Tribunal Denies Liquidator's Dissolution Request, Orders Stakeholders' Committee Formation

The Tribunal rejected the liquidator's prayer for dissolution of the Corporate Debtor under section 54 of the Insolvency and Bankruptcy Code, 2016. Instead, the Tribunal issued directions for the formation of the Stakeholders' Consultation Committee, release of a fixed deposit held by HDFC Bank, realization of trade receivables and assets, and completion of the liquidation process by a specified deadline. The suspended management/promoters were also directed to assist the liquidator in asset realization. The application was disposed of with these observations and directions.

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Issues Involved:
1. Application for dissolution of the Corporate Debtor under section 54 of the Insolvency and Bankruptcy Code, 2016.
2. Formation and role of the Stakeholders’ Consultation Committee.
3. Release of Fixed Deposit held by HDFC Bank.
4. Realization of trade receivables and assets of the Corporate Debtor.
5. Delay in completion of the liquidation process and its condonation.

Detailed Analysis:

1. Application for Dissolution of the Corporate Debtor:
The liquidator filed an application under section 54 of the Insolvency and Bankruptcy Code, 2016, seeking the dissolution of the Corporate Debtor. The application was supported by the final report on the liquidation process and a compliance certificate in Form H as required under regulation 45 of the Code. The liquidator reported that all assets of the Corporate Debtor had been disposed of and the proceeds distributed among stakeholders, except for a fixed deposit held by HDFC Bank.

2. Formation and Role of the Stakeholders’ Consultation Committee:
During the hearing, it was revealed that the liquidator had not formed the Stakeholders’ Consultation Committee as required by regulation 31A of the liquidation process. The Tribunal noted that the liquidator failed to provide a satisfactory explanation for this omission, despite the presence of five operational creditors. The Tribunal directed the liquidator to form the Stakeholders’ Consultation Committee within 10 days to ensure the maximization of the value of the assets of the Corporate Debtor.

3. Release of Fixed Deposit Held by HDFC Bank:
The liquidator reported that a fixed deposit amounting to Rs. 5,25,000 (face value) was held by HDFC Bank due to a lien against a bank guarantee that had expired. The Tribunal questioned the bank’s refusal to release the deposit despite the expiry of the claim period. The Tribunal directed HDFC Bank to release the fixed deposit with accrued interest within 10 days, noting that any delay might attract penalties under the Insolvency and Bankruptcy Code, 2016.

4. Realization of Trade Receivables and Assets:
The Tribunal observed that the liquidator had not taken adequate steps to realize trade receivables amounting to Rs. 4,80,46,624, as mentioned in the preliminary report. The liquidator cited ongoing cases under the Negotiable Instruments Act as a hindrance. The Tribunal found this reasoning unsatisfactory and directed the liquidator to make all attempts to realize the assets, including trade receivables, and maximize the value of the liquidation estate.

5. Delay in Completion of the Liquidation Process and Its Condonation:
The liquidation process was delayed beyond the extended timeline granted by the adjudicating authority. The liquidator attributed the delay to the COVID-19 lockdown and restrictions. The Tribunal condoned the delay of 78 days, excluding the lockdown period of 92 days, and directed the liquidator to complete the liquidation process and file the application for dissolution by 15.03.2021.

Orders:
The Tribunal rejected the liquidator’s prayer for dissolution and issued the following directions:
- The liquidator must form the Stakeholders’ Consultation Committee within 10 days and ensure the realization of assets, including trade receivables.
- HDFC Bank must release the fixed deposit with accrued interest within 10 days.
- The suspended management/promoters must assist the liquidator in realizing assets and completing the liquidation process.
- The liquidator must complete the liquidation process and file the application for dissolution by 15.03.2021.

The application was disposed of with these observations and directions.

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