2021 (4) TMI 623 - Tri - Insolvency and Bankruptcy

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. ... Dissolution of corporate debtor - liquidator's final report and Form H - Stakeholders' Consultation Committee - maximisation of value of liquidation estate - realisation of trade receivables - release of fixed deposit held as margin/security - condonation of delay in liquidation - directions to suspended management to assist liquidatorDissolution of corporate debtor - liquidator's final report and Form H - condonation of delay in liquidation - maximisation of value of liquidation estate - Stakeholders' Consultation Committee - release of fixed deposit held as margin/security - realisation of trade receivables - directions to suspended management to assist liquidator - Application under Section 54 read with regulation 45(3) for dissolution of the corporate debtor rejected with specific directions and limited condonation of delay. - HELD THAT: - The Tribunal found that the liquidator had not formed the Stakeholders' Consultation Committee during liquidation and had not taken satisfactory steps to realise assets, including noted trade receivables, prior to seeking dissolution. A fixed deposit held by HDFC Bank as margin/security remained withheld despite expiry of the bank guarantee claim period; the Bench observed that the bank could release the deposit after prescribed formalities. Taking into account lockdown-related restrictions, the Tribunal condoned a delay of 78 days excluding the lockdown period but declined immediate dissolution. Instead, the Tribunal issued mandatory directions to expedite completion of liquidation and maximise realisations: formation of the Stakeholders' Consultation Committee within 10 days; the liquidator to pursue release of the fixed deposit and execute any formalities the bank requires within 10 days; completion of the liquidation and distribution under section 53 on or before 13.03.2021 (completion of two years from liquidation order), and filing of a revised Form H and fresh application for dissolution on or before 15.03.2021. The suspended management and promoters were directed to extend all assistance to the liquidator. The Tribunal warned that delay by the bank in releasing assets may attract provisions of the IBC including penalty. [Paras 5, 6, 7, 8]Application for dissolution rejected; delay of 78 days condoned (excluding lockdown); liquidator directed to form Stakeholders' Consultation Committee, pursue release of the fixed deposit within 10 days, realise assets and complete liquidation and distributions by 13.03.2021, file revised Form H and fresh dissolution application by 15.03.2021; suspended management to assist; HDFC Bank directed to release the FD with interest within 10 days.Final Conclusion: The application for dissolution under Section 54 read with regulation 45(3) is refused; the Tribunal condones limited delay but directs specific steps to maximise asset realisation, secure release of a withheld fixed deposit, form the Stakeholders' Consultation Committee, complete liquidation and distributions by 13.03.2021 and file the revised compliance certificate and fresh dissolution application by 15.03.2021; non-compliance may attract IBC consequences. 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.