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Judgment
I.A No.389/2021: Per: Ajay Kumar Vatsavayi, Member (Judicial)
This application has been filed by Mr. Venkata Subbarao Kalva, the Resolution Professional of SWE Fashions Private Limited (Corporate Debtor) under Section 33(1) of the Insolvency and Bankruptcy Code, 2016 seeking an order for Liquidation of the Corporate Debtor namely SWE Fashions Private Limited, and to appoint the Applicant herein as the Liquidator for initiation of Liquidation Process of the Corporate Debtor etc.
The main CP bearing CP (IB) No.204/BB/2020 filed by “M/s. Algae Apparels” under Section 7 of the Insolvency and Bankruptcy Code, 2016 to initiate Corporate Insolvency Resolution Process (in short ‘CIRP’) against M/s.SWE Fashions Private Limited was admitted by this Adjudicating Authority on 23.03. 2021 and Mr. Venkata Subbarao Kalva was appointed as the Interim Resolution Professional (IRP) of the Corporate Debtor.
The brief facts of the case are that the said IRP made a public announcement in Form A on 24.03.2021 (Annexure 2) in English and Kannada newspapers and the Committee of Creditors (CoC) was constituted by the Interim Resolution Professional (IRP) comprising of the following Members:
| Sl. No. | Name of the Financial Creditor | Claim Admitted Amount in Rs. | % of Voting |
|---|---|---|---|
| 1. | State Bank of India (SBI, SAMB, Bengaluru) | Rs.29,84,09,716 | 98.80% |
| 2. | Vintage Blue Garments Private Limited | Rs.36,10,876 | 1.20% |
| Total | Rs.30,20,20,592 | 100% |
The members of the CoC at its 1st meeting held on 21.04.2021 confirmed the appointment of the Interim Resolution Professional (IRP) as Resolution Professional (RP) and his appointment was approved by this Adjudicating Authority vide order dated 06.08.2021 in IA.No.206 of 2021. Subsequently, the Resolution Professional has appointed Registered Valuers for the determination of liquidation value of the Corporate Debtor in accordance with provisions of the Code The 2nd meeting of CoC held on 24.05.2021, to consider and approve criteria for Resolution Applicants, Evaluation Matrix, fix performance security to be submitted by the Resolution Applicant in accordance with Regulation 36B (4A) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Resolution Professional invited Expression of Interest (EOI) in Form G by publishing in Financial Express (English) on 25th May 2021 and Samyuktha Karnataka (Kannada) on 25th May, 2021.
At the (3^{\text{rd}}) meeting of CoC held on 08.07.2021, the CoC inter alia approved the invitation for Expression of Interest (EOI) in Form G.
At the (5^{\text{th}}) meeting of CoC held on 17.08.2021, the CoC approved the invitation for Expression of Interest in Form G and Interlocutory Application before Hon'ble NCLT, Bengaluru Bench for filing the extension of CIRP period for 90 days. As per Order dated 09.11.2021 in IA No.265/2021, this Adjudicating Authority has extended the CIRP period by 90 days till 18.12.2021.
In the (6^{\text{th}}) meeting of CoC held on 09.12.2021, the CoC considered the issue of approval of liquidation of the Corporate Debtor at agenda Item No. 7 and resolved as under:-
"RESOLVED THAT as there is no resolution plan received for revival of the Corporate Debtor, the consent of Committee of Creditors be and is hereby accorded for initiation of liquidation of the Corporate Debtor under Section 33 of Insolvency and Bankruptcy Code 2016 ("the Code").
The resolution was approved by the Committee of Creditors with 98.80% voting share.
The Hon'ble NCLAT, in Praveen Kumar Nand Kumar v. VSL Securities Pvt Ltd. in CA No.1/2020 in CA.No.308/2000,dated 09.06.2020,observed as under:-
"Likewise, the decision of the COC recommending liquidation of the corporate debtor after proper evaluation of the assets and liabilities of corporate debtor with no Resolution Plan forthcoming would be a business decision falling within the domain of commercial wisdom of the COC which is not amenable to judicial review”.
We have carefully considered the submissions made in the application by the Resolution Professional and have also perused the records.
