TaxTMI 
TaxTMI 
2018 (10) TMI 230
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....for a further period of 90 days, (d) Direct the CoC to approve and pay the cost and expenses for obtaining the final Valuation Report of the Corporate Debtor as prepared by the Registered Valuers, (e) Direct the Resolution Professional (RP) to prepare, finalise and publish Information Memorandum of the Corporate Debtor, (f) Direct the CoC to approve the draft of the invitation for Expression of Interest (EOI) within a period of seven days failing which it will be deemed that the draft submitted by the Resolution Professional stands approved by the CoC, (g) Direct the RP to publish the invitation of EOI in accordance with law, (h) Such further order and/or other Orders be passed, direction and/or directions be given as this Hon'ble Tribunal may deem fit and proper. 2. Along with this application there are several other applications, one filed by the RP (MA 194/2018), one filed by one of the Financial Creditors namely SREI Equipment Finance Ltd. (hereinafter referred to as "SREI") (MA 347/2018), one filed by a company called Clean Coal Enterprises Pvt Ltd. (MA 293/2018), stating that it is willing to submit a Resolution Plan for the purpose of the resolution of the Cor....
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.... of RP as stipulated in IBC, 2016 till the time the incoming RP gets appointed by Adjudicating Authority; at a fees of Rs. 2,00,000/- per month plus applicable taxes along with other terms as may be stated in his offer letter 85.02% 0.00% 14.98% 100.00% 8. To consider notice period of minimum 5 days in accordance with Regulation 19(2) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. 87.25% 0.00% 12.75% 100.00% 4. Looking at the table, it is evident majority of CoC, as specified under the Code, ratified the fees of the IRP amounting to Rs. 2,00,000, and the fees of the Valuers, cost of E-Voting, cost of holding CoC meeting, appointment of Shri Bala Mouli as RP with a remuneration of Rs. 6,00,000 per month, and also to allow the IRP to continue until the Tribunal has given approval for the appointment of Shri Bala Mouli. On the application moved for approval of appointment of Shri Bala Mouli as RP, this Bench on 23.1.2018 approved appointment of Shri Bala Mouli as RP in the place of IRP. 5. In the second CoC meeting held on 1.2.2018, when one of the Financial Creditors (member of the CoC) wanted to move a....
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....urces Pvt. ltd. for the F.Y. 2016-2017, (v) to ratify the appointment of Batra & Batra as Special Auditors to report old outstanding debtors, long term loans given, advances for purchases, old inventory, etc. and prove their fees of Rs. 3,00,000 plus GST, (vi) to approve the monthly essential payments and to share according to the voting percentage till the completion of CIRP proceedings, (vii) to apprise the CoC members about the progress on lifting of stay to operate the TRA Account, (viii) to apprise the CoC members about a receipt of letter from the Liquidator of Gupta Coal India Pvt. Ltd. and seek directions for the same and to provide information sought by Rajani Associates, Attorneys, Mumbai in this connection, (ix) permitting RP to give authorisation to Rajani Associates to give legal notice to the Liquidator of Gupta Coal against the claims made, (x) to approve the budgeted expenses during the CIRP proceedings and authorise RP to approach SREI Infrastructure for interim finance on such terms as may be necessary as a priority debt and sign any relevant and necessary documents in this connection, (xi) to ratify the appointments and approve the fees of Rajani Associates and D....
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....s of the opinion that it was unlikely that a resolution plan would be feasible because CoC made it clear that the members of CoC did not wish to extend the time period of CIRP for 90 days. For CoC has not provided any comments on the evaluation matrix and having the RP witnessed the standstill approach of CoC, looking at CIRP period of 180 days coming to close on 2.4.2018, he filed this application asking this Bench to pass appropriate directions to the CoC to co-operate with the RP in conducting meetings and also for a direction to the CoC to contribute towards expenses of the Corporate Debtor in terms of their voting share or in the alternative to pass an order for liquidation of the Corporate Debtor u/s. 33(1)(i) (ii) and (iii) of the Code by appointing RP as Liquidator of the Corporate Debtor with powers as enunciated u/s. 34 of the Code. 10. Against this background, the Applicants in MA 342/2018 submit that despite circulation of the draft EOI dated 15.2.2018, except SREI, none of the members of CoC approved EOI recommending the same to be published inviting resolution plans from prospective resolution applicants. To substantiate this argument, these applicants submit that Re....
