2023 (2) TMI 378 - AT - Insolvency and Bankruptcy

Tribunal Upholds Liquidation Order, Dismisses Appeal

The Tribunal affirmed the Adjudicating Authority's order initiating liquidation against a company, appointing a Liquidator, and rejecting a resolution ... Liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - Committee of Creditors' commercial wisdom and voting decision - Role and duties of the Resolution Professional in CIRP - Protections and special treatment for MSMEs under Section 240-ALiquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - Committee of Creditors' commercial wisdom and voting decision - Role and duties of the Resolution Professional in CIRP - Protections and special treatment for MSMEs under Section 240-A - Validity of the Adjudicating Authority's order initiating liquidation of Gourmet Renaissance Private Limited and appointment of the Liquidator. - HELD THAT: - The Tribunal examined the conduct of the CIRP, the actions of the Resolution Professional and the minutes and correspondence of the Committee of Creditors (CoC). It found that the CIRP had proceeded through the prescribed steps, expression of interest was published, multiple opportunities were afforded to the prospective resolution applicant to submit and revise its plan, and the CoC considered the plan and related communications. The CoC, in its commercial judgment and by an overwhelming voting share, resolved to liquidate the corporate debtor after rejection of the resolution plan. The Appellant's contentions that he (as an MSME promoter) was improperly sidelined, that protections under the statutory regime for MSMEs were violated, that he was wrongly branded a wilful defaulter, and that there were mala fide acts or material irregularities by the Resolution Professional were considered but not found to establish a legal basis for setting aside the Adjudicating Authority's order. There was no material before the Tribunal to demonstrate that the CoC's decision to proceed to liquidation was vitiated or that the Adjudicating Authority erred in law in passing the liquidation order under Section 33; accordingly the Tribunal found no reason to interfere with the impugned order. [Paras 15]The order dated 05.08.2021 initiating liquidation and appointing the Liquidator is affirmed and the appeal is dismissed.Final Conclusion: The Appellate Tribunal affirmed the National Company Law Tribunal's order initiating liquidation of Gourmet Renaissance Private Limited under the IBC, holding that the CIRP and CoC process had been conducted and that there was no ground to interfere with the CoC's decision to liquidate; the appeal is dismissed. Issues Involved:1. Initiation of Liquidation Process under Section 33 of IBC.2. Appointment of Liquidator.3. Validity of the Committee of Creditors (CoC) decisions.4. Allegations of non-cooperation and procedural lapses by the Resolution Professional.5. Exclusion of the Appellant from the Corporate Insolvency Resolution Process (CIRP).6. Compliance with MSME protections under Section 240-A of IBC.7. Rejection of the Resolution Plan by the CoC.8. Allegations of malafide intentions and conflict of interest.9. Non-revocation of wilful defaulter status of the Appellant.Detailed Analysis:1. Initiation of Liquidation Process under Section 33 of IBC:The appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the order dated 05.08.2021 by the Adjudicating Authority (NCLT, Mumbai Bench) initiating the liquidation process against Gourmet Renaissance Private Limited. The Adjudicating Authority allowed the application filed by the Resolution Professional under Section 33 of IBC, directing the liquidation of the Corporate Debtor as per Chapter III of the Code.2. Appointment of Liquidator:The Adjudicating Authority appointed Ms. Vaishali Arun Patrikar as the Liquidator of the Corporate Debtor, directing her to issue a public announcement and take necessary steps as per the IBC and Liquidation Process Regulations. The moratorium under Section 14 ceased to operate, and all powers of the Board of Directors and Key Managerial Personnel vested in the Liquidator.3. Validity of the Committee of Creditors (CoC) decisions:The CoC, with a 99.78% voting share, resolved in favor of liquidation after failing to receive any viable resolution plan. The CoC meetings detailed the process, including the submission and rejection of multiple resolution plans by the Prospective Resolution Applicant, Mr. Atul Kumar Gupta.4. Allegations of non-cooperation and procedural lapses by the Resolution Professional:The Appellant alleged non-cooperation and procedural lapses by the Resolution Professional, including failure to prepare an Information Memorandum and unethical practices. The Resolution Professional and CoC members denied these allegations, stating they provided multiple opportunities for the submission of a resolution plan and adhered to the IBC procedures.5. Exclusion of the Appellant from the Corporate Insolvency Resolution Process (CIRP):The Appellant, an MSME holder, claimed exclusion from the CIRP, arguing that his rights were suppressed, and the protections under Section 240-A of IBC were ignored. The CoC and Resolution Professional contended that the Appellant's participation was not feasible due to his designation as a wilful defaulter and other procedural issues.6. Compliance with MSME protections under Section 240-A of IBC:The Appellant argued that the CoC failed to consider the MSME protections under Section 240-A, which exempts MSMEs from certain disqualifications under Section 29-A. The CoC and Resolution Professional maintained that all actions were compliant with the IBC and MSME regulations.7. Rejection of the Resolution Plan by the CoC:The CoC rejected the resolution plan submitted by Mr. Atul Kumar Gupta, citing non-compliance with IBC provisions and failure to meet the revised payment terms. The Resolution Professional communicated these rejections and provided opportunities for revisions, which were not satisfactorily addressed by the Prospective Resolution Applicant.8. Allegations of malafide intentions and conflict of interest:The Appellant alleged malafide intentions and conflict of interest by the CoC and Resolution Professional, aiming to push for liquidation rather than a meaningful resolution. The CoC and Resolution Professional denied these claims, asserting that all actions were in the best interest of the stakeholders and compliant with the IBC.9. Non-revocation of wilful defaulter status of the Appellant:The Appellant's status as a wilful defaulter was not revoked by NAMCO, despite requests by the Resolution Applicant. This status prevented the Appellant from participating in the resolution process and hindered the infusion of funds for the revival of the Corporate Debtor.Conclusion:After reviewing the arguments and evidence, the Tribunal affirmed the Adjudicating Authority's order dated 05.08.2021, initiating the liquidation process and appointing Ms. Vaishali Arun Patrikar as the Liquidator. The Tribunal found no merit in the Appellant's claims and dismissed the appeal, upholding the decisions made by the CoC and Resolution Professional. The Tribunal directed the Registry to upload the judgment and send a copy to the Adjudicating Authority.