CoC's unanimous liquidation decision upheld after sole asset lease cancellation left corporate debtor with no revival options

NCLAT Chennai dismissed an appeal challenging liquidation order of corporate debtor. CoC unanimously decided (100% voting) to liquidate after the sole asset - a 30-year lease from BRDCL - was cancelled on 30.03.2022, over 10 months before CIRP commencement. Corporate debtor's representatives acknowledged they hadn't challenged lease termination. With no assets and revival options, CoC's commercial wisdom prevailed under IBC provisions. Tribunal held promoters/shareholders lacked locus standi as aggrieved persons under Section 61 IBC, having no legal right to oppose liquidation. Commercial decisions by CoC are subject only to limited judicial review and cannot be interfered with when compliant with IBC requirements.

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Issues Involved:
1. Commercial decision of CoC and its justiciability.
2. Material irregularities in the CIRP process.
3. Applicability of Section 29A of the IBC and MSME exemptions.
4. Liquidation as a last resort.

Summary:

Commercial Decision of CoC:
The Tribunal upheld the commercial decision of the Committee of Creditors (CoC) to liquidate the Corporate Debtor, emphasizing that such decisions are non-justiciable as per the Supreme Court ruling in K. Shashidhar v. Indian Overseas Bank. The CoC's unanimous resolution to liquidate, backed by 100% voting, was deemed final and beyond judicial interference.

Material Irregularities in the CIRP Process:
The Appellants argued that the Corporate Insolvency Resolution Process (CIRP) was marred by material irregularities, including the lack of valuation, expression of interest, and proper assessment of the project. They contended that the Resolution Professional and CoC acted arbitrarily and failed to maximize asset value. The Tribunal found no merit in these claims, noting that the CoC's decision was based on commercial wisdom and the lack of assets due to the terminated lease.

Applicability of Section 29A of the IBC and MSME Exemptions:
The Appellants, being promoters of an MSME, argued for exemptions under Section 29A of the IBC, citing the Supreme Court's rationale in Hari Babu Thota v. Shree Aashraya Infra-con Limited. However, the Tribunal noted that the Appellants' interest in submitting a Resolution Plan was not considered due to their classification as a Non-Performing Asset (NPA) and pending Section 7 application against them, thus failing to meet Section 29A requirements.

Liquidation as a Last Resort:
The Tribunal reiterated that liquidation is a last resort, as emphasized in various Supreme Court judgments. The CoC's decision to liquidate was taken after thorough deliberation and in the absence of any viable Resolution Plan. The Tribunal found that the CoC had exercised its commercial wisdom appropriately, considering the lack of assets and the impracticality of reviving the Corporate Debtor due to the terminated lease.

Conclusion:
The Tribunal dismissed the appeal, affirming the Adjudicating Authority's order for the liquidation of the Corporate Debtor, M/s Green Gateway Leisure Ltd., and concluded that the CoC's decision was in compliance with the IBC and its regulations. The appeal was found devoid of merits and was dismissed without costs.

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