2022 (4) TMI 262 - AT - Insolvency and Bankruptcy

Order Admitting Application Under Section 7 of IBC Upheld

The appeal challenging the order admitting the application under Section 7 of the IBC and appointing an Interim Resolution Professional was dismissed as ... Appeal rendered infructuous by subsequent liquidation - CIRP failure and Committee of Creditors resolution for liquidation - Effect of post-admission liquidation on challenge to admission orderAppeal rendered infructuous by subsequent liquidation - CIRP failure and Committee of Creditors resolution for liquidation - Effect of post-admission liquidation on challenge to admission order - Whether the appeal challenging admission of the Section 7 petition and appointment of an Interim Resolution Professional is maintainable or must be dismissed as infructuous in view of the subsequent resolution for liquidation and order directing liquidation. - HELD THAT: - The Tribunal recorded that the Corporate Debtor's CIRP had effectively failed, the Committee of Creditors in its 21st meeting on 24.08.2021 passed a resolution for liquidation which was approved by e voting on 27.08.2021 with 79.75% votes in favour, and the Adjudicating Authority allowed I.A. No. 2179/2021 and ordered liquidation of the Corporate Debtor on 16.12.2021. Given these intervening developments, the challenge to the earlier order dated 20.12.2019 admitting the Section 7 petition and appointing an Interim Resolution Professional no longer subsists in practical effect. The Tribunal therefore held that the appeal has become infructuous in view of the liquidation order and dismissed the appeal accordingly. [Paras 19, 20]Appeal dismissed as infructuous in view of the Committee of Creditors' resolution for liquidation and the Adjudicating Authority's order directing liquidation; no order as to costs.Final Conclusion: The Appellate Tribunal dismissed the appeal as infructuous because the CIRP had failed, the CoC approved liquidation by requisite majority, and the Adjudicating Authority ordered liquidation of the Corporate Debtor; no costs were awarded. Issues Involved:1. Validity of the order dated 20.12.2019 admitting the application under Section 7 of the IBC.2. Allegations of arbitrary and illegal actions by the Respondent No. 1 Bank.3. Conduct of the Interim Resolution Professional and Committee of Creditors (CoC).4. Decision for liquidation of the Corporate Debtor.Detailed Analysis:1. Validity of the Order Dated 20.12.2019:The Appellant, a shareholder of Sri Adhikari Brothers Television Network Ltd., filed an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the order dated 20.12.2019 by the National Company Law Tribunal (NCLT), Mumbai Bench. This order admitted the application filed under Section 7 of the IBC by the Central Bank of India and appointed Mr. Vijendra Kumar Jain as the Interim Resolution Professional.2. Allegations of Arbitrary and Illegal Actions by the Respondent No. 1 Bank:The Appellant alleged that the Respondent No. 1 Bank acted arbitrarily and illegally by declaring the account of Respondent No. 2 as a Non-Performing Asset (NPA) without proper notice and selling pledged shares at a price lower than the market value, thereby causing a downfall in the market prices of the shares. The Appellant also contended that the bank did not provide details of the sold shares despite multiple requests.3. Conduct of the Interim Resolution Professional and Committee of Creditors (CoC):The Appellant argued that the Resolution Professional and CoC violated the order dated 17.01.2020 by terminating the Leave and License Agreement with TV Vision and SAB Events, which was against the interest of the Corporate Debtor. This termination allegedly stopped the recurring source of income for the Corporate Debtor, exacerbating its financial difficulties.4. Decision for Liquidation of the Corporate Debtor:The Resolution Professional, in his affidavit, stated that the only Resolution Plan put forth was rejected by the CoC with 100% votes, leading to a resolution for liquidation of the Corporate Debtor. The CoC approved the liquidation with 79.75% voting in favor. Consequently, an application for liquidation under Section 33 of the IBC was filed and allowed by the Adjudicating Authority on 16.12.2021, ordering the Corporate Debtor to be liquidated.Findings:The Tribunal noted that the Respondent No. 2 Company availed three term loans from Respondent No. 1, aggregating to Rs. 80 Crores, secured by hypothecating programme rights and pledging shares. The account was declared NPA on 28.09.2017 with total outstanding dues of Rs. 25.03 Crores. The application under Section 7 of the IBC was filed on 30.10.2018 and admitted on 20.12.2019.The Tribunal observed that despite multiple adjournments and attempts at settlement, no resolution was reached between the parties. The CoC's decision to liquidate the Corporate Debtor was based on the rejection of the only Resolution Plan and was approved by the Adjudicating Authority.Order:The Tribunal concluded that the Corporate Insolvency Resolution Process (CIRP) had failed, and the CoC's recommendation for liquidation was valid. Therefore, the appeal challenging the order dated 20.12.2019 was dismissed as infructuous, with no order as to costs. The Registry was directed to upload the judgment on the Appellate Tribunal's website and send a copy to the NCLT, Mumbai Bench.