Liquidation Ordered Under IBC Section 33 After CIRP Ends With No Resolution Plan; Business To Continue Going Concern

The NCLT (Kolkata) ordered liquidation of the corporate debtor under the IBC upon expiry of the extended CIRP period without receipt of any resolution plan by the RP or CoC. Although the CoC did not adopt a formal resolution recommending liquidation, the Tribunal held that, in the absence of any viable resolution plan within the statutory timeline, liquidation was the only legally permissible course. Observing from the RP's progress reports that the corporate debtor was a going concern with substantial assets, the Tribunal directed that liquidation be pursued, as far as practicable, on a going-concern basis and appointed the RP as liquidator.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, upon expiry of the CIRP period without receipt of any resolution plan, the Tribunal is required to order liquidation of the corporate debtor even in the absence of a formal CoC resolution recommending liquidation.

1.2 In ordering liquidation, whether the Tribunal may direct that the corporate debtor be liquidated and sold as a going concern, having regard to the nature and status of its assets.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Necessity of ordering liquidation upon expiry of CIRP without any resolution plan and without formal CoC recommendation

Interpretation and reasoning

2.1 The Tribunal noted that the CIRP was commenced under Section 7 of the Insolvency and Bankruptcy Code, 2016 and that the total CIRP period of 270 days, including extensions, concluded on 01.12.2019.

2.2 During the CIRP, expressions of interest were received from three prospective resolution applicants; however, none of them submitted a resolution plan. No resolution plan was received by the Resolution Professional or the Committee of Creditors during the entire CIRP period.

2.3 The Tribunal recorded that, although the CoC did not pass any formal resolution recommending liquidation, there was a complete absence of any resolution plan within the statutory CIRP period, despite extensions.

2.4 On these facts, the Tribunal held that it was "left with no option" but to pass an order of liquidation of the corporate debtor when no resolution plan was received within the CIRP period.

Conclusions

2.5 The Tribunal ordered liquidation of the corporate debtor under the Insolvency and Bankruptcy Code, 2016 upon expiry of the CIRP period without any resolution plan, holding that such liquidation is to be ordered even in the absence of a formal CoC resolution recommending liquidation.

2.6 The existing Resolution Professional was appointed as Liquidator, and consequential directions were issued regarding public announcement, cessation of the earlier moratorium and commencement of a fresh moratorium under Section 33(5), discharge of officers and employees under Section 33(7), reporting obligations, and treatment of the Liquidator's fee as liquidation cost under the applicable Regulations.

Issue 2: Direction to liquidate and sell the corporate debtor as a going concern

Interpretation and reasoning

2.7 From the progress reports submitted by the Resolution Professional, the Tribunal found that the corporate debtor had been a going concern, with assets including land and machinery.

2.8 Taking note of this status and the nature of the assets, the Tribunal considered it appropriate, while ordering liquidation, to protect the going concern value as far as possible.

Conclusions

2.9 While ordering liquidation, the Tribunal directed that the Liquidator should continue and is at liberty to sell the corporate debtor as a going concern, as far as possible, in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 and the applicable Liquidation Regulations.

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