Tribunal Overturns Interim Funding Order in Liquidation Case, Emphasizes CoC's Autonomy

The Tribunal found that the Corporate Debtor was not a going concern and was non-operational, leading to the approval of liquidation by the Committee of Creditors (CoC). The Tribunal held that the Adjudicating Authority was not justified in directing the CoC to raise interim funds as it contravened the Insolvency and Bankruptcy Code. The Tribunal set aside the Authority's directions, emphasizing that CoC's commercial decisions are non-justiciable. The appeal was allowed with no costs ordered.

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Issues Involved:
1. Whether the Corporate Debtor was a going concern.
2. Whether the Adjudicating Authority was justified in directing the Committee of Creditors (CoC) to raise interim funds and provide them to the Resolution Professional (RP) to run the CIRP period and meet the expenditure incurred till December 2019.

Issue-wise Detailed Analysis:

1. Whether the Corporate Debtor was a going concern:
The Tribunal observed that the Corporate Debtor was not a going concern and was non-operational. This was substantiated by the RP’s affidavit, which stated that the Corporate Debtor was under severe financial distress and non-operational. The RP retained only a few employees at reduced salaries to continue the CIRP, which was approved by the CoC. The Tribunal noted that the CoC had voted for liquidation and an application seeking liquidation was pending. The contention that the company was a going concern was found unsustainable based on the RP’s visits to the plant and the operational updates provided during the CoC meetings.

2. Whether the Adjudicating Authority was justified in directing the CoC to raise interim funds and provide them to the RP:
The Tribunal held that the directions issued by the Adjudicating Authority were contrary to the provisions of the Insolvency and Bankruptcy Code (IBC). As per Section 28(3) of the IBC, approval of the CoC by a vote of 66% is required to raise any interim funds. The CoC had not granted such approval, making the decision of the CoC non-justiciable. The Tribunal emphasized that the commercial or business decision of the CoC is non-justiciable, as established by the Supreme Court in the case of 'K. Sashidhar v. Indian Overseas Bank'. The Tribunal found that the Adjudicating Authority had passed the impugned order without hearing the CoC and without considering that the Corporate Debtor was not a going concern.

Conclusion:
The Tribunal set aside the directions given by the Adjudicating Authority in MA 4002/2019, stating that they were contrary to the provisions of the IBC. The appeal was allowed, and no costs were ordered. The Tribunal reiterated that the commercial decisions of the CoC, including the decision not to raise interim funds, are non-justiciable and cannot be directed by the Adjudicating Authority.

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