2022 (8) TMI 317 - Tri - Insolvency and Bankruptcy

Tribunal Orders Liquidation of SSB Retail India Pvt Ltd, Calls for IBC Amendment

Pavan Kankani, RP for SSB Retail India Private Limited Versus Karnataka Bank Limited and Ors.

The Tribunal ordered the liquidation of the Corporate Debtor, SSB Retail India Private Limited, due to a deadlock in voting share, with only 55.87% in ... Liquidation of Corporate Debtor - whether the Adjudicating Authority can order liquidation of the Corporate Debtor in terms of Section 33(1)(a) of IBC, when only one out of the two members of the CoC having voting share of only 55.87% present and voted for liquidation of the corporate debtor and the other lone member remained absent, when not less than sixty-six per cent of the voting share is required in terms of sub-clause (2) of Section 32 of IBC? - Section 33(1)(a) & 34(1) of Insolvency & Bankruptcy Code, 2016, read with Rule 11, 13 & 32 of NCLT Rules, 2016 - HELD THAT:- No doubt from a plain reading of 33(2) of the Code, it is manifestly clear that the decision of the committee of creditors seeking liquidation of the Corporate Debtor be approved by not less than sixty-six per cent of the voting share, however it is pertinent to note that sub-section 2 of section 33(2) of the Code, is silent as to whether the said 66% of voting share shall comprise of the members present either in person or by video-conference alone or shall include/exclude the other member(s) of CoC who are not present physically or through video conference in the meeting - In so far as the case on hand is concerned, admittedly the voting share of the Financial Creditor who was present and voted for liquidation of the Corporate Debtor, is only 55.87%. It is pertinent to state herein that the other lone Financial Creditor neither present nor cast his vote through it is entitled to vote. As per the submissions made before us there are no chances of the resolving the existing stalemate in near future as the other sole member of CoC is not willing to even attend the meetings of CoC. Therefore, under these circumstances, even if direct the Resolution Professional to once again call for the meeting of members of the CoC to consider the feasibility of going for a fresh EOI or liquidation, the same would only contribute to further delay in liquidating the corporate applicant herein, and thus, defeat the timelines set under the IB Code, hence we do not wish to go for the said option. The liquidation of the Company in the manner laid down in Chapter-III of the Code is allowed - application allowed. Issues Involved:1. Whether the Adjudicating Authority can order the liquidation of the Corporate Debtor with only 55.87% voting share.2. Interpretation of Section 33(2) of the Insolvency and Bankruptcy Code (IBC), 2016 regarding the required voting share for liquidation.3. Applicability of the ruling in Tata Steel Limited v. Liberty House Group Pte. Ltd. & Ors. to the present case.4. The impact of absenteeism of Committee of Creditors (CoC) members on the voting process.Detailed Analysis:1. Whether the Adjudicating Authority can order the liquidation of the Corporate Debtor with only 55.87% voting share:The core issue is whether the liquidation of the Corporate Debtor can be ordered when only 55.87% of the voting share, represented by one of the two CoC members, voted for liquidation, while the other member remained absent. The Tribunal noted that Section 33(2) of the IBC mandates a minimum of 66% voting share for liquidation. However, the absence of the second CoC member, who did not vote, created a deadlock, preventing the required 66% threshold from being met.2. Interpretation of Section 33(2) of the Insolvency and Bankruptcy Code (IBC), 2016 regarding the required voting share for liquidation:Section 33(2) states that the decision to liquidate must be approved by not less than 66% of the voting share. The Tribunal highlighted that the section is silent on whether the 66% must include only members present in person or via video conference or also those absent. The Tribunal emphasized that the absence of a clear directive in this regard led to ambiguity in the current case.3. Applicability of the ruling in Tata Steel Limited v. Liberty House Group Pte. Ltd. & Ors. to the present case:The Tribunal referred to the ruling in Tata Steel Limited, where it was held that only the voting shares of CoC members present in the meeting should be counted. The Tribunal found this ruling applicable to the present case, as both Section 30(4) (related to the approval of a resolution plan) and Section 33(2) (related to liquidation) of the IBC require a minimum voting share. The Tribunal concluded that the 55.87% voting share of the member present should be considered as 100% for the purpose of the resolution, as the absent member's voting share should not be counted.4. The impact of absenteeism of Committee of Creditors (CoC) members on the voting process:The Tribunal observed that the absenteeism of the second CoC member, who neither attended the meetings nor voted, created a stalemate. This situation hindered the liquidation process and defeated the timelines set under the IBC. The Tribunal suggested that the Insolvency and Bankruptcy Board of India (IBBI) consider amending Section 33(2) to address such deadlock situations, ensuring that the liquidation process is not stalled due to the absence of CoC members.Conclusion:The Tribunal ordered the liquidation of the Corporate Debtor, SSB Retail India Private Limited, in accordance with Chapter-III of the IBC. The Resolution Professional, Mr. Pavan Kankani, was appointed as the Liquidator. The Tribunal directed the Liquidator to issue a public announcement of the liquidation, cease the moratorium under Section 14, and ensure that no new legal proceedings are initiated against the Corporate Debtor. The Tribunal emphasized the need for cooperation from all personnel connected with the Corporate Debtor and specified the Liquidator's duties and entitlements.Order:The application for liquidation was allowed with specific directions, including:- Liquidation of the Corporate Debtor in the manner laid down in Chapter-III of the IBC.- Continuation of Mr. Pavan Kankani as the Liquidator.- Issuance of a public announcement of the liquidation.- Cessation of the moratorium under Section 14.- Vesting of all powers of the Board of Directors, Key Managerial Personnel, and partners in the Liquidator.- Cooperation from personnel connected with the Corporate Debtor.- Entitlement of the Liquidator to specified fees.- Notice of discharge to the Officers, employees, and workmen of the Corporate Debtor, except when the business is continued during the liquidation process.- Communication of the order to relevant authorities and the IBBI for consideration of amending Section 33(2) to prevent misuse and ensure the objectives of the IBC are met.