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Judgment
This Application has been filed under Section 54 read with Section 60(5) of the Insolvency and Bankruptcy Code, 2016, Regulation 14 of IBBI (Liquidation Process) 2016 and read with Rule 11 of the NCLT Rules, 2016 by the Resolution Professional of the Corporate Debtor seeking reliefs as follows;
a)To pass an Order of the Dissolution of the Corporate Debtor i.e Lokesh Secfin Private Limited under section 54 of the IBC, 2016 read with Regulation 14 of the IBBI (Liquidation Process) Regulations, of the Insolvency and Bankruptcy Code, 2016; consequently, the RP may be relieved.
b)To pass such orders or further orders as the nature and circumstances of the case may require and thus render justice.
The Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor was initiated under Section 10 by this Tribunal vide order dated 25.09.2023 and the Applicant herein was appointed as Interim Resolution Professional (IRP) and thereafter as Resolution Professional (RP).
Pursuant to the order of CIRP, the Applicant caused the Public Announcement on 28.09.2023 by inviting claims from all the stakeholders and fixed the last date for submission of claim as 09.10.2023.
The IRP received a claim from the Unsecured Financial Creditor, Bank of Baroda, Chennai, for Rs. 756,09,48,751 (Rupees Seven Hundred and Fifty Six Crores, Nine Lakhs Forty Eight Thousand Seven Hundred and Fifty One Only) and there were no claims received from secured financial creditors, operational creditors, and other creditors. IRP constituted a Committee of Creditors (CoC) on 18.10.2023 based on the claims received and admitted. In the meantime, another financial creditor, Union Bank of India submitted claim, as per Regulation 12(2) of the IBC Act 2016 on 06.11.2023, and it was admitted for Rs. 350,74,54,309 (Rupees Three Hundred and Fifty Crores Seventy Four Lakhs Fifty Four Thousand Three Hundred and Nine Only) on 09.11.2023.
As a result, a revised CoC was formed on 10.11.2023 with voting percentage Bank of Baroda (68.31%) and Union Bank of Baroda (31.69%).
It is stated that in the 1st COC meeting, the COC members passed a resolution and voted for the Liquidation of the Corporate Debtor on 04.02.2024. Consequently, the Applicant filed an application under section 33(2) of the Insolvency Bankruptcy Code, 2016 seeking Liquidation of the Corporate Debtor. This Tribunal vide Order dated 18.04.2024 in IA/(LIQ)/4/2024 recorded as under:
"The matter of M/s. Lokesh Secfin Private Limited IA(LIQ)/4/2024 came up for hearing on 18th April 2024 regarding who will bear the liquidation costs and liquidator fees. At that time, this Tribunal noted that an affidavit had been filed by the Ld. Counsel for the Applicant/RP vide Sr. No. 1843, stating that CoC meetings were held on 11.03.2024 and 04.04.2024 to discuss the queries raised by the Tribunal in its order dated 22.02.2024. The Ld. Counsel submitted that CIRP expenses have been paid in full and that the RP has also received his fees, but as for the liquidation expenses and fees for the Liquidator, the CoC is not willing to pay the same. It was stated on behalf of the CoC that it would abide by the directions of this Tribunal. The Ld. Counsel for the Applicant/RP submits that, considering the decision taken by the CoC, the Applicant/RP is no longer interested in continuing with the liquidation process and requests to be relieved from the process. Let the copy of the order be served on the CoC for response/reply. List the application for hearing on 07.06.2024."
On 07.06.2024, this Tribunal directed the RP to file an affidavit confirming that the previous hearing orders were served to the CoC members. Accordingly, the applicant filed an affidavit of service on 13.06.2024. This Tribunal directed the learned counsel for the CoC to file reply. The CoC filed its reply on 30.06.2024
On 13.08.2024 this Tribunal ordered as under:
Reply filed by the CoC stating that entire CIRP cost including the fee of the RP has been paid. Both Financial Creditors and Corporate Applicant had intimated their inability to bear the liquidation expenses as there is no amount which is to be realized. It is stated that as per Section 10 application, there was only one asset of the Corporate Debtor which was in the form of investments in the shares of SBQ Steels Ltd and that has become zero. There is no business activity and no income to meet the statutory expenses. It is stated that the Suspended Director had informed that if the Liquidator restricts the cost to Rs. 1,50,000/-, they are willing to bear.
