Tribunal affirms liquidation order as CoC rejects CIRP withdrawal proposal due to non-compliance

The Tribunal upheld the Adjudicating Authority's order for the liquidation of the Corporate Debtor, as the decision by the Committee of Creditors (CoC) to liquidate was deemed justified due to the lack of viable resolution plans and the impending expiration of the Corporate Insolvency Resolution Process (CIRP) period. The Appellant's proposal for withdrawal of CIRP under Section 12A was rejected by the CoC for non-compliance with regulations and lack of commercial viability. Consequently, the appeal was dismissed, affirming the decision to liquidate the Corporate Debtor.

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Issues Involved:
1. Whether the order passed by the Adjudicating Authority for liquidation of the Corporate Debtor is in accordance with the law.
2. Whether the CoC's decision to liquidate the Corporate Debtor was justified.
3. Whether the Appellant's proposal for withdrawal of CIRP under Section 12A was duly considered.

Issue-wise Detailed Analysis:

1. Whether the order passed by the Adjudicating Authority for liquidation of the Corporate Debtor is in accordance with the law:

The Adjudicating Authority allowed the application filed by the Resolution Professional under Section 33(2) read with Section 60(5) of the Insolvency and Bankruptcy Code, 2016, for the liquidation of the Corporate Debtor. The CoC, in its 8th meeting, resolved to liquidate the Corporate Debtor with an 85.64% voting share. The Adjudicating Authority noted that no resolution plans were received despite two invitations for Expression of Interest (EOI), and the CIRP period was due to expire. Therefore, the order for liquidation was passed, appointing the Respondent as the liquidator.

2. Whether the CoC's decision to liquidate the Corporate Debtor was justified:

The CoC was formed with Financial Creditors holding 100% voting share, including Axis Bank, Shriram Transport Corporation Ltd., Reliance Commercial Finance Ltd., and SREI Equipment Finance Ltd. Despite best efforts and re-issuing Form-G, no applications were received from prospective resolution applicants. The CoC, in its commercial wisdom, decided to liquidate the Corporate Debtor, having not received any viable resolution plans. The CoC's decision was based on the fact that the CIRP period was expiring, and the proposal by the Appellant was not commercially viable.

3. Whether the Appellant's proposal for withdrawal of CIRP under Section 12A was duly considered:

The Appellant, a Promoter Shareholder holding 50% of the equity shares, proposed withdrawal of CIRP under Section 12A, which was rejected by the CoC. The Appellant's proposal was not considered viable by the CoC. The Adjudicating Authority observed that the Appellant failed to comply with the procedure prescribed under Regulation 30A of the IBBI Regulations, 2016, for withdrawal under Section 12A. The proposal was not accompanied by a bank guarantee towards estimated expenses, as required by the regulations.

Conclusion:

The Tribunal concluded that the Appellant failed to make out any case either on law or on facts. The decision of the CoC to liquidate the Corporate Debtor was based on commercial wisdom and was justified given the circumstances. The Appellant's proposal for withdrawal of CIRP was not compliant with the required regulations and was not commercially viable. Therefore, the order passed by the Adjudicating Authority dated 28.04.2022 was upheld, and the appeal was dismissed.

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