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

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

Mr. P.C. Gaggar, Liquidator Versus M/s. Multichemical Industries Pvt. Ltd.

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 the Corporate Debtor - section 54 of the Insolvency and Bankruptcy Code, 2016 read with regulation 45(3) of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - HELD THAT:- It is informed by the liquidator that he has not formed the Stakeholders’ Consultation Committee and no Stakeholders’ Consultation Committee meeting has taken place during the liquidation period. The reason for not forming/or conducting the meeting could not be clarified by the liquidator, when 5 Operational Creditors are there besides the promoters/ shareholders of CD. It is also reported, during the hearing that, a Fix Deposit of ₹ 5,25,000.00(Face value) with interest accrued therein of the CD lying with HDFC Bank even the Bank Guarantee/claim period of Letter of Guarantee (LG) is over. This deposit given as margin/security is not released reportedly for want of original Bank guarantee. It is not understood how the Bank is not releasing the Deposit of CD under Liquidation/Dissolution, when sufficient provision/guidelines are available with the Bank to release the deposit after giving 15/30 days’ formal notice to the beneficiary of the LG, when the validity of claim period is over. What has prevented the HDFC from not releasing the FD when the claim period mentioned in the LG is over. The liquidator is to form Stakeholders’ Consultation Committee within 10 days of this order as per Regulation of liquidation process 31 A and make all attempts to ensure maximization of value of assets of CD / liquidation estates including Trade Receivables - The liquidator is to take up the matter with HDFC Bank for release of the FD with interest within 10 days from today. The liquidator may execute/ complete formalities, if asked for by the Bank, for release of the FD of the CD under Liquidation. Application disposed off. 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.