Ld. Counsel for the RP submits that there are Income Tax dues and only after the settlement of dues, the dissolution application can be filed.
The Applicant states that the offer given by the Suspended Director is not acceptable to him.
Having considered all these facts and the fact that the company is to be dissolved, let the Financial Creditors / Suspended Directors bear the minimum expenses of the liquidation process. The Liquidator is directed to proceed as per IBBI Liquidation Regulation 14.
The Liquidator is directed to complete the process within two months and his fee is fixed as Rs. 1,00,000/- to be borne by Financial Creditors and the Suspended Directors. IA(LIQ)/4(CHE)2024 is accordingly disposed of.
It is stated that in view of the order dated 13.08.2024 in IA(LIQ)/4(CHE)2024, the applicant sent notice and agenda to the CoC members and convened the meeting. The status of meeting is given as under:
It is stated that the CoC members observed that since the realizable value of the assets of the Corporate Debtor is "Nil" and there are no funds to meet the full CIRP cost as well as liquidation cost, there is no point in proceeding with the liquidation and then applying for the dissolution of the Corporate Debtor. Based on the above, 5th COC meeting was concluded to go for about early dissolution without liquidation process in light of this Tribunal order. The Applicant/RP placed a resolution before the CoC members and stated that the minimum required 66% voting is required for approval of the early dissolution of the Corporate Debtor.
The Applicant/RP acted in accordance with Regulation 26(4) of the IBBI Regulations, 2016, and sent minutes of the 5th COC meeting to the COC members and informed that e-voting will commence at 10:00 AM on September 10, 2024, and conclude at 6:00 PM on September 11, 2024. It was resolved as under:
"RESOLVED THAT as per the provisions of section 54(1) of the Insolvency and Bankruptcy Code, 2016, and other relevant Regulation 14 of the IBBI Regulations, 2016, an application be made to the Adjudicating Authority to dissolve Lokesh secfin Private Limited without proceeding to liquidation process".
It is stated that Bank of Baroda, with a voting share of 68.31%, voted in favor of early dissolution. However, Union Bank of India, holding voting share of 31.69%, requested the applicant to grant one week's time to vote on the said resolution. Accordingly, the applicant extended the deadline to 18.09.2024. Union Bank of India then requested additional time until 20.09.2024 at 6:00 PM. Since no response was received from Union Bank of India by the extended deadline, the voting was concluded, and the resolution was passed with a 68.31% voting share.
It is stated that this Tribunal vide order dated 13.08.2024 had ordered that “ the Liquidator is directed to proceed as per Regulation 14 of IBBI (Liquidation Process) Regulations, complete the process within two months, and his fee fixed at ₹1,00,000/-, will be borne by the Financial Creditors and the Suspended Directors." Thereafter, the Promoters of the Corporate Applicant sent a demand draft (DD) for ₹50,000 (Rupees Fifty Thousand Only), vide DD No. 504951 dated September 3, 2024, drawn on ICICI Bank, Alwarpet Branch, towards the suspended directors' share of 50% of the liquidation fee, in terms of the above order of this Tribunal. Furthermore, in the interest of resolving the matter and based on the repeated requests from the lenders, the promoters of the Corporate Applicant arranged funds to bear the balance amount of ₹50,000 (Rupees Fifty Thousand Only). Accordingly, the promoters of the Corporate Applicant sent a second DD for ₹50,000 (Rupees Fifty Thousand Only), vide DD No. 505350 dated September 9, 2024, drawn on ICICI Bank, Alwarpet Branch. It is stated that an amount of ₹2,067/- was lying in the Corporate Debtor's Account, which was carried forward to the Corporate Debtor's CIRP Account on 12.09.2024.
