2021 (10) TMI 1035 - Tri - Insolvency and Bankruptcy

Tribunal Orders Liquidation of Corporate Debtor under Insolvency Code Section, Emphasizes Compliance

The Tribunal ordered the liquidation of the Corporate Debtor under Chapter III of the Insolvency and Bankruptcy Code. The Resolution Professional's ... Initiation of liquidation - Liquidation order on intimation of Committee of Creditors' decision - Commercial wisdom of the Committee of Creditors - Appointment of Liquidator from approved panel - Removal/exclusion of Resolution Professional as Liquidator for lackadaisical conduct - Liquidation costs and Liquidator's fees - Sale as a going concern and assessment of assets - Public announcement and submission of claimsInitiation of liquidation - Liquidation order on intimation of Committee of Creditors' decision - Commercial wisdom of the Committee of Creditors - Whether the corporate debtor should be directed to be liquidated under the Code and on what basis the Adjudicating Authority should treat the application under Section 33(1) instead of Section 33(2). - HELD THAT: - The CoC, at its 5th meeting on 07.03.2020, passed a resolution to liquidate the corporate debtor with 100% voting share after no eligible resolution applicant was available. The Tribunal noted the settled principle that a decision of the CoC to recommend liquidation after evaluation and absence of a resolution plan is a business decision within the CoC's commercial wisdom. Although Section 33(2) permits liquidation on intimation by the RP where such intimation is made during CIRP before confirmation of a plan, the RP filed the application after the prescribed period and without explanation for the delay; the application is therefore treated under Section 33(1). On satisfaction of the conditions under Section 33(1), the Tribunal directed that the corporate debtor be liquidated in accordance with Chapter III of the Code and issued consequential directions regarding the liquidation process. [Paras 5, 8, 16]The corporate debtor is ordered to be liquidated under Section 33(1) of the Code and the liquidation shall proceed in accordance with Chapter III with the specified directions.Removal/exclusion of Resolution Professional as Liquidator for lackadaisical conduct - Appointment of Liquidator from approved panel - Whether the incumbent Resolution Professional should be continued as Liquidator and, if not, who is to be appointed as Liquidator. - HELD THAT: - Section 34(1) provides that the RP shall act as Liquidator subject to written consent. The Tribunal found that the RP had unexplained and inordinate delay in filing the liquidation application after the CoC resolution and prior to lockdown, reflecting lackadaisical conduct; on that basis the RP should not be continued as Liquidator. Pursuant to Section 34(7) and having received the IBBI-approved panel forwarded by the NCLT, New Delhi, the Tribunal selected a member of the panel (Mr. Sawinder Singh Chug as appearing at Serial No. 6 on the panel) to be appointed as Liquidator. [Paras 9, 10]The RP is not continued as Liquidator; Mr. Sawinder Singh Chug from the approved panel is appointed as Liquidator.Liquidation costs and Liquidator's fees - Sale as a going concern and assessment of assets - Public announcement and submission of claims - Directions governing the conduct of the liquidation process including costs, fees, sale of assets and claims procedure. - HELD THAT: - The Tribunal recorded relevant regulatory framework: Regulation 39B (liquidation cost) to be met as per the Liquidation Process Regulations, Regulation 39C (assessment of sale as going concern) requires the liquidator to follow regulation 32 of the Liquidation Process Regulations if sale as going concern fails, and Regulation 39D (fees of the liquidator) contemplates fees as specified by the Board and as provided in Rule 4 of the Liquidation Process Regulations. The Tribunal directed the Liquidator to publish the public announcement in Form B within five days calling stakeholders to submit claims with the last date 30 days from the liquidation commencement date, to file a preliminary report within 75 days and fortnightly progress reports thereafter, and applied the statutory consequences in relation to suits, powers of directors and assistance by personnel as set out in Section 33 and related provisions. [Paras 11, 12, 13, 14, 16]The liquidation shall be conducted in accordance with the cited IBBI regulations and the Liquidation Process Regulations, including meeting liquidation costs, following procedures for sale as a going concern, paying liquidator's fees as prescribed, publishing the statutory announcement and processing claims within the prescribed timelines.Final Conclusion: The Tribunal held that, on satisfaction of the conditions of Section 33(1), Addinath Rubbers Private Limited is ordered to be liquidated; the incumbent RP is not continued as Liquidator for want of timely conduct and Mr. Sawinder Singh Chug is appointed as Liquidator, with the liquidation to proceed under the applicable IBBI and Liquidation Process Regulations and the directions specified in the order. Issues:Liquidation order under Section 33(1) or Section 33(2) of the Insolvency and Bankruptcy Code, 2016; Appointment of Liquidator; Compliance with Regulations for Liquidation Process.Analysis:1. Liquidation Order under Section 33(1) or Section 33(2):The case involved an application for liquidation filed by the Resolution Professional under Section 33(2) of the Insolvency and Bankruptcy Code, 2016. The Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor was initiated, and after the CoC's decision to liquidate the Corporate Debtor, the application was filed. However, the application was submitted after the prescribed period, leading the Tribunal to treat it under Section 33(1) instead of Section 33(2) of the Code.2. Appointment of Liquidator:Section 34(1) mandates that the Resolution Professional appointed for the CIRP shall act as the Liquidator upon the Adjudicating Authority's order for liquidation. In this case, the Resolution Professional had ample time to file the application for liquidation but failed to do so promptly. Due to this delay and lack of explanation, the Tribunal decided that the Resolution Professional should not continue as the Liquidator. Instead, a new Liquidator was appointed from the panel approved by the National Company Law Tribunal.3. Compliance with Regulations for Liquidation Process:The Tribunal referred to various regulations such as Regulation 39B, 39C, and 39D of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. These regulations deal with liquidation costs, assessment of sale as a going concern, and fees of the Liquidator. The Tribunal also highlighted the importance of complying with Regulation 12 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, regarding the publication of public announcements and the submission of claims by stakeholders.In conclusion, the Tribunal directed the liquidation of the Corporate Debtor in accordance with Chapter III of the Code, appointed a new Liquidator, and outlined specific directions for the liquidation process, including the publication of public announcements, filing of reports, and cessation of powers of the Corporate Debtor's management. The application was disposed of, and necessary copies of the order were directed to be supplied to relevant parties for compliance.