Corporate debtor liquidation ordered under Section 33 IBC after 90.16% creditor committee vote citing enforcement attachment

The NCLT Mumbai ordered liquidation of a corporate debtor under Section 33 of the IBC, 2016. The CoC resolved to liquidate with 90.16% majority voting, citing bleak resolution prospects due to asset attachment by Enforcement Directorate under PMLA, 2002 and ongoing investigations. The original resolution professional declined to act as liquidator due to personal difficulties. The CoC subsequently appointed an alternative liquidator in the eighth meeting. The tribunal relied on SC precedent establishing that CoC decisions based on commercial wisdom are non-justiciable, noting its limited judicial review powers in such commercial matters.

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Issues:
Liquidation of Corporate Debtor under Section 33 of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Application for Liquidation:
The Applicant, as the Resolution Professional of the Corporate Debtor, filed an application for liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016. The Corporate Debtor was admitted into Corporate Insolvency Resolution Process and the Resolution Professional was appointed by the Committee of Creditors.

2. Attachment of Assets:
Due to alleged fraud by the Corporate Debtor and its officers, law enforcement agencies like CBI and ED probed the affairs of the Corporate Debtor and attached its properties. The Applicant faced challenges in accessing the assets for the insolvency resolution process, leading to the denial of extension of the CIRP period by the CoC.

3. CoC Decision for Liquidation:
The CoC, in its meetings, discussed the bleak chances of insolvency resolution due to the ongoing investigations and attachment of assets. The CoC, with a majority vote, resolved to liquidate the Corporate Debtor as the assets were seized, and the Company had no running business.

4. Appointment of Liquidator:
The Resolution Professional expressed personal difficulty in acting as a Liquidator, and Mr. Santanu T. Ray was appointed as the Liquidator of the Corporate Debtor by the CoC. The Tribunal approved this appointment and directed the Liquidator to conduct the liquidation process as per the IBBI regulations.

5. Judicial Review and Liquidation Order:
The Tribunal cited the limited powers of judicial review in matters of commercial wisdom of the CoC. Considering the CoC's decision and the circumstances, the Tribunal ordered the liquidation of the Corporate Debtor under Section 33(2) of the Code. Various directives were issued regarding the liquidation process, powers of the Liquidator, contribution to liquidation costs, and communication of the order to relevant stakeholders.

6. Conclusion:
The Tribunal allowed the application for liquidation, appointed Mr. Santanu T. Ray as the Liquidator, and provided detailed instructions for the liquidation process, including communication of the order to concerned parties and discharge of officers and employees of the Corporate Debtor. The Resolution Professional was directed to hand over relevant documents to the newly appointed Liquidator.

This comprehensive analysis covers the key issues and details of the judgment regarding the liquidation of the Corporate Debtor under the Insolvency and Bankruptcy Code, 2016.

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