It is stated that the Applicant maintained the existing current RP account in the name of 'LOKESH SECFIN PRIVATE LIMITED CIRP PROCESS,' with Account No: 7654882793 at Indian Bank, IFSC Code: IDIB000E001. It is stated that the total amount of ₹1,02,067 was utilized for the dissolution. Subsequently, the closure letter for the current account in the name of LOKESH SECFIN PRIVATE LIMITED CIRP PROCESS was submitted to Indian Bank on 21.09.2024 and account closure letters are placed at Annexure K of the Petition typeset.
It is stated that the applicant/ RP sent a letter dated August 19, 2024, to the Income Tax Department, informing that a dissolution application for the Corporate Debtor will be filed, as there are no assets. However, no response was received from the Income Tax Department.
It is stated that as per audited financial statements for the financial year 2024-2025, the total assets of the Corporate Debtor as on 15.09.2024 are as follows:
STATEMENT OF ASSETS AND LIABILITIES AS AT 15.09.2024
It is stated the Applicant/RP received the dissolution cost as per the order dated 13.08.2024. In this regard, the Applicant has submitted an affidavit concerning the receipt of Applicant's remuneration and dissolution expenses. The Copy of the Affidavit is attached as "Annexure-O" of the application.
The details of the compliances as mandated under Section 54 of the IBC, 2016 read with the IBBI (Liquidation Process) Regulations, 2016 are listed hereunder:-
| S.NO | COMPLIANCE | AVERMENTS | PAGE NO. IN THE APPLICATION |
|---|---|---|---|
| 1 | Regulation 12 | Public Announcement in Form B | N/A |
| 2 | Regulation 35(2) | Appointment of Registered Valuers where no valuation conducted during CIRP | N/A |
| 3 | Regulation 31(2) | List of Stakeholders within 45 days of the Liquidation Commencement Date | N/A |
| 4 | Regulation 31A | Constitution of Stakeholders Consultation Committee (SCC) | N/A |
| 5 | Regulation 13 | Preliminary Report | N/A |
| 6 | Regulation 34 | Preparation of Asset Memorandum within Seventy-Five days from LCD | N/A |
| 7 | Regulation 41 | Opening of Bank Account in the name of the company in Liquidation | N/A |
| 8 | Proof of Closure of the above Bank Account and other account in the name of the Company | 91-95 | |
| 9 | Regulation 15 | Quarterly Progress Reports and proof of filing the same before this Tribunal | N/A |
| 10 | Regulation 36 | Asset Sale Reports after sale of Reports | N/A |
| 11 | Regulation 42(2) | Proof of Distribution within Ninety days from the receipt of realization | N/A |
| 12 | Regulation 45 (3) | Final report dated 24.09.2024 | Annexure M |
| 13 | Regulation 5 (1) (e) | Compilation of Minutes of SCC | 51-71 |
| 14 | Regulation 15 | Audited Accounts of receipts and Payments | 88-90 |
| 15 | Regulation 37 | Completion of Liquidation Process within one year from Liquidation Commencement Date or extension if any, date of the order & period | N/A |
| 16 | Form-H –Compliance Certificate | 105-111 |
We have heard Ld. Counsel for the Applicant and perused the report and synopsis filed by the RP.
Regulation 14 of the IBBI (Liquidation Process) Regulations, 2016 provides as under:
"14.Early dissolution any time after the preparation of the Preliminary Report, if it appears to the liquidator that-
the realizable properties of the corporate debtor are insufficient to cover the cost of the liquidation process; and
the affairs of the corporate debtor do not require any further investigation; he may apply to the Adjudicating Authority for early dissolution of the corporate debtor and for necessary directions in respect of such dissolution."
Section 54 of the IBC, 2016 reads as follows: -
Section 54 “(1) where the assets of the corporate debtor have been completely liquidated, the liquidator shall make an application to the Adjudicating Authority for the dissolution of such corporate debtor. (2) The Adjudicating Authority shall on application filed by the liquidator under subsection (1) order that the corporate debtor shall be dissolved from the date of that order and the corporate debtor shall be dissolved accordingly. (3) A copy of an order under sub-section (2) shall within seven days from the date of such order, be forwarded to the authority with which the corporate debtor is registered.”
