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Judgment
PER- BACHU VENKAT BALRAM DAS, MEMBER (JUDICIAL)
This is an application filed by the Resolution Professional, under Section 33(1) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as the “Code”) for issuance of directions for liquidation of Corporate Debtor, M/s. Kay Em Copper Private Limited.
The facts in brief are that the Financial Creditor of the Corporate Debtor, M/s. Tata Capital Financial Services Limited had filed an application under Section 7 of the Code, bearing number IB-2027/(ND)/2019, for initiation of Corporate Insolvency Resolution Process (CIRP), against the Corporate Debtor. The said application was admitted by this Tribunal on 19.04.2021, thereby initiating CIRP against the Corporate Debtor and therein, appointing Mr. Dhiren Shantilal Shah as the Interim Resolution Professional (IRP).
Thereafter, the IRP had issued a public announcement in Form-A, which was published in the 'Business Standard in English edition and in Hindi edition both dated 24.04.2021, calling on the creditors to submit their claims along with proofs. On receipt of claims and their verification / collation, the Committee of Creditors (CoC) was constituted by the IRP.
The IRP prepared a List of Creditors on 23.07.2022 after verification of claims received pursuant to the Public Announcement dated 07.07.2022 & 08.07.2022 in which the last date of receipt of claims was 18.07.2022 and filed the List of Creditors along with the Report certifying constitution of the Committee of Creditors with this Adjudicating Authority on 23.07.2022.
That in terms of Section 18(1)(a) of the Code, the Interim Resolution Professional collated all claims submitted by creditors pursuant to the Public Announcement and after the determination of the financial position of the Corporate Debtor, constituted a Committee of Creditors comprising of all financial creditors of the Corporate Debtor within the time provided under the Code and scheduled the First Meeting of the Committee of Creditors (hereinafter, the "CoC") on 21.05.2021 and accordingly the Interim Resolution Professional issued notice of meeting to the following creditors with respective voting rights:
State Bank of India- 83.27%
Tata capital Financial Services — 16.73%
The IRP convened the first meeting of Committee of Creditors on 21.05.2021. In the said meeting he placed the agenda for the appointment of IRP as the Resolution Professional or to replace the IRP with another Resolution Professional in terms of the Section 22 (2) of the Code before the members of Committee of Creditors. That the members of the Committee of Creditors discussed the proposal of the IRP and deliberated that the Committee of Creditors do not wish IRP to continue as the Resolution Professional. Thus, the CoC sought time to identify the suitable Insolvency Professional to replace the IRP and till such replacement the Committee of Creditors requested the IRP to continue as the Resolution Professional.
That in the second CoC meeting dated 20.07.2021 the CoC resolved to appoint Mr. Harvinder Singh as Resolution Professional of the Corporate Debtor. Subsequent to the above, this Tribunal vide order 11.08.2021 passed in IA 3480/2021 confirmed the appointment of Mr. Harvinder Singh as the Resolution Professional.
That thereafter, the Applicant, RP, after the collation of claims had re-constituted the CoC on 09.09.2021 as one more claim from financial creditor i.e., Axis Bank Limited was received. The re-constituted Committee of Creditors comprised of the following Financial Creditors:
| S. No | Name of the Financial Creditors | Amount Claimed(Rs) | Claim admitted (subject to reconciliation with Books of Accounts)(Rs) | Voting Share Percentage (%) |
|---|---|---|---|---|
| 1. | State Bank of India | 22,92,84,777 | 22,92,84,777 | 69.14 |
| 2 | Tata Capital Financial Services | 4,60,62,444 | 4,60,62,444 | 13.89 |
| 3 | Axis Bank | 5,6233,175.43 | 5,62,73,175.43 | 16.97 |
| Total | 33,16,20,396.43 | 33,16,20,396.43 | 100% |
That the Applicant convened the 4th meeting of the CoC on 23.09.2021. During the meeting, the Resolution Professional discussed regarding the current working status of the CD. It was informed that the CD was not a going concern and had no fixed assets. The RP further discussed regarding the action to be taken as the Company is not a going concern. The RP discussed about the extension of CIRP period as 180 days of CIRP were going to expire on 15.10.2021. It was discussed since there were no assets in the Corporate Debtor and that the Company was not a going concern and was non-working, it was better to go for liquidation of the Corporate Debtor.