The relevant provisions of Sections 33(1) and 33(2) of the Code are as follows:-
“33. Initiation of liquidation.-
(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 liquidation; and
(iii)require such order to be sent to the authority with which the corporate debtor is registered.
(2)Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).”
Prescribed period for filing application- In the present case, the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was admitted on 23.03.2021 and the period of 180 days were completed on 19.09.2021. The present application is filed on 15.12.2021 i.e., within the prescribed period.
Appointment of Liquidator - Section 34 (1) of the Code provides that where the Adjudicating Authority passes an order for liquidation of the Corporate Debtor under Section 33, the Resolution Professional appointed for the CIRP shall, subject to submission of written consent, act as the Liquidator for the purpose of Liquidation. Shri Venkata Subbarao Kalva, Resolution Professional with Registration No. IBBI/IPA-002/IP-N00179/2017-2018/10655 has filed the written consent dated 18.11.2021. The Law Research Associate of this Adjudicating Authority has checked the credentials of the proposed Liquidator and nothing adverse has been found on record. Therefore, Shri Venkata Subbarao Kalva is appointed as the Liquidator.
Regulation 39B, 39C and 39D in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 have been inserted by Notification No. IBBI/2019-20/GN/REG/048 dated 25.07.2019. Relevant aspects in this respect are examined hereunder
a. Liquidation Cost [Regulation 39B of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation 2016] -The liquidation cost is as per the resolution passed at agenda Item No.9 in (6^{\text{th}}) CoC meeting.
b. Assessment of Sale as a going concern [Regulation 39C of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation 2016] - The liquidator shall follow the Regulation 32 of the IBBI (Liquidation Process) Regulation, 2016 while selling the assets of the Corporate Debtor.
c. Fees of the Liquidator [Regulations 39D of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016] -The fee payable to the Liquidator is as per the resolution passed at agenda Item.No.8 in (6^{\text{th}}) CoC meeting
Pending applications, if any, and its effects – The Learned Counsel for the Applicant has stated that there is no pending application before any Tribunal of law or any other authority or any other Tribunal.
In view of the satisfaction of the conditions provided under Section 33 (1) of the Code, the Corporate Debtor M/S SWE Fashions Private Limited is directed to be liquidated in the manner as laid down in Chapter III of the Code. Some of the directions are noted as under:
That as per Section 33 (5) of the Code and subject to Section 52 of the code, no suit or other legal proceedings shall be instituted against the corporate Debtor; Provided that a suit or other legal proceedings may be instituted by the Liquidator on behalf of the Corporate Debtor, with the prior approval of the Adjudicating Authority; ii. That the provisions of sub-section (5) of Section 33 of the Code shall not apply to legal proceedings in relation to such transactions as may be notified by the Central Government in consultation with any financial sector regulator; and iii. That this order of liquidation under Section 33 of the Code shall be deemed to be a notice of discharge to the officers, employees and workmen of the Corporate Debtor, except when the business of the Corporate Debtor is continued during the liquidation process by the Liquidator; and iv. That all the powers of the Board of Directors, key managerial personnel and the partners of the Corporate Debtor, as the case may be, shall cease to have effect and shall be vested in the Liquidator; and
That the personnel of the Corporate Debtor shall extend all assistance and cooperation to the Liquidator as may be required by him in managing the affairs of the Corporate Debtor and provision of Section 19 of the Code shall apply in relation to voluntary liquidation process as they apply in relation to liquidation process with the substitution of references to the liquidator for references to the Interim Resolution Professional.
That the Liquidator shall publish public announcement in accordance with Regulation 12 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations 2016, and in Form B of Schedule II of these Regulations within five days from receipt of this order calling upon the stake holders to submit their claims as on liquidation commencement date and provide the last date for submission of claim which shall be 30 days from the liquidation commencement date. vii. That the announcement shall be published in accordance with Regulation 12(3) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. viii. That in accordance with Regulation 13 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, the 'Liquidator' shall file his preliminary report within 75 days and to file regular progress reports as per Regulation 15 every fortnightly thereafter.
Thus, I.A No. 389 of 2021 stands disposed of.
Copy of this order be supplied to the counsel for the Liquidator as well as to the Registrar of Companies, Bengaluru forthwith. The Registry is also directed to send a copy of this order to the Liquidator at his e-mail address.