It is stated in Form H that no applications are pending before this Tribunal for avoidance, Preferential, Undervalued or Fraudulent Transactions.
The RP has filed the synopsis showing the realization and the distribution which are reproduced as under:
Realization:
Distribution:
It is seen from the Auditors Certificate on receipts and payments pertaining to voluntary Liquidation, that the details of receipts are matching with the details of payments and the same is reproduced hereunder:-
It is to note that early dissolution has been ordered by coordinate benches of NCLT and Hon’ble NCLAT in the following cases:
Naresh Kumar Munjal vs. M/s Laksh Foods Pvt. Ltd. and Ors., IA 6092/2022 of CP (IB) 1181/2018 (NCLT, New Delhi Bench).
Mr. Mandar Shrikant Wagh, IRP of M/s. Synew Steel Private Limited, I.A 435/2020 in CP (IB)/96/BB/2020 (NCLT Bengaluru Bench).
Shyson Thomas vs. Mr. Madhugiri Venkatarayappa Sudarshan, TA (AT) No.8 of 2021 CA (AT)(CH)(INS)/925/2020; order 9 I.A-6092/2022 in CP(IB)-1181/ND/2018 dated 01.06.2023. (NCLAT Chennai).
It is apt to refer Shyson Thomas vs. Mr. Madhugiri Venkatarayappa Sudarshan (TA (AT) No.8 of 2021 in CA(AT) (CH) (Ins.) No.925/2020) where the NCLAT held in para 2 as under:
“2.The `Adjudicating Authority’ (`National Company Law Tribunal’, Bengaluru Bench), while passing the `impugned order’ in IA No. 198 of 2020 in CP (IB) No. 180 / BB / 2018, at Paragraph Nos. 5 & 6, had observed the following:
5.``In terms of Section 60 of Code, the Adjudicating Authority shall be NCLT having territorial jurisdiction over the place, where the registered office of Corporate Persons is located. By conjointly reading the above provisions, the ultimate objective of Code is either to resolve the issue by way of Resolution Plan or to dissolve the Corporate Debtor, as expeditiously as possible. If the facts and circumstances of a case, justify there would not serve any purpose to keep the Corporate Debtor under regular CIRP proceedings, and thereafter under Liquidation proceedings, under the provisions of Code, the Adjudicating Authority, by exercising its inherent powers conferred under the Code, can pass appropriate order(s) in the interest of speedy justice.
6.The above facts and circumstances of the Case fully justified, that there would be no useful purpose be served, by placing the Corporate Debtor under Liquidation process, under the extant provisions of Code. Since no assets exists in the Company, as declared by the Resolution Professional, the liquidation process under the provisions of Code, is deemed to have completed under Chapter III of Part II of Code, and thus it would just and proper for the Adjudicating Authority to dissolve the Company as prayed by the Resolution Professional. The instant Application is filed in accordance with law and the Resolution to dissolve the Corporate Debtor was approved by the Sole COC, as detailed supra.’’”
At this juncture it is relevant to refer Rule 11 of NCLT which reads as under;
11.Inherent Powers: - Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal.
Since, there are no assets in the Corporate Debtor. The COC has also opined that the assets of the Corporate Debtor cannot be realized to defray the costs pertaining to the liquidation. Consequently, the COC concurred with the early dissolution of the Corporate Debtor.
From the averments made in the Application along with the perusal of the final report and the Compliance Certificate filed in Form-H, it is seen that the Corporate Debtor has been completely liquidated. In the circumstances as averred and as prayed for, an order for dissolution is required to be passed by this Tribunal under Section 54 of the IBC, 2016. Accordingly, we order for early dissolution of the Corporate Debtor viz., Lokesh Secfin Private Limited. The RP is directed to forward the copy of this Order to the RoC concerned and also to the IBBI for its records within a period of 7 days from the date of this Order.
In terms of the above, this IA (DIS) 25/CHE/2024 stands allowed and CP(IB)/31/CHE/2023 also stands disposed of.
File be consigned to records.