2022 (4) TMI 1365 - Tri - Insolvency and Bankruptcy

Dismissal of Liquidator's Application highlights need for cooperation, transparency, and active involvement in insolvency proceedings

The Tribunal dismissed the Liquidator's application for non-prosecution due to lack of cooperation from the Suspended Board of Directors, undervalued and ... Preferential Transaction and relevant time - undervalued and fraudulent transactions - sale of inventory was entered into with the related parties at a price lower than the book value which clearly demonstrates the intent of the Corporate Debtor, or not - HELD THAT:- On perusal of the records, it is seen that the Liquidator has not entered appearance since 09 August 2021. Thereafter, the IA was listed on three dates i.e., on 01 November 2021, 12 January 2022 and 25 February 2022. Court notice had also been sent to the Liquidator, the Counsel for the Liquidator, and the Respondents on 18 January 2022. The notices have been duly delivered, yet neither did the Liquidator appear on 25 February 2022 nor did the Counsel appointed by the Liquidator appear. The Liquidator should not expect that applications filed by him will be given due consideration even if he, as applicant, does not choose to appear. There are no reason to treat the Liquidator differently from other applicants whose applications will meet the same fate if they choose not to appear on multiple occasions. The application is dismissed for non-prosecution. Issues:Liquidation of Corporate Debtor under CIRP, Non-cooperation of Suspended Board of Directors, Undervalued and Preferential Transactions, Fraudulent Transactions with Related Parties, Non-appearance of Liquidator, Dismissal of IA for non-prosecution, Referral to IBBI for lackadaisical behavior.Analysis:The Tribunal dealt with an application filed by the Liquidator of a Corporate Debtor under the Insolvency and Bankruptcy Code. The Corporate Debtor was admitted under the Corporate Insolvency Resolution Process (CIRP) following a petition by Corporation Bank. The Liquidator highlighted the lack of cooperation from the Suspended Board of Directors, leading to difficulties in obtaining necessary documents. Despite efforts, no Expression of Interest was received, and the Committee of Creditors decided on liquidation due to the absence of proper documents and the CIRP period nearing its end.Moreover, the Liquidator discovered undervalued and preferential transactions with related parties, indicating potential fraudulent activities to defraud creditors. Specific instances of such transactions were detailed, including discrepancies in inventory sales and debt balance manipulations. The Liquidator raised serious allegations under sections 45, 66, 49, and 66 of the Code, emphasizing the need to prove these claims before the Adjudicating Authority.However, a significant issue arose as the Liquidator failed to appear in proceedings since August 2021, despite multiple notices and hearing dates. The Tribunal expressed dissatisfaction with the lack of participation, emphasizing that the Liquidator cannot expect favorable treatment without active engagement. Consequently, the Tribunal dismissed the application for non-prosecution and referred the matter to the IBBI due to the Liquidator's indifferent conduct.In conclusion, the Tribunal's decision to dismiss the application and notify the IBBI underscores the importance of active involvement and diligence in insolvency proceedings. The order directs the Registry to disseminate the decision to all concerned parties and stresses the need for compliance with formalities for further actions.