Eden Rose Trading Private Limited vs Elevated Mercantile Private Limited

PER: CORAM

The present Interlocutory Application has been filed by Mr. Subodh Balkrishna Gokhale, the Liquidator of Elevated Mercantile Private Limited (Corporate Debtor) under Section 54 of the Insolvency and Bankruptcy Code, 2016 (Code) seeking dissolution of the Corporate Debtor.

The Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor was ordered to be commenced on 05.06.2018 by the Tribunal on the basis of an Application filed by Eden Rose Trading Private Limited, the Operational Creditor under Section 9 of the Code.

Pursuant to the admission Order, Mr. Navin Khandelwal was appointed as the Interim Resolution Professional (IRP). However, due to personal difficulty, the IRP sought discharge from its duties, and pursuant to the Application filed by the IRP, the Applicant herein was appointed as the Resolution Professional (RP).

As no Resolution Plan was received and there was no possibility for the revival of the Corporate Debtor, the members of the Committee of Creditors (CoC) passed a Resolution to liquidate the Corporate Debtor. The Liquidation Order was passed vide Order dated 15.03.2019 and the Applicant herein was appointed as the Liquidator of the Corporate Debtor.

The Applicant made a public announcement in Form-B inviting the claims from the stakeholders of the Corporate Debtor on 25.03.2019 in two newspapers ‘Free Press Journal’ (Mumbai Edition) (English) and ‘Navashakti’ (Mumbai Edition) (Marathi).

The Applicant received 11 claims from the Operational Creditors but none from any Financial Creditor. The Applicant had also received claims from the two shareholders of the Corporate Debtor. The list of stakeholders is as under:-

During the Liquidation Process it was observed by the Applicant that the Corporate Debtor does not have any fixed or movable assets. The only asset available with the Corporate Debtor was in the nature of ‘Trade Receivable’, which were to the tune of Rs.318,33,48,797/-. Since there were no assets available, Asset Memorandum was not prepared, and no Valuers were appointed.

As there were no assets for realisation besides the ‘Trade Receivables’, the Applicant explored every possible option for recovery of the amount due and payable to the Corporate Debtor from its debtors. The Applicant issued notices to the debtors for recovering the outstanding amounts by each debtor; however, no concrete success was achieved by the Applicant.

The Applicant states that in the month of March, 2020, due to COVID-19 Pandemic and restrictions imposed vide the national lockdown, the Liquidation Process of the Corporate Debtor was at standstill. Further, by amendment in the Insolvency and Bankruptcy Board of India (Liquidation Process) regulations, 2016 (Liquidation Process Regulations) vide insertion of new Regulation 47A, the period of lockdown imposed by the Central Government is to be excluded for the purpose of computation of the timeline in relation to any liquidation process. Further, the Hon’ble Supreme Court vide its Order dated 23.03.2020 Suo Motu Writ Petition(C) 03 of 2020, extended the limitation period by excluding the period from 15.03.2020 to 14.03.2021. Hence, the statutory period of 2 years for completion of the liquidation process of the Corporate Debtor stood extended till 14.03.2022.

