2021 (3) TMI 872 - Tri - Insolvency and Bankruptcy

Tribunal Orders Liquidation of Non-Operational Company, Upholds Creditor Committee's Decision

Pariman Enterprises Pvt. Ltd. Versus Atlantis Life Sciences Pvt. Ltd.

The Tribunal allowed the application for liquidation of the Corporate Debtor due to its non-operational status and lack of significant assets, appointing ... Liquidation of Corporate Debtor - applicant is guilty of suggestion falsi and supressio very - HELD THAT:- It is observed from the minutes of the 4nd CoC meeting that the CoC has, with 100% majority, decided to liquidate the Corporate Debtor. The suspended director of the Corporate Debtor has raised objections for allowing this application on the ground that the manner in which the CIRP of the Corporate Debtor has been conducted is erroneous, illegal, flawed and deserves to be set aside. He has also asked for exclusion of a period of 270 days from computing it in the total CIRP period. For this, an application bearing MA No. 2739/2019 was also filed by them which was dismissed in default by this Tribunal vide an order dated 25.01.2021 as nobody has pursued it. Also, the Corporate Debtor is non-operational for last two years and the only asset left with it is a shop at Borivali. The promoter of the Corporate Debtor had also given proposal for One Time Settlement through Asset Purchase by Asset Reconstruction Company which is not acceptable to the CoC - it is a settled principle of law regarding the Commercial Wisdom of the CoC to liquidate the Corporate Debtor and it need not be interfered with. Application allowed. Issues Involved:1. Liquidation of the Corporate Debtor under Section 33(1) read with Section 60 of the Insolvency and Bankruptcy Code, 2016.2. Appointment of the Liquidator under Section 34(1) of the Insolvency and Bankruptcy Code, 2016.3. Allegations of improper conduct and process violations during the Corporate Insolvency Resolution Process (CIRP).4. Objections by the suspended director against the liquidation and conduct of the CIRP.5. Commercial Wisdom of the Committee of Creditors (CoC) in deciding liquidation.Issue-Wise Detailed Analysis:1. Liquidation of the Corporate Debtor:The application for liquidation was filed by the Resolution Professional (RP) under Section 33(1) read with Section 60 of the Insolvency and Bankruptcy Code, 2016, seeking the liquidation of the Corporate Debtor. The Tribunal noted that the CoC, with 100% majority, decided to liquidate the Corporate Debtor due to its non-operational status for the last two years and the absence of significant assets except a shop at Borivali. The Tribunal observed that the Corporate Debtor’s only asset was a shop, and there were no operations or manufacturing facilities, making revival unfeasible.2. Appointment of the Liquidator:The Tribunal appointed Mr. Dilipkumar Natvarlal Jagad as the Liquidator under Section 34(1) of the Insolvency and Bankruptcy Code, 2016. The Liquidator was directed to conduct the liquidation process as per the Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016. The Liquidator was granted all powers of the board of directors, key managerial personnel, and partners of the Corporate Debtor, which would cease to exist and vest with the Liquidator.3. Allegations of Improper Conduct and Process Violations:The suspended director alleged that the RP conducted the CIRP improperly, violating the principles of the Code. He claimed that no attempts were made to revive the Corporate Debtor, and no advertisements were published for inviting Expressions of Interest or Resolution Plans. The Tribunal noted that the suspended director’s application for excluding a period of 270 days from the CIRP period was dismissed due to non-pursuance.4. Objections by the Suspended Director:The suspended director opposed the liquidation, arguing that the Corporate Debtor was capable of operating as a going concern and had identified an investor willing to acquire it. He alleged that the RP and CoC did not make efforts to invite Resolution Plans and that the decision to liquidate was a mere formality influenced by the Financial Creditor (Bank of Baroda). The Tribunal dismissed these objections, emphasizing the commercial wisdom of the CoC.5. Commercial Wisdom of the CoC:The Tribunal upheld the CoC’s decision to liquidate the Corporate Debtor, citing the Supreme Court’s decisions in K. Sashidhar vs Indian Overseas Bank and Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. These decisions highlight the importance of respecting the commercial wisdom of the CoC. The Tribunal concluded that the CoC’s unanimous decision to liquidate the Corporate Debtor was based on careful assessment and was not to be interfered with.Conclusion:The Tribunal allowed the application for liquidation, appointing Mr. Dilipkumar Natvarlal Jagad as the Liquidator and directing the initiation of the liquidation process. The objections raised by the suspended director were dismissed, and the Tribunal emphasized the commercial wisdom of the CoC in deciding the liquidation. The Liquidator was instructed to manage the liquidation process in accordance with the relevant regulations, and all powers of the Corporate Debtor’s board and key personnel were vested in the Liquidator.