That the RP convened the 5th meeting of the CoC on 11.10.2021. During the meeting, the RP informed the CoC that no new claim has been received after the last CoC meeting. RP further informed that the claim of Operation Creditor i.e., Kaycee Batteries & Alloys Pvt Ltd was found to be a false claim and was rejected. The CoC members further approved the agenda for moving an application before the NCLT for extension of time beyond the period of 180 days as per the provisions of IBC, 2016 for a further period of 90 days and pass the necessary Resolution. That pursuant to the above resolution, the RP filed an Application bearing no. 5187 of 2021 seeking exclusion of time due to lockdown period on account of 2nd wave of COVID 19, i.e, 180 days from the date of initiation of CIRP. The same was allowed by this Tribunal vide its order dated 03.12.2021 thereby extending the CIRP period to 03.03.2022 after excluding lockdown period on account of COVID 19. That further extension of 90 days was also granted by this Tribunal thereby extending the CIRP period from 03.03.2022 to 02.05.2022.
That the RP convened the 6th meeting of the COC on 01.12.2021. That one new claim of Union Bank of India was received after the 6th CoC meeting. The admitted claim amount of Union Bank of India was Rs, 2,85,36,677/-.
That the RP after the collation of claims re-constituted the COC on 16.02.2022. The reconstituted Committee of Creditors comprises of the following Financial Creditors:
| S. No | Name of the Financial Creditors | Amount Claimed(Rs) | Claim admitted (subject to reconciliation with Books of Accounts) (Rs) | Voting Share Percentage (%) |
|---|---|---|---|---|
| 1. | State Bank of India | 22,92,84,777.00 | 22,92,84,777.00 | 63.66% |
| 2 | Tata capital Financial Services | 4,60,62,444.00 | 4,60,62,444.00 | 12.79% |
| 3 | Axis Bank | 5,62,73,175.43 | 5,62,73,175.43 | 15.63% |
| 4 | Union Bank of India | 2,85,36,677.00 | 2,85,36,677.00 | 7.92% |
| Total | 33,16,20,396.43 | 33,16,20,396.43 | 100% |
That in the 9th CoC meeting held on 30.04.2022, the agenda for approval of the liquidation of the Corporate Debtor under Section 33 of IBC, 2016 was put before the COC members. The Committee of Creditors approved the following Resolution unanimously with 100% voting rights:
“RESOLVED THAT the COC hereby resolves to liquidate the Corporate Debtor under the provisions of section 33 of IBC, 2016 due to the reason that there are no assets in the corporate debtor and the corporate debtor is not a going concern and therefore there is no possibility of its revival. Further the COC authorizes the Resolution Professional Mr. Harvinder Singh to move an application under section 33 on behalf of the COC for obtaining an order for liquidation of the corporate debtor from Adjudicating Authority”
The COC approved the aforesaid Resolution regarding the liquidation of Corporate Debtor by 100% voting power, which left no option with Resolution Professional other than the liquidation of the Corporate Debtor. The matter for appointment of Mr. Harvinder Singh as Liquidator subject to the approval of Adjudicating Authority was placed before COC. The matter was put for voting and passed with 85%
Pursuant to the provisions of Section 34 of the IBC, 2016, the Resolution Professional has submitted his written consent to act as the Liquidator.
The Hon'ble NCLAT vide order dated 25.11.2021 in Company Appeal (AT) (Insolvency) No.470 of 2019 in the matter of Innovative Construventures Private Limited and Anr. Vs Brainer Trade and Fin-Tech Private Limited and Ors. held that the IBC empowers the Committee of Creditors to liquidate the Corporate Debtor any time after its constitution under Section 21 and before confirmation of Resolution Plan including any time before the preparation of Information Memorandum.