Further, a joint meeting of the Applicant along with the stakeholders and debtors of the Corporate Debtor was held. Out of 11 Creditors, 9 Creditors owed certain amounts payable to the debtors of the Corporate Debtor. Therefore, the Creditors assigned their debts to the respective debtors to whom the said Creditors also owed certain amounts. Accordingly, on 15.12.2021, a Deeds of Assignment of the Debt was entered between the stakeholders of the Corporate Debtor and the Debtors of the Corporate Debtor. Thus, out of the total Creditors' dues of about 402.74 Crore, the dues of about Rs.180.05 Crore were assigned to the respective debtors and thus the dues payable to the Creditors and dues receivable from the debtors are reduced by 180.05 Crore. Accordingly, the stakeholders of the Corporate Debtor have been settled pursuant to the Deeds of Assignment of debt executed between the Debtors and the Creditors of the Corporate Debtor. Further, in addition to the set-off by way of assignment, two Creditors, namely, Ruchi Soya Industries Ltd. and Ruchi Worldwide Ltd., waived the amount of Rs. 222.69 Crore, which was payable by the Corporate Debtor as they have trade relations with the Debtors of the Corporate Debtor. Thus, out of the total Creditors' dues of about Rs. 402.74 Crore, the dues of about Rs. 180.05 Crore have been assigned and the dues of Rs.222.69 Crore settling the entire balance of Rs. 402.74 Crore of the stakeholders representing the Trade Creditors and with the contra entry of Rs. 180.05 Crore, the dues receivable from the debtors are also reduced by 180.05 Crore. Thus, the dues of all the Operational Creditors whose claims had been admitted are settled by set-off against the dues receivable from the Debtors.

The Liquidator called for another meeting of stakeholders on 13.08.2024, wherein it was stated that the balance of 138.23 Crore, which are not received by the Corporate Debtor needs to be adjusted. The Liquidator has tried multiple times to recover the said amount. The debtors are not able to pay and it is not in the interest of the stakeholders to pursue litigation for recovery. Therefore, the said amount is regarded as non-recoverable debt. The Corporate Debtor asked the stakeholders if they could adjust the remaining amount. The stakeholders denied the request stating that further adjustment of debt will be difficult for them to explain to their respective stakeholders. The stakeholders of the Corporate Debtor, therefore, ratified writing-off of the non-recoverable debts amounting to Rs. 138.23 Crore.

The summary of the receipts and payments from 15.03.2019 to 02.02.2022 is as under:-

The Liquidator states that after paying all the liquidation costs, there is no balance left to pay any amount to the Equity Shareholders of Rs. 1,00,000/-.

The Applicant intimated to the Income-Tax Authorities about the commencement of the liquidation of the Corporate Debtor on 11.04.2020. Further, the Applicant also applied for cancellation of the Goods and Service Tax Number of the Corporate Debtor and the competent authority was pleased to issue an Order for cancellation subject to payment of the outstanding amount of Rs.20,000/-. The same had been paid by the Applicant on behalf of the Corporate Debtor.

The Applicant prepared the Audited Financial Statement of the Corporate Debtor from Financial Year 2018-2019 till Financial Year 2020-2021 and also a provisional statement till 02.02.2022 by the date of the closure of the Liquidation Process.

Further, the Applicant has filed an Additional Affidavit dated 04.12.2023 stating that the Bank Account held with HDFC Bank, Vikhroli Branch, Mumbai having account number 09982020000949 has been closed on 02.02.2022.

The Applicant/ Liquidator submitted the Final Report on 25.02.2022.

The Applicant/ Liquidator has filed Form H- Compliance

Certificate under Regulation 45(3) of the Liquidation Process Regulations.

On examination of the documents annexed to the Application, and based on the submissions made by the Ld. Counsel appearing for the Applicant, it appears that the affairs of the Corporate Debtor have been wound up and its assets have been completely liquidated. The stated facts and circumstances indicate that due process of liquidation, as per extant provisions and in the manner indicated in the Code and Regulations, has been followed by the Liquidator to liquidate the assets of the Corporate Debtor. The Liquidation Process has been duly completed as per the provisions of the Code. Thus, it would be just and equitable for this Authority to dissolve the Corporate Debtor and that no party is going to be adversely affected thereby. In view of the above, the Corporate Debtor deserves to be dissolved. It is ordered accordingly in the following terms:-

The Application be and the same is allowed as follows.

Elevated Mercantile Private Limited, the Corporate Debtor, is hereby dissolved with immediate effect.

The Registry is directed to forward a certified copy of this order to the Registrar of Companies, Mumbai within a period of seven days for necessary action.

The Liquidator is discharged.

CP (IB) No. 176/(MB)/2018 stands disposed of.