Liquidation under the Insolvency Code may be reviewed where resolution steps remain incomplete and reconsideration is justified.
A committee of creditors' resolution to liquidate a corporate debtor under Section 33(2) of the Insolvency and Bankruptcy Code is wide in scope, but it is not immune from scrutiny on the facts of the case. Liquidation need not be ordered mechanically where the resolution process has not been meaningfully exhausted, including the stages relating to the information memorandum and invitation for expression of interest. Where Form-G has been issued and the expression of interest period is still open, the committee may be required to reconsider liquidation in light of further developments. The stated position is that resolution efforts should be given due effect before liquidation is resorted to.
Issues: (i) Whether, on the facts of the case, the Adjudicating Authority was bound to pass a liquidation order merely because the committee of creditors had resolved to liquidate the corporate debtor under Section 33(2) of the Insolvency and Bankruptcy Code, 2016. (ii) Whether the direction to the committee of creditors to reconsider the liquidation decision, after issuance of Form-G and before the expiry of the expression of interest period, called for interference in appeal.
Issue (i): Whether, on the facts of the case, the Adjudicating Authority was bound to pass a liquidation order merely because the committee of creditors had resolved to liquidate the corporate debtor under Section 33(2) of the Insolvency and Bankruptcy Code, 2016.
Analysis: The statutory scheme under Section 33(2) empowers liquidation when the committee of creditors, by the requisite voting share, decides to liquidate before confirmation of a resolution plan. The Explanation makes it clear that such decision may be taken any time after constitution of the committee and before confirmation of the resolution plan, including before preparation of the information memorandum. The tribunal held that this power is wide, but it is not insulated from judicial review in the facts of a particular case. On the present record, the decision to seek liquidation was taken before the expression of interest process had run its course and without showing that the statutory stages for resolution had been meaningfully explored.
Conclusion: The Adjudicating Authority was not bound to mechanically order liquidation on the committee's resolution; its refusal to do so was justified.
Issue (ii): Whether the direction to the committee of creditors to reconsider the liquidation decision, after issuance of Form-G and before the expiry of the expression of interest period, called for interference in appeal.
Analysis: Regulation 36 and Regulation 36A indicate that the information memorandum and the invitation for expression of interest form part of the resolution process and must be given due effect before liquidation is resorted to. Since Form-G had been issued and the last date for receipt of expression of interest had not expired, the tribunal found no error in the Adjudicating Authority's view that the committee of creditors should reconsider the matter in light of further developments. The order preserved the possibility of an informed decision consistent with the Code's focus on resolution before liquidation.
Conclusion: No interference was warranted with the direction to reconsider the liquidation proposal.
Final Conclusion: The appeal failed because the impugned order was consistent with the insolvency framework requiring resolution efforts to be meaningfully considered before liquidation, and the appellate tribunal found no ground to disturb it.
Ratio Decidendi: A resolution of the committee of creditors to liquidate under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 is subject to judicial review on the facts of the case, and liquidation need not be ordered where the resolution process has not been meaningfully completed.
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