Liquidation under insolvency law: creditor commercial judgment and fact-specific going concern sale options were upheld, while compromise remains open.
A liquidation decision taken by the committee of creditors after receipt of no compliant resolution plan will not be interfered with when it reflects commercial judgment under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 and no arbitrariness or illegality is shown. The recommendation to first explore sale of the corporate debtor as a going concern is fact-sensitive under the liquidation regulations and does not compel a particular mode of sale where the business has ceased and assets are non-operational. The separate statutory route of compromise or arrangement under the liquidation framework and Section 230 of the Companies Act, 2013 remains available within the permissible period.
Issues: (i) Whether the order directing liquidation of the corporate debtor was liable to be interfered with. (ii) Whether the liquidator was bound to first explore sale of the corporate debtor as a going concern and whether a compromise or arrangement could still be pursued.
Issue (i): Whether the order directing liquidation of the corporate debtor was liable to be interfered with.
Analysis: The committee of creditors had, after a prolonged insolvency process and upon receipt of no compliant resolution plan, resolved to liquidate the corporate debtor with full voting support. The statutory scheme under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 permits liquidation once the committee of creditors, by the requisite voting share, decides to liquidate before confirmation of a resolution plan. The record showed that the resolution plans received were found non-compliant and that the decision to liquidate was taken after consideration of the relevant facts and materials. No arbitrariness or illegality in the exercise of commercial judgment was established.
Conclusion: The challenge to the liquidation order failed and the liquidation direction was upheld.
Issue (ii): Whether the liquidator was bound to first explore sale of the corporate debtor as a going concern and whether a compromise or arrangement could still be pursued.
Analysis: Regulation 39C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 enables the committee of creditors to recommend that the liquidator first explore sale of the corporate debtor or its business as a going concern, but the decision in the case reflected a considered commercial determination that standalone sale, slump sale, collective sale or sale in parcels was more appropriate on the facts. The corporate debtor had no aircraft in operation, the slots had been revoked, and the business had been at a standstill, making interference unwarranted. At the same time, Regulation 2B of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 and Section 230 of the Companies Act, 2013 kept open the route of compromise or arrangement within the prescribed period after liquidation.
Conclusion: No direction could be issued to compel a prior going concern sale, but a compromise or arrangement remained open in accordance with law.
Final Conclusion: The appellate challenge was rejected, while preserving the statutory liberty to seek compromise or arrangement before the liquidator within the permissible framework.
Ratio Decidendi: A liquidation decision taken by the committee of creditors within the framework of Section 33(2) of the Insolvency and Bankruptcy Code, 2016, based on non-receipt of any compliant resolution plan and on commercial considerations, will not be interfered with unless shown to be arbitrary or illegal; recommendations regarding going concern sale under the liquidation regulations are fact-sensitive and discretionary, and the separate statutory route of compromise or arrangement remains available where the law permits.
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