Tribunal upholds liquidation order, sets aside dismissal of application for new Liquidator

The Tribunal upheld the liquidation order due to the absence of a resolution plan within the stipulated time, noting the financial losses and lack of cooperation in the Corporate Insolvency Resolution Process (CIRP). However, it set aside the dismissal of the application to replace the Resolution Professional, remitting the matter to appoint a new Liquidator as proposed by the Committee of Creditors (CoC) or another professional from IBBI to address concerns and ensure a proper transition.

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Issues Involved:

1. Validity of the liquidation order passed by the Adjudicating Authority.
2. Allegations against the Resolution Professional (RP) and his conduct during the Corporate Insolvency Resolution Process (CIRP).
3. Replacement of the Resolution Professional as Liquidator.

Issue-wise Detailed Analysis:

1. Validity of the Liquidation Order:

The appeal was filed against the liquidation order passed by the Adjudicating Authority, which dismissed the application for replacing the Resolution Professional and ordered the liquidation of the Corporate Debtor. The Appellant argued that the Corporate Debtor was moving towards profitability and that the losses were decreasing. However, the Respondent No. 1 (Resolution Professional) countered that the Corporate Debtor was incurring more losses and the working capital was depleting. The Appellant's claims of securing fresh orders were disputed by the Respondent No. 1, who highlighted non-cooperation from the Appellant and other promoters. The Adjudicating Authority noted that no resolution plan was received within the stipulated time, making the liquidation order unavoidable. The Tribunal upheld the liquidation order, stating that the extended period for CIRP had ended and no resolution plan was submitted.

2. Allegations Against the Resolution Professional:

The Appellant accused the Resolution Professional of misrepresenting facts and acting with mala fide intentions to push the Corporate Debtor into liquidation. The RP was alleged to have presented incorrect CIRP expenses and failed to raise interim finance to keep the unit operational. The Respondent No. 1 defended his actions, citing non-cooperation from the Appellant and the financial distress of the Corporate Debtor. The Tribunal found that the Appellant did not raise these issues before the Adjudicating Authority during the liquidation proceedings and noted the non-cooperation and incomplete records provided by the Appellant. The Tribunal concluded that the RP's decision to temporarily suspend operations was justified given the financial losses and lack of working capital.

3. Replacement of the Resolution Professional as Liquidator:

The CoC had resolved to replace the Resolution Professional during a Joint Lenders' Meeting, citing dissatisfaction with the RP's conduct during the CIRP. The Adjudicating Authority dismissed the application for replacement, stating that the CoC failed to prove lack of knowledge or misrepresentation. The Tribunal, however, found that the Adjudicating Authority did not adequately consider the contents of the Joint Lenders' Meeting minutes, which expressed concerns about the RP's conduct. The Tribunal held that it would have been more appropriate to appoint a different Insolvency Professional as Liquidator, given the CoC's lack of confidence in the current RP. Consequently, the Tribunal remitted the matter back to the Adjudicating Authority to appoint another Insolvency Professional as Liquidator, ensuring proper handover of charge.

Conclusion:

The Tribunal maintained the liquidation order but set aside the dismissal of the application for replacing the Resolution Professional. The matter was remitted back to the Adjudicating Authority to appoint a new Liquidator, as proposed by the CoC or another professional from IBBI, ensuring proper transition and addressing the CoC's concerns. The appeal was disposed of accordingly.

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