Further, Section 33(2) states as follows: "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[approved by not less than sixty-six per cent. of the voting share] 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).
Explanation. – For the purpose of this sub-section, it is hereby declared that the committee of creditors may take the decision to liquidate the corporate debtor, any time after its constitution under sub-section (1) of section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum.”
In the matter of Sreedhar Tripathy vs. Gujarat State Financial Corporation and Ors., the Hon’ble NCLAT in para 7 stated as under: -
The Explanation under Section 33(2) has been inserted by Act of 26 of 2019 contains the legislative declaration and intention. The CoC in the Legislative Scheme has been empowered to take decision to liquidate the Corporate Debtor, any time after its constitution and before confirmation of the resolution plan. The power given to the CoC to take decision for liquidation is very wide power which can be exercised immediately after constitution of the CoC. The reasons which has been given in Agenda Item 1, it is made clear by the CoC that the Corporate Debtor is not functioning for last 19 years and all machinery has become scrap, even the building is in dilapidated condition and the CIRP will involve huge costs. We are not convinced with the submission of learned counsel for the Appellant that the CoC's decision is an arbitrary decision. CoC is empowered to take decision under the statutory scheme and when in the present case the decision of the CoC for liquidation has been approved by the Adjudicating Authority, we see no good ground to interfere at the instance of the Appellant. However, we make it clear that the decision taken by the CoC was in the facts of the present case and it cannot be said that whenever decision is taken for liquidation the same is not open to judicial review by the Adjudicating Authority and this Appellate Tribunal. It depends on the facts of each case as to whether the decision to liquidate the Corporate Debtor is in accordance with the I & B Code or not. With these observations, the Appeal is dismissed.
It is well settled that decision taken by CoC for liquidation in commercial wisdom of the CoC should not be interfered with by the Adjudicating Authority. In the present situation extension of time will only result in unnecessary expenses. Further the resolution for liquidation of CD was approved by COC with 100% voting. Therefore, this Tribunal sees no merit in interfering with the commercial wisdom of the CoC.
In view of the above, the application is allowed by ordering liquidation of the Corporate Debtor, namely M/s. Kay Em Copper Pvt. Ltd. with following directions:
a. That Mr. Harvinder Singh, the Resolution Professional of the Corporate Debtor, is relieved from the present assignment as Resolution Professional.
b. That Mr. Harvinder Singh, holding Registration No. IBBI/IPA001/IP-N004631/2017-18/10806, is appointed as the Liquidator in terms of Section 32(1) of the Code;
c. Registry is directed to communicate this Order to the Registrar of Companies, NCT of Delhi & Haryana and to the Insolvency and Bankruptcy Board of India;
d. The Order of Moratorium passed under Section 14 of the Insolvency and Bankruptcy Code, 2016 shall cease to have its effect and a fresh Moratorium under Section 33(5) of the Insolvency and Bankruptcy Code shall commence;
e. This order shall be deemed to be notice of discharge to the officers, employees and the workmen of the corporate debtor as per Section 33(7) of the Insolvency and Bankruptcy Code, 2016;
f. The Liquidator is directed to proceed with the process of liquidation in the manner laid down in Chapter III of Part II of the Insolvency and Bankruptcy Code, 2016 and in accordance with the relevant rules and regulations.
g. The Liquidator shall follow up and continue to investigate the financial affairs of the Corporate Debtor in accordance with provisions of Section 35(1) of the Code.
h. The liquidator shall also follow up the pending applications for their disposal during the process of liquidation including initiation of steps for recovery of dues of the Corporate Debtor as per law.
The Liquidator shall submit Preliminary Report to the Adjudicating Authority within seventy-five days from the liquidation commencement date as per Regulation 13 of the Insolvency and Bankruptcy (Liquidation Process) Regulations, 2016;
j. Copy of this order be sent to the Financial Creditor, Corporate Debtor and the Liquidator for taking necessary steps;
k. I.A. 2323/2022 (ND)/2022 filed in IB- 2027/ND/2019 is disposed of in terms of the aforesaid terms.