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....it that since there are disputes and differences between the Corporate Debtor and MSEC, the disputes in between them have been referred to arbitration. They further submit for the arbitration award has been passed in favour of this Corporate Debtor, there is a fair chance of revival of the functioning of this Corporate Debtor which in turn will lead to maximum repayment of public money borrowed by the Corporate Debtor, but in the event this company goes into liquidation, there cannot be any chance for making any payment to the public and financial institutions lent money to this Corporate Debtor. They further submit in case this Corporate Debtor is put into liquidation, the assets of the company will not fetch proper value to settle the liabilities of the Corporate Debtor. They submit that the powers given to CoC has been grossly misused and the CoC has illegally and wrongfully withheld its approval causing impediments to the RP in discharging his statutory obligations. 12. This application in short is since more than 60 days have gone in appointing RP in the place of Interim Resolution Professional, if that period taken for appointment of RP is excluded with a direction to the Co....
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....pplicant addressed a communication dated 27.3.2018 to the RP expressing its interest to submit a resolution plan in the case of the Corporate Debtor. This applicant submits that the bar under Section 29A of the Code is not applicable to it. It has a strong financial position and capable of infusing sufficient funds for the resolution of the Corporate Debtor. This applicant has also more or less placed the same averments which others placed stating that the liquidation is the last resort under IBC, to fortify the same, in the application itself, the applicant has relied upon "InderPreet Singh vs. Mariners Buildcon India Ltd. (185 (PB)/2017 dated29.1.2018)" and also "Vedika Nut Crafts Pvt. Ltd. (IB-40(PB/2017)" to say that the basic objective of the Code is resolution and liquidation has to be a measure of last resort, therefore, a direction shall be given to the RP to float EOI as per the provisions of Section 25(2)(h) of the Code after floating such EOI, the resolution plans if any received in response should be placed before the CoC, to achieve the same, the period of CIRP shall be extended for another 90 days which this Corporate Debtor has not availed of. 16. With these avermen....
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.... Code for exclusion of 60 days from the CIRP and for a direction to the CoC to extend the CIRP time period, but no reason has been mentioned anywhere as to how this applicant would be aggrieved if it has gone for liquidation, moreover it has also not been said whether sending it for liquidation is in violation of any provision of law. (ii) On record and admittedly as well, this Corporate Debtor is shut long before, it has disputes with MSEC, Western Coalfield which was purportedly providing coal to MSEC has also been in dispute with MSEC, in this web of litigation, this Corporate Debtor has not been getting any business. Unless coal is supplied to MSEC, unless such coal is given to this Corporate Debtor for washing, this Corporate Debtor will not have any business. What likely happens in future, nobody knows. To prove that this Corporate Debtor is likely to get some business in future, all these applicants who are interested for resolution should have placed some material before this Bench. But no such material has been placed before this Bench except an abstract argument about provision of law. There are no facts available to breathe life into the expectations canvassed by the a....
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.... a Code that has come into existence to go for resolution, if not, then for liquidation. It is not legislated anywhere that CoC is commanded to go for resolution alone and they shall not go for liquidation directly. If nothing is there for resolution, then the only go for CoC is for liquidation so that at least the CoC would fetch something out of the breakup value of whatever residue remained in the Corporate Debtor. If we see the CoC attitude right from the beginning, CoC is not interested even to spend a single pie over this Corporate Debtor. It is not that this Corporate Debtor alone has come for liquidation process. It has been day in and day out, IBC Adjudicating Authority has been dealing with various IBC Cases, every case will have its own facts. There are cases where CoC spent money looking at the asset lying in the Corporate Debtor, there are cases where CoC has not spent any money. It is a business decision taken by the CoC within the realm of it. This Bench cannot thrust upon the CoC to go for resolution on the assumption this Code objective is for resolution, not for liquidation. Indeed, no such legislation is present anywhere in this Code. 21. Before going to the obj....
