2021 (5) TMI 666 - AT - Insolvency and Bankruptcy

Tribunal Upheld Liquidation Order for Thiru Arooran Sugars Ltd. Appeal Dismissed

The Tribunal upheld the Adjudicating Authority's order for Liquidation of the Corporate Debtor, Thiru Arooran Sugars Ltd., emphasizing the CoC's ... Liquidation of Corporate Debtor - real grievance of the ‘Appellant’ is that the ‘Adjudicating Authority’ had failed to consider the efforts at resolving the debt of the ‘Corporate Debtor’ in the teeth of the Insolvency and Bankruptcy Code, which provides for ‘Liquidation’ in the event of failure of ‘CIRP’ or non-receipt of any ‘Resolution Plan’ within the specified period - HELD THAT:- The claim of the ‘Resolution Applicant’ was rejected by 76.02% of voting share by the ‘Financial Creditors’, in the 23rd ‘Committee of Creditors’ meeting that took place on 30.11.2020, of course, after taking into account of the feasibility and viability, etc., as mentioned in CIRP Regulations. Moreover, e-voting was held from 05.12.2020 to 07.12.2020. This ‘Tribunal’ keeping in mind of a primordial fact that the decision of the ‘Committee of Creditors’ takes a pivotal seat based on ‘Commercial Wisdom’, taking note of the fact that the ‘Committee of Creditors Members’ with 76.02% voting share had voted against the ‘Resolution Plan’ and in the teeth of ingredients of 33(2) of the Insolvency and Bankruptcy Code, 2016, comes to a irresistible conclusion that the ‘impugned order of Liquidation’ in respect of the ‘Corporate Debtor’ passed by the ‘Adjudicating Authority’ is free from legal infirmities - Appeal dismissed. Issues Involved:1. Appointment and actions of the Resolution Professional.2. Rejection of the Resolution Plan by the Committee of Creditors.3. Submission and consideration of Compromise Settlement Offers.4. Impact of Liquidation on Operational Creditors, particularly farmers.5. Legal validity of the Adjudicating Authority's order for Liquidation.Issue-wise Detailed Analysis:1. Appointment and actions of the Resolution Professional:The Appellant, who was the Chairman and Managing Director of the Corporate Debtor, Thiru Arooran Sugars Ltd., challenged the appointment of the Interim Resolution Professional (IRP) and his subsequent confirmation as the Resolution Professional (RP) by the Committee of Creditors (CoC). The Appellant argued that the RP failed to present critical information to the Adjudicating Authority, including the fact that the final Resolution Plan submitted was 17% lower than the RP's assessed Liquidation Value of Rs. 217 Crores.2. Rejection of the Resolution Plan by the Committee of Creditors:The CoC, after three rounds of inviting Expressions of Interest (EOI) and Resolution Plans, rejected the final Resolution Plan on 07.12.2020. The Appellant contended that the CoC did not adequately consider the Promoters' One Time Settlement (OTS) offers, which included an upfront deposit and subsequent revised offers aimed at settling dues with the Secured Creditors. The CoC's decision to reject the Resolution Plan and vote for Liquidation was based on a 76.02% voting share, aligning with the commercial wisdom principle upheld by the Supreme Court in Kalpraj Dharamshi & Anr v Kotak Investment Advisors Ltd. & Anr.3. Submission and consideration of Compromise Settlement Offers:The Appellant highlighted multiple Compromise Settlement (CS) offers submitted by the Promoters, including a fresh offer on 27.09.2020 and a revised offer on 23.11.2020. These offers proposed higher payments to Creditors and full settlement of farmers' dues, which were not adequately considered by the CoC. The Appellant argued that the CS offers were in line with RBI guidelines and provided better outcomes for all stakeholders compared to Liquidation.4. Impact of Liquidation on Operational Creditors, particularly farmers:The Appellant emphasized the adverse effects of Liquidation on farmers, who are classified as Operational Creditors and rank lowest in the priority of distribution under Section 53 of the Insolvency and Bankruptcy Code (IBC). The Liquidation would result in significant financial distress for 13,431 farmers, who faced anxiety over their overdue cane prices and liabilities for Crop Loans. The Appellant argued that the CS offers would ensure full payment to farmers and relieve them from loan obligations, making them eligible for fresh loans.5. Legal validity of the Adjudicating Authority's order for Liquidation:The Appellant contended that the Adjudicating Authority's order for Liquidation was flawed as it did not consider pending interlocutory applications regarding the Constitution of the CoC and the status of Creditors. The Appellant argued that the order was contrary to law and should be set aside. However, the Tribunal noted that the CoC's decision, based on commercial wisdom, is paramount and should not be interfered with, as upheld by the Supreme Court. The Tribunal concluded that the Adjudicating Authority's order was free from legal infirmities and dismissed the Appeal.Conclusion:The Tribunal dismissed the Appeal, upholding the Adjudicating Authority's order for Liquidation of the Corporate Debtor, Thiru Arooran Sugars Ltd. The Tribunal emphasized the importance of the CoC's commercial wisdom and found no legal infirmities in the Liquidation order. Consequently, the Appellant's contentions were rejected, and the connected interlocutory applications were closed.