2025 (1) TMI 1215 - AT - IBC

NCLAT upholds liquidation order after Committee of Creditors' unanimous vote under Section 33(2)

Amrit Rajani Erstwhile Director M/s Shri Balaji Entertainments Private Limited Versus Pegasus Assets Reconstruction Private Limited, Shri Balaji Entertainment Private Limited

NCLAT dismissed the appeal challenging liquidation order of corporate debtor. The Committee of Creditors (CoC) unanimously voted for liquidation with 100% ... Liquidation of the Corporate Debtor - CoC had not taken full initiatives to resolve the Corporate Debtor which is against the spirit of the Code - Section 7 application was admitted on forged documents - Request to Appellate Tribunal not to consider such additional document filed by the Respondent No. 1. The CoC had not taken full initiative to resolve the Corporate Debtor against the spirit of the Code - HELD THAT:- Section 33(2) of the Code leaves hardly any choice to the Adjudicating Authority, once the CoC decide with the 66% voting rights to liquidate the Corporate Debtor. In the present case, the resolution to liquidate was passed by 100% votes in CoC. Hence, there are no error in the Impugned Order. Section 7 application was admitted on forged documents filed by the Respondent No. 1 - HELD THAT:- The Section 7 application was admitted on forged documents filed by the Respondent No. 1 and the conduct of the Resolution Professional is not good as it accepted the claims of the Financial Creditor without verification. Additional documents of ledger accounts of SVC Bank were introduced to harm the Corporate Debtor - HELD THAT:- These documents were part of the judicial record and necessary for determining the validity of the Section 7 application. There are no merit in the Appellant's objections to the introduction of these documents. Alleged manipulation of record by Financial Creditor - HELD THAT:- No concrete evidenced has been reproduced by the Appellant to establish the said allegations. It is already noted that the documents produced by the SVC Bank clearly stipulate responsibilities of the Corporate Debtor as co-borrower and Corporate Guarantor. There are no merit in the submissions made on this account by the Appellant. Conclusion - i) The CoC's decision to liquidate, supported by 100% voting, was in compliance with Section 33(2) of the Code, which mandates liquidation if the CoC resolves to do so with the requisite majority. ii) There are no error in the Adjudicating Authority's order to liquidate, given the absence of assets and the lack of viable resolution options. There are no error in the CoC decision to the Liquidator of the Corporate Debtor which was accepted by the Adjudicating Authority in the Impugned Order - appeal dismissed. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment include:(I) Whether the Committee of Creditors (CoC) failed to take adequate initiatives to resolve the Corporate Debtor, contrary to the objectives of the Insolvency and Bankruptcy Code, 2016 (the Code).(II) Whether the Section 7 application was admitted based on forged documents submitted by the Financial Creditor, and whether the conduct of the Resolution Professional in accepting claims without verification was appropriate.(III) Whether the introduction of additional documents, such as the ledger accounts of SVC Bank, was permissible and if they were prejudicial to the Corporate Debtor.(IV) Whether there was manipulation of records by the Financial Creditor.ISSUE-WISE DETAILED ANALYSIS(I) Adequacy of CoC's Initiatives to Resolve the Corporate DebtorThe legal framework under the Code emphasizes the resolution and revival of corporate debtors, with liquidation as a last resort. The Appellant argued that the CoC did not make genuine efforts to revive the Corporate Debtor. However, the Tribunal noted that the CoC issued Form G inviting Expressions of Interest (EoI) but received no responses, indicating a lack of interest in resolving the Corporate Debtor. The CoC also faced challenges in asset valuation due to the non-availability of asset details, raising doubts about the existence of assets. The Tribunal found that the CoC's decision to liquidate was based on the absence of assets and the improbability of revival, and was supported by a unanimous vote.(II) Admission of Section 7 Application and Conduct of the Resolution ProfessionalThe Appellant alleged that the Section 7 application was admitted on forged documents and criticized the Resolution Professional for accepting claims without verification. The Tribunal observed that similar allegations were previously raised and dismissed by the Adjudicating Authority. The Tribunal also referenced a related appeal where it allowed additional documents, including ledger accounts, to be considered, reinforcing the legitimacy of the Section 7 application. The Tribunal found no merit in the Appellant's claims of forgery or negligence by the Resolution Professional.(III) Introduction of Additional DocumentsThe Appellant contended that the additional documents, such as ledger accounts, were introduced to harm the Corporate Debtor. The Tribunal noted that these documents were part of the judicial record and necessary for determining the validity of the Section 7 application. The Tribunal had previously allowed these documents to be admitted, finding them relevant to the case. Thus, the Tribunal found no merit in the Appellant's objections to the introduction of these documents.(IV) Alleged Manipulation of Records by Financial CreditorThe Appellant argued that records were manipulated by the Financial Creditor using blank signed papers. The Tribunal noted that no concrete evidence was provided to support these allegations. The Tribunal found that the documents from SVC Bank clearly established the Corporate Debtor's responsibilities as a co-borrower and corporate guarantor, undermining the Appellant's claims of manipulation.SIGNIFICANT HOLDINGSThe Tribunal upheld the decision to liquidate the Corporate Debtor, emphasizing the following principles and determinations:- The CoC's decision to liquidate, supported by 100% voting, was in compliance with Section 33(2) of the Code, which mandates liquidation if the CoC resolves to do so with the requisite majority.- The Tribunal found no error in the Adjudicating Authority's order to liquidate, given the absence of assets and the lack of viable resolution options.- The Tribunal rejected the Appellant's allegations of forgery and negligence by the Resolution Professional, finding no substantive evidence to support these claims.- The Tribunal affirmed the admissibility of additional documents, finding them relevant and necessary for the case.In conclusion, the Tribunal dismissed the appeal, finding it devoid of merit, and upheld the liquidation order issued by the Adjudicating Authority. No costs were awarded, and any interim applications were closed.