Arvinder Singh vs M/s. Sanmati Distributors Private Limited

Per: Bidisha Banerjee, Member (Judicial)

This Adjudicating Authority convened through hybrid mode.

IA(IBC)/313(KB)2023 is an application filed under section 60(5)) of the Insolvency and Bankruptcy Code, 2016 (hereinafter called the “Code”) read with rule 11 of the National Company Law Tribunal Rules, 2016 by the Resolution Professional of Sanmati Distributors Private Limited (CIN: U51102WB2005PTC101265) (hereinafter called the “Corporate Debtor”) praying for dissolution of the Corporate Debtor. This application is duly supported by an affidavit^{11.At pages 22 and 23 of the application} affirmed by Mr. Santanu Bhattacharjee, Resolution Professional.

This Adjudicating Authority vide its order^{22.Annexure A at pages 25 to 31 of the application} dated 27/04/2022 on a Petition filed by Arvinder Singh (Operational Creditor) under section 9 of the Code directed initiation of the Corporate Insolvency Resolution Process (hereinafter called the “CIRP”) against M/s. Sanmati Distributors Private Limited (Corporate Debtor) appointing Mr. Santanu Bhattacharjee, an Insolvency Professional as Interim Resolution Professional (hereinafter called the “IRP”).

In terms of regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) public announcement^{33.Averments in para 2 at page 10 and copy being Annexure C at pages 33-34 of the application} in Form A was published in two newspapers in “Financial Express” (English) and “Ekdin” (Bengali) on 29/04/2022. A copy of the same was uploaded on the Website of Insolvency and Bankruptcy Board of India. A copy for Form A forms Annexure “C”^{44.At pages 33 and 34 of the application}

Committee of Creditors^{55.Annexure D at pages 35 to 36 of the application} (“CoC”) was duly formed with sole petitioning Operational Creditor, Mr. Arvinder Singh. The CoC at its 1^st meeting held on 26/05/2022 confirmed the appointment of IRP as RP. Copy of the minutes of the 1^st CoC meeting forms Annexure E^{66.Annexure E at pages 37 to 43 of the application}.

It is stated in the application that the applicant duly informed about the CIRP process to all the statutory authorities including the Registrar of Companies and jurisdictional Income Tax Authority and complied with all the Rules and Regulations as prescribed under the provisions of the Code and Regulations framed thereunder from time to time to revive the Corporate Debtor in a best possible manner for the better interest of the stakeholders^{77.Averments in para 6 at page 11 of the application.}. The applicant has conducted CoC meetings from time to time to discuss on possibility to revive the company and further to update the progress in the matter. Copy of the minutes of 2^nd CoC to 4^th CoC meetings form Annexure F^{88.At pages 44 to 70 of the application}.

Since the Corporate Debtor was not in operation for last several years as well as there was no transactions for the last few years, the sole CoC member has decided not to issue Form G and/or to appoint any transaction/forensic auditor^{99.Averments in para 8 at page 12 of the application}. The audited financial statements of the Corporate Debtor revealed that it has no fixed assets, no inventory, no employees/workers and “nil” revenue and is a loss making company. The copy of the audited financial statement of the Corporate Debtor for the last two financial years forms Annexure G^{1010.At page 71 to 94 of the application}.

It is stated in the application that the applicant has appointed two IBBI Registered Valuers for ascertaining the fair and liquidation value of the Corporate Debtor, who have submitted their reports which reveals fair value and liquidation value as Rs.2,35,403.33 respectively. Copy of the valuation reports of the registered valuers form Annexure H^{1111.At page 95 to 117 of the application}.

It is stated in the application that after getting the valuation report, the applicant has called 3^rd CoC meeting on 08/08/2022 for approval of publication of Form G inviting Expression of Interest from prospective resolution applicants but the sole member of the CoC dissented the same and passed resolution for liquidation considering the facts and circumstances of the case. Accordingly, an application being IA(IBC)/1090(KB)2022 was filed^{1212.Averments in para 12 at page 14 of the application}.

It is also stated that during the hearing of IA(IBC)/1090(KB)2023, this Adjudicating Authority has observed certain issues with respect to liquidation of the Corporate Debtor due to non-availability of assets, funds, etc. Accordingly, the applicant had called the 5^th CoC meeting on 06/01/2023 to discuss the main issue for early dissolution since the Corporate Debtor has no assets during the liquidation process to meet liquidation cost including fees of the liquidator. Based on details discussions, the CoC resolved to file an application for dissolution before this Adjudicating Authority without going for liquidation of the Corporate Debtor. The resolution for dissolution was passed with 100% voting share, which is reproduced below:

The applicant has stated that the only cash balance available with the suspended members of board of directors of the Corporate Debtor and also as per the valuation reports, has been realised from them. Upon realisation of the said cash balance from the suspended members of the Board of Directors, the same was immediately deposited into the bank account of the applicant, so that the necessary payment of CIRP cost could be made since the Corporate Debtor did not have any operative bank account^{1414.Averments in para 15 at pages 15 and 16 of the application}.

