2020 (4) TMI 864 - Tri - Insolvency and Bankruptcy

Tribunal Orders Liquidation of Corporate Debtor, Appoints Liquidator

The Tribunal ordered the liquidation of the Corporate Debtor, appointed Mr. Rajeev Bansal as the Liquidator, and issued directions for compliance with the ... Liquidation under section 33(1)(a) - non-receipt of resolution plan within CIRP period - role of Resolution Professional as Liquidator under section 34(1) - replacement of RP by Adjudicating Authority under section 34(4) - appointment of liquidator from IBBI panel pursuant to section 34(5)-(7) - liquidation costs and contribution by committee under Regulation 39B - assessment of sale as a going concern under Regulation 39C - fixing fee of the liquidator under Regulation 39D - public announcement and submission of claims under Liquidation Process RegulationsLiquidation under section 33(1)(a) - non-receipt of resolution plan within CIRP period - Order for liquidation of the Corporate Debtor was to be passed as no resolution plan was received within the insolvency resolution process period. - HELD THAT: - The Adjudicating Authority noted that the corporate insolvency resolution process had expired and no resolution plan under section 30(6) was received before the expiry of the CIRP period. The statutory mandate in section 33(1)(a) requires that where no plan is received within the prescribed period, the Authority shall pass an order requiring the corporate debtor to be liquidated, issue a public announcement of liquidation and send the order to the authority with which the corporate debtor is registered. On the basis of the absence of any resolution plan by the relevant dates, the Authority directed that the Corporate Debtor be liquidated in accordance with Chapter III of the Code and issued the consequential directions required by section 33. [Paras 11]Isolux Corsan India Engineering & Construction (P.) Ltd. ordered to be liquidated under section 33(1)(a); directions under section 33 issued.Role of Resolution Professional as Liquidator under section 34(1) - replacement of RP by Adjudicating Authority under section 34(4) - appointment of liquidator from IBBI panel pursuant to section 34(5)-(7) - Resolution Professional did not give written consent to act as Liquidator and the Adjudicating Authority appointed a liquidator from the IBBI panel. - HELD THAT: - Section 34(1) provides that the RP shall act as liquidator upon submission of written consent, and section 34(4) empowers the Authority to replace the RP if such consent is not furnished. Having recorded that the RP did not submit written consent (and that the CoC had not approved appointment/fees), the Authority exercised its power under section 34(5)-(7) to direct the Board to propose and then appoint another insolvency professional. The Tribunal received the IBBI panel and selected Mr. Rajeev Bansal from the approved panel; his credentials were examined and found unexceptionable, and he was appointed as Liquidator. [Paras 13, 14, 15, 16, 17]Mr. Rajeev Bansal appointed as Liquidator in place of the RP who did not give written consent.Liquidation costs and contribution by committee under Regulation 39B - assessment of sale as a going concern under Regulation 39C - fixing fee of the liquidator under Regulation 39D - Committee of Creditors did not approve a contribution plan under Regulation 39B(3); the CoC approved sale of specified business as a going concern under Regulation 39C; Liquidator's fee not approved by CoC and shall be payable under Liquidation Process Regulations. - HELD THAT: - The Tribunal noted insertion of Regulations 39B-39D and examined the CoC's decisions in the 14th meeting. The CoC did not approve a plan under Regulation 39B(3) for contribution to meet any shortfall between estimated liquidation costs and liquid assets, preferring to sanction an initial corpus and allow quarterly contributions and stakeholder consultation under Regulation 2A of the Liquidation Process Regulations. Separately, the CoC approved sale of the EPC contract/business as a going concern in liquidation in accordance with Regulation 39C. As the CoC did not approve the appointment and fees of the Liquidator, the Tribunal directed that the Liquidator's fees shall be paid in accordance with Regulation 4(2) and 4(3) of the Liquidation Process Regulations, 2016. [Paras 19, 20, 21, 22]No plan under Regulation 39B(3) approved; sale of specified business as a going concern approved; Liquidator's fee to be paid as per applicable Liquidation Process Regulations.Public announcement and submission of claims under Liquidation Process Regulations - compliance with Chapter III of the Code - Directions issued concerning compliance with Chapter III, publication of public announcement, and the procedure and timeline for submission of claims and reports by the Liquidator. - HELD THAT: - The Authority directed strict compliance with Chapter III of the Code and the Liquidation Process Regulations. Specific directions included embargo on suits against the corporate debtor except as permitted, deemed discharge of employees, vesting