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Issues: (i) Whether the order directing liquidation under section 33(2) of the Insolvency and Bankruptcy Code, 2016 could be sustained when the record showed that revival as a going concern had not been properly explored. (ii) Whether the liquidation order was vitiated by procedural irregularities and the conduct of the resolution professional.
Issue (i): Whether the order directing liquidation under section 33(2) of the Insolvency and Bankruptcy Code, 2016 could be sustained when the record showed that revival as a going concern had not been properly explored.
Analysis: The Code treats resolution and continuation of the corporate debtor as a going concern as the primary objective, while liquidation is a last resort. On the material placed before it, the proceedings showed that proposals for restart and revival were not given meaningful consideration and that the corporate debtor was pushed towards liquidation despite indications that operational revival could have been explored further. The Court found that the resolution professional had not taken reasonable steps consistent with the obligation under the Code to preserve the corporate debtor as a going concern and to pursue the resolution process in a fair and independent manner.
Conclusion: The liquidation order could not be sustained and was liable to be set aside.
Issue (ii): Whether the liquidation order was vitiated by procedural irregularities and the conduct of the resolution professional.
Analysis: The record disclosed serious concerns regarding the manner in which the resolution professional conducted the CIRP, including a lack of independent approach, joint representation with the financial creditor, meetings held at the creditor's premises, and the reproduction of an earlier order after the original hearing bench composition had changed. These circumstances, along with the failure to meaningfully comply with the requirements of the CIRP and to act in a neutral manner, persuaded the Court that the process was not conducted with the fairness expected under the Code. The Court also considered it appropriate that the matter be re-examined by the adjudicating authority, including the possibility of changing the resolution professional.
Conclusion: The liquidation order was vitiated by procedural infirmity and the conduct of the resolution professional.
Final Conclusion: The appeal succeeded, the liquidation direction was set aside, and the matter was sent back for fresh consideration in accordance with law.
Ratio Decidendi: Under the Insolvency and Bankruptcy Code, liquidation is a measure of last resort and cannot be sustained where the process has not fairly and independently explored revival of the corporate debtor as a going concern or where material procedural unfairness undermines the integrity of the CIRP.
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