The applicant has also stated that CIRP cost was fully ratified and the applicant has been paid out of the cash and bank balance available in the Corporate Debtor’s account and additionally after taking necessary contribution from the only CoC member, the petitioning Operational Creditor, who has initiated the CIRP process, the fees of the applicant have been fully settled and/or paid. The applicant declares that no CIRP cost is due and payable as on the date of filing of the instant application. Copy of receipt and payment prepared by the applicant forms Annexure J^{1515.At page 130 to 132 of the application}.

Accordingly, based on the 5^th CoC meeting, the applicant has filed the instant application being IA(IBC)/313(KB)2023 for early dissolution of the Corporate Debtor. Hence, vide order dated 07/02/2023, this Adjudicating Authority has dismissed IA(IBC)/1090(KB)2022 as infructuous and IA(IBC)/313(KB)2023 was ‘reserved for orders’.

Vide order dated 29/03/2023 clarification was asked from the applicant with regard to depositing the cash balance in the bank account of the applicant which was realised from the suspended members of the Board of Directors in order to payment of CIRP cost.

In response to the aforesaid order dated 29/03/2023, the applicant has filed a supplementary affidavit clarifying the position, which are reproduced below: -

Meanwhile, the 180 days CIRP period had expired on 23/10/2022.

We have heard the Ld. Counsel for the RP, perused the application and the documents attached therewith.

Section 33(1)(a) of the Code mandates that the Adjudicating Authority shall pass an order of liquidation where no resolution plan is received before the expiry of the CIRP. Sub-section (2) thereof requires the Adjudicating Authority to pass the liquidation order where the Resolution Professional intimates to the Adjudicating Authority the decision of the Committee of Creditors approved by not less than 66% of the voting share to liquidate the Corporate Debtor.

Section 54 of the Code reads as follows: -

Rule 14 of the IBBI (Liquidation Process) Regulations, 2016 reads as follows: -

Rule 11 of the NCLT Rules, 2016 confers inherent powers on NCLT, which reads as follows: -

Section 12 of the Code stipulates time-limit for completion of insolvency resolution process, which reads as follows: -

Upon conjoint reading of the above provisions, the ultimate objective of the Code is either to resolve the issue by way of approval of Resolution Plan or to liquidate and then to dissolve the Corporate Debtor, as expeditiously as possible. In the instant case, the Corporate Debtor has ‘nil’ fixed assets as well as ‘nil’ inventory, no employees/workers and also non-operational for the last several years, which would be evident from the audited financial statements of the Corporate Debtor. Since the Corporate Debtor does not prima facie own any valuable assets whose value is capable of maximization and as per valuation reports submitted by two IBBI approved Valuers, the liquidation value in the nature of cash and cash equivalent only comes to a meagre sum of Rs.2,35,403. Moreover, the Corporate Debtor has entirely eroded its share capital, ‘nil’ assets, ‘nil’ inventory, non-operational for the last several years, inoperative bank accounts and perceptible state of affairs was not a going concern when it was admitted under CIRP, no useful purpose would be served by ordering liquidation of the Corporate Debtor.

Since the Corporate Debtor does not have either any fixed assets or any inventory and over and above it’s non-operational for the last several years, no useful purpose would be served by instituting liquidation process as required under section 33 of the Code.

It is submitted by the Ld. Counsel for the RP that the CoC, which comprises of the petitioning Operational Creditor only, has taken decision to dissolve the Corporate Debtor without going for liquidation at first and then for dissolution, since the Corporate Debtor having ‘nil’ assets and ‘nil’ inventory. It would be in order to resort to direct dissolution of the Corporate Debtor rather than first sending it to liquidation fruitlessly and then attempting to liquidate non-existent assets and then dissolving the Corporate Debtor, particularly when it is clear that even the part of CIRP cost and RP’s fees have been borne by the Operational Creditor. In view of the “nil” assets it is presumed that the assets of the Corporate Debtor have been liquidated. As regards the compliance regarding bank account, the bank account opened with Axis Bank, SCO 343-344, Sector 35B, Chandigarh 160 022 having Account No.041010200016472 has been closed since 15-03-2016, which is evident from the certificate dated 25/04/2023 issued by Axis Bank, Chandigarh (Annexure “B” to Supplementary Affidavit affirmed on 28/04/2023 by the Resolution Professional).

In view of the above facts and circumstances, it is prudent to dissolve the Corporate Debtor, and it is ordered accordingly. However, personal liability/Guarantee of any Director/Promoter of the Corporate Debtor, if any, would not absolve them of their liability by virtue of this order. Aggrieved party/parties, if any, shall be at liberty to continue or to take appropriate legal remedies against them.

The Resolution Professional is further directed to serve a copy of this order upon the Registrar of Companies, West Bengal, immediately and, in any case, within fourteen days of receipt of this order. The Registrar of Companies shall take further necessary action upon receipt of a copy of this order.

The Resolution Professional shall stand discharged from his responsibilities, subject to all procedural compliances.

IA(IBC)/313(KB)2023 in CP(IB)/54(KB)2020 is allowed with the above directions and both the IA(IBC)/313(KB)2023 and CP(IB)/54(KB)2020 are hereby disposed of accordingly.

The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.

Certified Copy of this order may be issued, if applied for, upon compliance of all requisite formalities.

File be consigned to records.