of powers in the Liquidator, and cooperation by personnel. The Liquidator was directed to publish the public announcement in the prescribed manner within five days of receipt of the order, calling for claims as on the liquidation commencement date and fixing the last date for claims at thirty days from the liquidation commencement date. Further directions required filing of the preliminary report within 75 days and fortnightly progress reports thereafter. [Paras 23, 24, 25, 26]Directions given for compliance with Chapter III and Liquidation Process Regulations, public announcement to be published within five days, claims to be submitted within 30 days of liquidation commencement date, and filing of requisite reports by the Liquidator.Final Conclusion: The Tribunal ordered liquidation of Isolux Corsan India Engineering & Construction (P.) Ltd. under section 33(1)(a); appointed Mr. Rajeev Bansal as Liquidator in place of the RP who did not consent; recorded the CoC decisions (no contribution plan under Regulation 39B, approval of sale as a going concern under Regulation 39C) and directed that Liquidator's fees, publication, claims procedure and other steps be undertaken in accordance with the Liquidation Process Regulations and Chapter III of the Code. Issues Involved:1. Application for liquidation under section 33 (1) (a) of the Insolvency and Bankruptcy Code, 2016.2. Appointment of a Liquidator.3. Compliance with Regulations 39B, 39C, and 39D of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.4. Directions and compliance under Chapter III of the Insolvency and Bankruptcy Code and Liquidation Process Regulations, 2016.Detailed Analysis:1. Application for Liquidation under Section 33 (1) (a) of the Insolvency and Bankruptcy Code, 2016:The Resolution Professional (RP) filed an application seeking the liquidation of Corporate Debtor-Isolux Corsan India Engg & Construction Pvt. Ltd. (Isolux) under section 33 (1) (a) of the Insolvency and Bankruptcy Code, 2016. The Corporate Insolvency Resolution Process (CIRP) was initiated on 11-10-2018, and the RP was appointed. Despite multiple extensions and invitations for Expression of Interest (EOI), no resolution plans were received by the final date of 3-6-2019. Consequently, the Committee of Creditors (CoC) unanimously decided to liquidate Isolux as per section 33 (1) (a) of the Code.2. Appointment of a Liquidator:In the 14th meeting of the CoC held on 08-11-2019, the agenda to appoint a Liquidator and approve the fees was disapproved. Consequently, the RP did not consent to act as the Liquidator. As per section 34 (4) (c) of the Code, the Adjudicating Authority (AA) appointed Mr. Rajeev Bansal as the Liquidator, following the procedure under sections 34 (5) to (7) of the Code. The Law Research Associate confirmed the credentials of Mr. Rajeev Bansal, and no adverse findings were reported.3. Compliance with Regulations 39B, 39C, and 39D of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016:- Regulation 39B: The CoC did not approve a plan for providing contributions to meet the liquidation costs. Instead, a corpus of Rs. 30.00 lacs was sanctioned initially, to be contributed by CoC members in proportion to their voting share. Subsequent contributions were to be made quarterly.- Regulation 39C: The CoC approved the sale of Isolux’s business as a going concern, specifically the EPC contract awarded by NHAI for the construction of a section of NH 75 in Karnataka.- Regulation 39D: Since the CoC did not approve the Liquidator’s fees, it was to be paid in accordance with Regulation 4 (2) and 4 (3) of the Liquidation Process Regulations, 2016.4. Directions and Compliance under Chapter III of the Insolvency and Bankruptcy Code and Liquidation Process Regulations, 2016:The Tribunal issued several directions to ensure compliance with Chapter III of the Code and the Liquidation Process Regulations, 2016:- Section 33(5): No suits or legal proceedings shall be instituted against the corporate debtor, except with the Liquidator’s approval.- Notice of Discharge: The liquidation order serves as a notice of discharge to the officers, employees, and workmen, unless the business continues during liquidation.- Powers of the Board of Directors: These powers cease and vest in the Liquidator.- Assistance and Cooperation: Corporate Debtor personnel must assist the Liquidator as required.- Public Announcement: The Liquidator must publish an announcement within five days, calling stakeholders to submit claims within 30 days.- Preliminary Report: The Liquidator must file a preliminary report within 75 days and regular progress reports every fortnight.The Financial Creditors are not restricted from enforcing personal guarantees. The Liquidator is directed to take possession of the Corporate Debtor’s assets.Conclusion:The Tribunal ordered the liquidation of Isolux under section 33 (1) (a) of the Code, appointed Mr. Rajeev Bansal as the Liquidator, and provided detailed directions to ensure compliance with the relevant provisions and regulations. The application CA No. 1079/2019 was disposed of accordingly.