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....m as specified under the Code. The duty lies in Section 25(2)(h) is to invite resolution applicant with the approval of the CoC, it is not that RP is free enough to invite prospective resolution applicants on his own without approval of CoC. That being the mandate of the legislature, it can never be visualised that RP shall invite for the prospective resolution applicants by issuing an invitation of EOI which is nothing but transgressing the duty cast upon the RP. Even in a pigment of imagination, it cannot be contemplated that either the RP violated the Code or the CoC violated the Code. RP will not have interest regarding the assets of the company, but whereas CoC is vested with interest upon the assets of a company. It is a right vested with the creditors of the company to proceed against the assets of company. It's a basic proposition of law available right from Contract Act to various commercial laws subsequently evolved giving a right to creditor to proceed against debtor. Basing on this legal proposition, I hold that this Bench cannot venture into saying that the discretion vested with the creditors could be modified by this Bench. The rights emanating from the operation....
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....ng Authority until such time, this Adjudicating Authority cannot invoke jurisdiction to question the discretion of the CoC. 26. As to initiation of liquidation, this Adjudication Authority can invoke its jurisdiction when it does not receive resolution plan under sub-section (6) of Section 30 or when resolution plan has been rejected under Section 31 of the Code. If such situation arises, it is a mandate upon this Adjudicating Authority to pass an order requiring the Corporate Debtor to be liquidated in the manner as laid down in the Liquidation Process Chapter; issue public announcement stating that the Corporate Debtor is in liquidation; require such order to be sent to the Authority with which the Corporate Debtor is registered. This Adjudicating Authority has not been ordained in the Code to find out as to why EOI has not been invited, as to why CoC has not decided to opt for resolution process. The only requirement to initiate the liquidation is as to whether resolution plan has been received by the Adjudicating Authority within the time under sub-section 6 of Section 30 or in the case where resolution plan has been rejected under Section 31 of the Code. It has not been menti....
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....icture only when CoC has taken a decision to go for resolution. When no proposal for resolution has come from CoC, this Adjudicating Authority cannot press upon the CoC to go for only resolution and not for liquidation. As to Section 33, I again reiterate that when the case falls under (a) or (b) of Section 33(1) of the Code, the Adjudicating Authority shall order for liquidation. To say that it is mandate, I believe, I must read the text of Section 33(1) of the Code, which is as follows: "33(1) Where the Adjudicating Authority, - (a) before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast track corporate insolvency resolution process under section 56, as the case may be, does not receive a resolution plan under sub-section (6) of Section 30; or (b) rejects the resolution plan under Section 31 for the non-compliance of the requirements specified therein, it shall- (i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter; (ii) issue a public announcement stating that the corporate debtor is in l....
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....o why CoC has not given approval for invitation of resolution plans. He is neither an Adjudicating Authority nor an officer to supervise the discretion vested with the CoC. 33. As to the application filed by suspended directors, they have no role to ask for any relief before this Bench, they may have a chance to ask in case liquidation value or at least fair value is more than the liabilities admitted by the RP. There is no whisper in respect to this aspect and it cannot be in contemplation that assets would be more than liabilities because it is the Corporate Debtor who filed section 10 petition to initiate CIRP process, it happens only when the company is not in a position to pay the liabilities of it. In any event, these suspended directors cannot have any grievance to say that if the company is opted for resolution, they would get something out of the company. Here the principal stakeholders are the creditors, more specifically financial creditors whose interest is stuck in the Corporate Debtor, if they themselves opt for liquidation, such decision or indecision cannot be reversed so as to send it back to the CoC. Moreover, I say that this Adjudicating Authority has no jurisdi....
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.... has been taken in RP taking charge, therefore that period is to be excluded, but if we go through the Code, it is evident that IRP, as per Section 22(5) of the Code, will continue to function as the RP until the time, RP appointment is confirmed by IBBI. It is not the case of anybody, IRP did not continue functioning as RP until charge has been handed over to the RP. So mere RP not taking over the charge from the IRP in any way has not brought the CIRP to standstill therefore, this argument of exclusion of the period for handing over charge to RP by IRP is nothing but a myth manifested by all these applicants to deprive the CoC to realise whatever remained in the Corporate Debtor. 38. In view of these reasons, this Bench hereby orders for liquidation as stated under Section 33 with the following directions: a. This Bench hereby orders the Corporate Debtor to be liquidated in the manner as laid down in the Chapter by issuing a Public Notice stating that the Corporate Debtor is in liquidation with a direction to the Liquidator to send this order to RoC under which this Company has been registered. b. As to appointment of Liquidator, the Resolution Professional i.e. the applican....