2021 (5) TMI 107 - Tri - Insolvency and Bankruptcy

Tribunal Rejects Liquidation Order for Corporate Debtor

The Tribunal declined to order liquidation of the Corporate Debtor, Oxford Facilities Management, despite the CoC's resolution due to the absence of ... Liquidation of the Corporate Debtor - appeal pending before the Hon'ble NCLAT - liquidation sought on the ground that the only asset of the Corporate Debtor is a fixed deposit of ₹ 3.5 Crore - HELD THAT:- In the present case, the CoC has resolved by 100% voting share to liquidate the Corporate Debtor as the Corporate Debtor has no immovable assets. Be that as it may, it will not be justifiable to pass an order of liquidation at this stage till the Hon'ble NCLAT takes a final view on the appeal filed. This view is being taken in view of the fact that the only asset of the Corporate Debtor is a fixed deposit which can be withdrawn and distributed within a short period of time, and it would be a tad difficult to reverse the clock once the liquidation order is passed. If further action is taken to distribute the fixed deposit by liquidating the same, then it will also have the effect of rendering the appeal otiose. The liquidation of the Corporate Debtor cannot be allowed at this stage - application dismissed. Issues:1. Liquidation of the Corporate Debtor with only a fixed deposit as the asset.2. Challenge to the decision of the Committee of Creditors (CoC) for liquidation by a member of the Suspended Board of Directors.Issue 1: Liquidation of the Corporate DebtorThe Resolution Professional (RP) filed an application seeking liquidation of the Corporate Debtor, Oxford Facilities Management, as its only asset was a fixed deposit of Rs. 3.5 Crore. The CoC, with 100% voting share, resolved to proceed with liquidation and appointed the RP as the Liquidator. The RP consented to act as Liquidator as per the provisions of the Insolvency and Bankruptcy Code, 2016. However, a member of the Suspended Board of Directors challenged the CoC's decision, seeking to set it aside and obtain a stay on the liquidation process.Issue 2: Challenge to CoC's DecisionThe member of the Suspended Board of Directors raised objections to the CoC's decision for liquidation, arguing that the appeal pending before the Hon'ble NCLAT regarding the admission order should be considered before any further steps are taken. The CoC's decision to proceed with liquidation was contested based on the grounds that the Corporate Debtor lacked immovable assets. The CoC's resolution for liquidation was challenged, emphasizing the need to await the final view of the Hon'ble NCLAT on the appeal filed.Judgment Analysis:The Tribunal considered the appeal pending before the Hon'ble NCLAT challenging the admission order and noted that no stay had been granted. Given the objective of the Code to revive the Corporate Debtor within a specified timeframe, the Tribunal acknowledged the fixed deposit as the sole asset of the Corporate Debtor. While the CoC had resolved for liquidation due to the absence of immovable assets, the Tribunal refrained from passing a liquidation order at that stage to await the NCLAT's final decision. Concerns were raised about the irreversible consequences of liquidation, especially with the fixed deposit being distributable in a short period. As a result, the Tribunal rejected the application for liquidation and dismissed the challenge to the CoC's decision, emphasizing the need to await the NCLAT's decision. The RP was granted liberty to mention if earlier orders from the NCLAT were received, and the main CP was listed for progress reporting on a future date.