2022 (2) TMI 65 - AT - Insolvency and Bankruptcy

Tribunal Upholds Liquidation Order, Dismisses Appeal on Corporate Debtor's Liquidation

Amit Suresh Bhatnagar Suspended Management of Maktel Power Limited Versus Mr. Dharit Kishorbhai Shah Resolution Professional Maktel Power Limited, Elcen Machines Pvt. Ltd.

The Tribunal upheld the liquidation order dated 05.05.2021, dismissing the appeal and affirming the liquidation of the Corporate Debtor (CD). The ... Liquidation of Corporate Debtor - Appellant was disallowed by Resolution Professional (RP), to participate in the Committee of Creditors (CoC) meeting of the Corporate Debtor (CD) - HELD THAT:- The RP has tried twice for initiation of ‘Expression of Interest’ (EOI) process and at the first stage, he received two EOIs from the ‘Prospective Resolution Applicants’ who were only interested in the plant premises of the CD. However, it was not approved by the CoC and CoC decided again in the 6th CoC meeting for fresh EOI and the same were also published in Newspapers. However, no EOIs were received by the RP then the members of the CoC in its 8th meetings of CoC resolved with 100% majority for Liquidation of the CD on 08.03.2021. As far as Section 24(3)(b) of the Code is concerned, it is very much clear that the RP is to give notice for each meeting to the CoC members of the ‘Suspended Board of Directors’ and so is the case with ‘Chapter-VI of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016’. Here the determining factor is that the Appellant was Director of the CD till 01.11.2016 and same was much prior to initiation of CIRP on 11.09.2020 - The DIN of the Appellant has been disqualified by the Registrar of Companies (ROC) in accordance with provision of Section 164(2) of the Companies Act, 2013 vide order dated 21.06.2017 and hence, the Appellant has already vacated the office of the Director in accordance with section 167 of the Companies Act, 2013. The Appellant was not part of the suspended Board of Directors of the CD. No records reflects that the Appellant has challenged his cancellation of DIN with any appropriate Authority. No board meeting in which he has participated since cessation of his vacation of office after DIN cancellation were produced before us. Hence, the Appellant is not part of the Suspended Board of Directors and he cannot challenge the decision of the CoC as Hon’ble Apex Court has made amply clear that the Commercial Wisdom of the CoC is non- justiciable. Appeal dismissed. Issues Involved:1. Challenge to the liquidation order.2. Disallowance of participation in Committee of Creditors (CoC) meetings.3. Disqualification of the Appellant as Director.4. Revival efforts for the Corporate Debtor (CD).Issue-Wise Detailed Analysis:1. Challenge to the Liquidation Order:The Appellant, a suspended management/ex-director of Maktel Power Limited, filed an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 against the liquidation order dated 05.05.2021 passed by the National Company Law Tribunal (NCLT), Ahmedabad Bench. The Appellant sought to set aside the liquidation order and re-initiate the Corporate Insolvency Resolution Process (CIRP).2. Disallowance of Participation in CoC Meetings:The Appellant contended that he was not issued notice for the first CoC meeting and was not provided with the agenda. Although he received notice for the second meeting, he was not given a way link to participate. The Appellant cited the Supreme Court judgment in Vijay Kumar Jain Vs. Standard Chartered Bank, asserting his right to participate in CoC meetings. The Tribunal, however, noted that the Appellant was not part of the suspended Board of Directors at the time of CIRP initiation and thus did not have the right to participate.3. Disqualification of the Appellant as Director:The Respondent argued that the Appellant was disqualified as a director under Section 164(2) of the Companies Act, 2013, due to defaults by another company, Apex Power Equipments Pvt. Ltd. The Appellant's Director Identification Number (DIN) was disqualified from 01.11.2016 to 31.10.2021. The Tribunal observed that the Appellant had vacated his office as a director in accordance with Section 167 of the Companies Act, 2013, and had not challenged his DIN disqualification with any appropriate authority.4. Revival Efforts for the Corporate Debtor (CD):The Appellant claimed that the Resolution Professional (RP) failed to take adequate steps for the revival of the CD. The RP, however, demonstrated that he had made multiple attempts to initiate the Expression of Interest (EOI) process, but no viable EOIs were received. Consequently, the CoC resolved with 100% majority to liquidate the CD. The Tribunal upheld the CoC's decision, emphasizing that the commercial wisdom of the CoC is non-justiciable, as reiterated by the Supreme Court in several judgments, including Committee Of Creditors Of Essar Steel India Limited Vs. Satish Kumar Gupta.Conclusion:The Tribunal concluded that the Appellant was not part of the suspended Board of Directors and thus did not have the standing to challenge the CoC's decisions. The Tribunal upheld the impugned order dated 05.05.2021, dismissing the appeal and affirming the liquidation of the CD. All pending interim applications were disposed of, and no order as to costs was made.