CoC's Decision for Liquidation Upheld, Directors' Appeal Dismissed

The Tribunal upheld the Adjudicating Authority's decision to allow the liquidation of the corporate debtor as the Committee of Creditors (CoC) had unanimously resolved for liquidation due to the absence of a resolution plan and the expiration of the Corporate Insolvency Resolution Process (CIRP) period. The Tribunal emphasized that the CoC's commercial wisdom in such decisions is not subject to judicial review, citing precedent. Consequently, the appeal filed by the suspended directors challenging the liquidation order was dismissed.

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Issues Involved:
1. Challenge to the order of liquidation.
2. Compliance with the directions issued by the Adjudicating Authority.
3. Commercial wisdom of the Committee of Creditors (CoC).

Summary:

1. Challenge to the order of liquidation:
The appeal was filed by two suspended directors of the corporate debtor challenging the order of the Adjudicating Authority (National Company Law Tribunal), Jaipur Bench, dated 31.08.2022, which allowed IA No. 325/JPR/2020 filed by the Resolution Professional for passing an order of liquidation. The Adjudicating Authority also dismissed IA No. 433/JPR/2021, which prayed for an extension of the Corporate Insolvency Resolution Process (CIRP) period as it had become infructuous.

2. Compliance with the directions issued by the Adjudicating Authority:
The appellants contended that the Resolution Professional did not complete the audit of the corporate debtor or prepare the Information Memorandum, and that assets had been siphoned off by other directors. They argued that the CoC could not have passed a resolution for liquidation without completing the necessary processes. The Adjudicating Authority had issued various orders (dated 26.11.2020, 18.11.2021, 17.12.2021, and 07.03.2022) which, according to the appellants, were not complied with. The Resolution Professional, however, submitted that all orders issued by the Adjudicating Authority were complied with and that the CIRP was conducted in accordance with relevant regulations. The CoC, with 100% vote share, resolved to liquidate the corporate debtor as no resolution plan was forthcoming, and the CIRP period, including an extension, had expired.

3. Commercial wisdom of the Committee of Creditors (CoC):
The CoC, in its 11th meeting held on 28.09.2020, resolved to liquidate the corporate debtor with 100% vote share, noting that no resolution plan was received and the CIRP period had ended. The Tribunal emphasized that the commercial wisdom of the CoC in deciding to liquidate the corporate debtor, especially when no resolution plan was forthcoming, is not subject to judicial review. The Tribunal cited a previous judgment, "Praveen Kumar Nanda Kumar vs. VSL Securities Pvt. Ltd. & Ors.," which upheld the CoC's decision to liquidate when the CIRP period had expired and no resolution plan was available.

Conclusion:
The Tribunal found no error in the Adjudicating Authority's decision to allow the liquidation application, given that the CIRP period had ended, and the CoC had resolved to liquidate the corporate debtor with 100% vote share. The appeal was dismissed accordingly.

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