited Versus Global Houseware Limited

The Tribunal ordered the liquidation of the Corporate Debtor, appointing Mr. Vijender Sharma as the liquidator, as the resolution plans were rejected by ... Liquidation of Corporate Debtor - rejection of resolution plans - mandatory period of CIRP - HELD THAT:- Since the resolution plan as submitted by the resolution applicants stand rejected by the CoC and we do not find any legal infirmity in rejecting the resolution plan by the CoC as it is seen that the CoC has repeatedly considered the case of the promoters of the CD, this Tribunal is of the view that liquidation process in relation to the CD is required to be initiated as contemplated under Section 33 of IBC, 2016 with all the attendant consequences. In view of no Resolution Plan having been approved by the CoC within the period of CIRP of 180 days as well as the extended period of 90 days, recourse is to only press the liquidation mode as provided under the provisions of Section 33 of IBC, 2016 of which the relevant is sub-section 1 of Section 33 In view of lack of any Resolution Plan meeting the criteria fixed being received, the scope of resolving the insolvency is not in existence and in the circumstances taking into consideration the provisions under Section 33(1) of IBC, 2016, as extracted above, the only recourse available is liquidating the CD in view of the CoC in their meeting having unanimously rejected the only Resolution Plan available before it thereby effectively approved for the liquidation of the Corporate Debtor and there being no Resolution Plan being placed before it, this Tribunal orders for liquidation of the Corporate Debtor and in the circumstances the CD stands liquidated and the incidence of liquidation to follow, on and from the date of this order in terms of provisions of IBC, 2016 and more particularly as given in Chapter-III of IBC, 2016 and also in terms of Insolvency and Bankruptcy (Liquidation Process) Regulations, 2017 - Further in terms of the said Regulations, the Liquidator shall file his report to this Tribunal as mandated therein. The present RP, namely Mr. Vijender Sharma shall act as the liquidator based upon his consent expressed, as the liquidator of the CD. He shall issue the public announcement that the CD is in liquidation. In relation to officers/employees and workmen of the CD, taking into consideration Section 33(7) of IBC, 2016, this order shall be deemed to be a notice of discharge - The Liquidator appointed being the Resolution Professional during the CIRP period shall follow up and continue to investigate the financial affairs of the CD particularly, in relation to preferential transactions/under valued transactions and such other like transactions including fraudulent preferences. The Corporate Resolution Process of the Corporate Debtor comes to a close and moratorium granted under Section 14 of IBC, 2016 at the time of admission is also lifted but the provisions of Sections 33(5) & 33(6) shall apply. Issues Involved:1. Initiation and culmination of Corporate Insolvency Resolution Process (CIRP).2. Rejection of resolution plans by the Committee of Creditors (COC).3. Applications filed by Resolution Applicants challenging the rejection.4. Analysis of the status reports filed by the Resolution Professional (RP).5. Consideration of liquidation of the Corporate Debtor (CD).Detailed Analysis:1. Initiation and Culmination of CIRP:The Corporate Insolvency Resolution Process (CIRP) for the Corporate Debtor (CD) was initiated on 03.05.2017. The process involved the appointment of Mr. Ashwani Kumar as the Interim Resolution Professional (IRP), who filed three status reports. Subsequently, the Committee of Creditors (COC) appointed a new Resolution Professional (RP), Mr. Vijender Sharma, whose appointment was confirmed by the Tribunal on 30.06.2017. The CIRP period, including an extension of 90 days, expired on 15.04.2018.2. Rejection of Resolution Plans by COC:The Resolution Professional (RP) filed an application for liquidation after the COC, with an 83.45% voting share, rejected the resolution plans submitted by the Resolution Applicants in its 6th meeting held on 16.04.2018. The rejection was due to non-compliance with the criteria laid down by the COC, including the net worth requirement and eligibility under Section 29A of the Insolvency and Bankruptcy Code (IBC), 2016. The COC recommended liquidation as the CD's operations were closed, and there was no realization from any debtor.3. Applications Filed by Resolution Applicants Challenging the Rejection:The Resolution Applicants filed applications under Section 60(5) of the IBC, 2016, challenging the rejection of their resolution plans. They argued that the RP erroneously concluded their ineligibility under Section 29A and failed to place the resolution plans before the COC. The Tribunal had earlier directed the RP to place the resolution plans before the COC, which were subsequently rejected by the COC on 13.04.2018.4. Analysis of the Status Reports Filed by the RP:The RP filed multiple status reports detailing the progress of the CIRP. The reports included information on the financial status of the CD, the rejection of the resolution plans, and the recommendation for liquidation. The RP also highlighted the difficulties in maintaining the plant and the non-payment of fees to the former RP and the current RP.5. Consideration of Liquidation of the CD:The Tribunal, after considering the sequence of events and the rejection of the resolution plans by the COC, concluded that the only recourse available was liquidation under Section 33 of the IBC, 2016. The Tribunal noted that the resolution applicants, who were members of the board of directors of the CD, failed to meet the eligibility criteria and the net worth requirement. The Tribunal also considered the amendments to the IBC, 2016, but found that the resolution applicants did not establish their status as MSME and that the amendments were not applicable retrospectively.Conclusion:The Tribunal ordered the liquidation of the Corporate Debtor, appointing Mr. Vijender Sharma as the liquidator. The liquidation process was to follow the provisions of the IBC, 2016, and the Insolvency and Bankruptcy (Liquidation Process) Regulations, 2017. The Corporate Resolution Process of the Corporate Debtor was concluded, and the moratorium granted under Section 14 of the IBC, 2016, was lifted. The applications filed by the resolution applicants were dismissed as infructuous.