NCLAT affirms NCLT's liquidation decision for Corporate Debtor despite revival attempts

The NCLAT upheld the NCLT's decision to allow the Liquidator to proceed with the liquidation of the Corporate Debtor as no revival efforts were successful, despite attempts under Section 230 of the Companies Act, 2013. The Tribunal rejected the request to exclude 367 days from the liquidation timeline, stating that the Liquidator had ample time to complete the process diligently. The Liquidator was directed to continue with the liquidation process as per the original orders, and the application connected to the case was disposed of.

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Issues Involved:
1. Approval for proceeding with the liquidation of the Corporate Debtor.
2. Exclusion of a period of 367 days from the liquidation process timeline.

Detailed Analysis:

Approval for Proceeding with Liquidation:

The application was filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 by the Liquidator seeking permission to proceed with the liquidation of the Corporate Debtor. The Corporate Insolvency Resolution Process (CIRP) commenced on 05.01.2018, and the Interim Resolution Professional (IRP) was appointed. Despite the CIRP period completion on 02.10.2018, no resolution plan was approved. Consequently, the Resolution Professional sought approval for liquidation, which was granted by the NCLT, Kolkata Bench on 06.12.2018.

An appeal by MEPL to the NCLAT challenged the liquidation order, resulting in an interim order on 22.02.2019, which restricted the sale or transfer of the Corporate Debtor's assets without prior approval. The NCLAT directed the Liquidator to proceed under Section 230 of the Companies Act, 2013, to attempt revival before liquidation. Despite efforts, including inviting schemes and extending deadlines, the proposal by MEPL did not receive the required approval from 75% of secured creditors, achieving only 50.37%.

The NCLAT, in its order dated 01.07.2019, noted the unsuccessful attempts under Section 230 and did not interfere with the liquidation order. Consequently, the Tribunal allowed the Liquidator to proceed with the liquidation process as per the original orders dated 06.12.2018 and 03.01.2019, in accordance with the IBBI (Liquidation Process) Regulations, 2016.

Exclusion of a Period of 367 Days from Liquidation Process Timeline:

The Liquidator sought the exclusion of 367 days from the liquidation timeline due to the time spent in the scheme process and the appeal by MEPL. Regulation 44(1) of the Liquidation Process Regulations prescribes a one-year period for completion, extendable with the Adjudicating Authority's approval. The timeline for liquidation was initially two years before amendments reduced it to one year, but the amendments were inapplicable to processes commenced before 25.07.2019.

The Liquidator argued that the delay was beyond control and due to efforts to maximize stakeholder value by seeking a scheme. Despite the pandemic and resultant lockdowns, which were recognized by the Supreme Court and NCLAT for extending limitations, the Tribunal found that the liquidation could still be completed within the extended timelines.

Therefore, the Tribunal declined the request for exclusion of the 367 days, noting that the Liquidator had sufficient time to complete the process diligently.

Order:
1. The Liquidator shall proceed with the liquidation of the Corporate Debtor as per the orders dated 06.12.2018 and 03.01.2019.
2. The prayer for exclusion of 367 days from the liquidation period is rejected.
3. The application I.A. (IB) No. 119/CTB/2020 connected with CP (IB) No. 593/KB/2017 is disposed of.
4. Urgent certified copy of this order, if applied for, be issued upon compliance with all requisite formalities.

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