Committee of Creditors has power under Section 33(2) IBC to decide corporate debtor liquidation with objective reasons

The NCLAT held that the Committee of Creditors (CoC) has the power under Section 33(2) of the IBC to decide on liquidation of a corporate debtor after proper constitution. The CoC's decision to liquidate was found valid as it provided objective reasons including absence of employees, business operations, registered office, annual filings since 2011, returns, and transactions since 2017. The tribunal emphasized that while CoC decisions must be reasoned and not arbitrary, the present case demonstrated objective consideration. The Adjudicating Authority's order dated 31.08.2023 was set aside and the appeal was allowed.

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Issues Involved:
The appeal challenges the order allowing liquidation and the requirement of Form-G for liquidation decision by the Committee of Creditors.

Liquidation Decision and Form-G Requirement:
The appeal was filed against the order allowing liquidation and directing for liquidation. The Committee of Creditors (CoC) passed a resolution for liquidation based on reasons such as lack of business activity, no employees, and no financial transactions. The appellant argued that the Insolvency and Bankruptcy Code does not mandate the issuance of Form-G before the CoC can decide on liquidation. The Resolution Professional published Form-G after an interim order but received no Expression of Interest (EOI). The Tribunal noted that the CoC's decision for liquidation was based on objective considerations and upheld the decision, emphasizing that the CoC has the authority to decide on liquidation after its constitution.

Validity of CoC Decision and Judicial Review:
The Tribunal referred to a judgment highlighting the wide powers of the CoC to decide on liquidation, emphasizing that decisions must be reasoned and not arbitrary. The CoC's decision in this case was deemed valid due to the lack of business activity and other factors. The Tribunal dismissed the appeal, stating that decisions for liquidation are subject to judicial review based on individual case facts. The respondent cited a judgment where the absence of claims led to the closure of the Corporate Insolvency Resolution Process (CIRP), emphasizing that a CoC cannot be constituted with a single Operational Creditor. However, the Tribunal clarified that the cited judgment did not address the issue of constituting a CoC with a single Operational Creditor.

Pending Curative Petition and Subsequent Application:
The respondent mentioned a pending Curative Petition against the admission order of Section 9. Despite the subsequent application for liquidation filed by the Resolution Professional after the Form-G issuance, the Tribunal found the application to be infructuous due to the appeal decision. The appeal was allowed, setting aside the Adjudicating Authority's order and directing for liquidation, appointing a Liquidator for the Corporate Debtor's liquidation proceedings. Each party was directed to bear its own costs.

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