2019 (6) TMI 907 - Tri - Insolvency and Bankruptcy

Corporate Debtor's Liquidation Ordered, Directors' Non-cooperation, Liquidation Costs Allocation

The court ordered the liquidation of the Corporate Debtor due to the lack of cooperation from Directors/Promoters, ceasing of business operations, and ... Dissolution of Corporate Debtor - Liquidator entitlement to liquidation costs and remuneration - Proportionate contribution by stakeholders/secured creditors - Final Report under the IBBI (Liquidation Process) Regulations - Relief and discharge of Liquidator - Communication to Registrar of CompaniesDissolution of Corporate Debtor - Final Report under the IBBI (Liquidation Process) Regulations - Dissolution of M/s. SKC Retail Limited upon filing of the Final Report and winding up of affairs. - HELD THAT: - The Tribunal considered the Liquidator's Final Report prepared under Regulation 45 and Section 35 of the Code and noted that the Corporate Debtor had ceased carrying on business, statutory and financial records were not made available by promoters/directors, no assets were discoverable, and no realizable funds remained. On the basis of the material in the application, the Final Report and the factual findings regarding absence of assets and inability to carry forward liquidation realizations, the Tribunal exercised its power under Section 54(2) of the Insolvency and Bankruptcy Code, 2016 to order dissolution of the Corporate Debtor from the date of the order. [Paras 10, 12, 14]The Corporate Debtor, M/s. SKC Retail Limited, is dissolved with effect from the date of the order.Liquidator entitlement to liquidation costs and remuneration - Proportionate contribution by stakeholders/secured creditors - Liquidator is entitled to liquidation costs including remuneration, to be paid by secured creditors/stakeholders in proportion to their lending ratio. - HELD THAT: - The Liquidator submitted a claim for liquidation costs and remuneration, supported by the Final Report indicating no assets available in the Corporate Debtor to meet such costs. Relying on the Liquidator's filings and the prior directions regarding CoC contributions, the Tribunal held that the Liquidator is entitled to the claimed liquidation costs. The Tribunal directed secured creditors and other stakeholders to pay the liquidation costs to the Liquidator in proportion to their claims/lending ratio, thereby allocating payment responsibility among stakeholders where estate assets are insufficient or absent. [Paras 6, 11, 16]Liquidation costs including the Liquidator's remuneration are payable to the Liquidator and shall be borne by the secured creditors/stakeholders in proportion to their lending ratio.Relief and discharge of Liquidator - Communication to Registrar of Companies - Liquidator is relieved of his duties consequent to dissolution and directed to send the order to the Registrar of Companies. - HELD THAT: - On ordering dissolution of the Corporate Debtor, the Tribunal recorded that the Liquidator stands relieved. The Tribunal further directed the Liquidator and Registry to send a copy of the dissolution order to the Registrar of Companies with which the Corporate Debtor is registered within seven days, ensuring administrative compliance with the dissolution order. [Paras 14, 15]The Liquidator is relieved; a copy of the order shall be sent to the Registrar of Companies within seven days.Final Conclusion: The Tribunal accepted the Liquidator's Final Report, ordered dissolution of M/s. SKC Retail Limited, relieved the Liquidator, directed transmission of the order to the RoC, and held that liquidation costs including the Liquidator's remuneration are payable by secured creditors/stakeholders in proportion to their lending ratio. Issues Involved:1. Liquidator's application under Section 54 of the Insolvency and Bankruptcy Code, 2016 for liquidation process.2. Prayers made by the Liquidator in the Miscellaneous Application.3. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the I&B Code, 2016.4. Claims received during the CIR Process.5. Ceasing of business by the Corporate Debtor and lack of cooperation from Directors/Promoters.6. Dispute regarding expenses incurred during the CIR Process.7. Order for liquidation of the Corporate Debtor and appointment of Liquidator.8. Claims received from EPFO and Income Tax Department.9. Preparation of reports by the Liquidator based on limited information.10. Liquidation costs and remuneration to the Liquidator.11. Lack of financial records and assets for valuation.12. Legal proceedings during Liquidation Proceedings.13. Dissolution of the Corporate Debtor and relief to the Liquidator.14. Directions for payment of Liquidation costs to the Liquidator.Analysis:1. The Liquidator filed an application under Section 54 of the Insolvency and Bankruptcy Code, 2016, seeking liquidation of the Corporate Debtor. The application also invoked Regulation 14 and Section 35 read with Regulation 45 of IBBI (Liquidation Process) Regulations, 2016.2. The Liquidator's prayers included taking record of reports, ordering payment of liquidation costs, dissolution of the company, and any other appropriate orders deemed fit by the Bench.3. The Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor under Section 7 of the I&B Code, 2016, with the appointment of the Liquidator as the Interim Resolution Professional (IRP).4. During the CIR Process, various financial creditors submitted claims, detailing the amounts owed by the Corporate Debtor, with the Committee of Creditors (CoC) being constituted to oversee the resolution process.5. The Corporate Debtor had ceased business operations since 2011, and lack of cooperation from Directors and Promoters hindered the formulation of a suitable Resolution Plan.6. Disputes arose regarding the allocation of expenses incurred during the CIR Process, leading to appeals and directions for payment by the CoC members.7. Subsequently, the Corporate Debtor was ordered for liquidation, and the Liquidator was appointed to oversee the process.8. Claims were received from the Employees Provident Fund Organisation (EPFO) and the Income Tax Department, stating outstanding amounts due from the Corporate Debtor.9. The Liquidator faced challenges due to limited availability of statutory documents and information, leading to the preparation of reports based on the information accessible.10. Liquidation costs, including the Liquidator's remuneration, were detailed, with directions sought for payment by stakeholders due to the lack of available assets.11. The absence of financial records and discoverable assets posed challenges in conducting valuations during the liquidation process.12. Legal proceedings and claims by secured creditors were highlighted, along with the inability to investigate certain matters due to the lack of records.13. The judgment ordered the dissolution of the Corporate Debtor and relieved the Liquidator from further responsibilities.14. Directions were provided for the payment of liquidation costs to the Liquidator by the stakeholders in proportion to their lending ratio, effectively concluding the application.