Supreme Court Upholds Creditors' Authority in Corporate Liquidation Process

The Supreme Court held that the Adjudicating Authority lacks jurisdiction to interfere in the Committee of Creditors' commercial wisdom regarding the liquidation of a Corporate Debtor under the Insolvency and Bankruptcy Code, 2016. The judgment ordered the cessation of the moratorium, appointment of a Liquidator, issuance of public announcements, and transfer of powers to the Liquidator. The Company Liquidator is empowered to charge fees based on asset value, and the Corporate Debtor's personnel must cooperate. The application for liquidation was allowed, with the Resolution Professional appointed as the Liquidator, excluding the lockdown period from the Corporate Insolvency Resolution Process duration.

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Issues involved:
Liquidation of Corporate Debtor under Section 33 & 34 of IBC, 2016 - Jurisdiction of Adjudicating Authority to interfere in CoC's commercial wisdom.

The judgment pertains to an application filed under Section 33 & 34 of the Insolvency and Bankruptcy Code, 2016 (IBC) for the liquidation of a Corporate Debtor. The Corporate Insolvency Resolution Process (CIRP) was initiated earlier, and the Committee of Creditors (CoC) decided to continue with the Interim Resolution Professional (IRP) as the Resolution Professional (RP). Subsequently, the CoC resolved in favor of liquidation during a meeting, with 97.83% voting for liquidation. The Adjudicating Authority noted that it lacks jurisdiction to interfere in the commercial wisdom of the CoC, citing precedents such as K. Sasidhar's case and a judgment by the Supreme Court of India. The Supreme Court emphasized that the commercial wisdom of the CoC is paramount in deciding on the maximization of asset value and payment to creditors.

The judgment orders the cessation of the moratorium under Section 14 of the IBC upon liquidation, directs the Liquidator to issue a public announcement, and mandates sending a copy of the order to the relevant authority. It restricts legal proceedings against the Corporate Debtor, except those authorized by the Liquidator with prior approval. The order exempts specific transactions from this restriction as notified by the Central Government. It serves as a notice of discharge to the Corporate Debtor's personnel unless the business continues during liquidation. The powers of the Board of Directors and other key personnel cease, transferring to the Company Liquidator, who must follow the specified duties under the IBC and regulations.

Additionally, the Company Liquidator is empowered to charge fees based on the liquidation estate assets' value. The judgment instructs the Corporate Debtor's personnel to cooperate with the Liquidator. It directs communication of the order to relevant authorities promptly. The application for liquidation is allowed, with the RP acting as the Liquidator. Notably, the lockdown period during the COVID-19 pandemic is excluded from the CIRP period. The application is allowed and disposed of accordingly, with the specified observations.

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