Mr.G.Madhusudhan Rao vs M/s.Suryajyoti Spinning Mills Limited

Mr.G.Madhusudhan Rao,

Per: Rajeev Bhardwaj, Member (Judicial)

Facing difficulty in getting access to the industrial unit of the Corporate Debtor and consequently selling it to the prospective buyer, the liquidator approached this Authority seeking police protection.

The Corporate Debtor is engaged in the business of spinning cotton, polyester and PV Blends, having 4 units located at the following places in the District of Mahabubnagar, Telangana.

The Corporate Insolvency Resolution Process (CIRP) was started against the Corporate Debtor vide order dated 05.09.2019. When no resolution plan was received, the Corporate Debtor went into liquidation vide order dated 18.04.2023. The present liquidator replaced the earlier one vide order dated 30.07.2023.

The first notice for the sale of the Corporate Debtor as a going concern was issued on 06.08.2023, but it was unsuccessful. Subsequently, the second notice was issued on 19.11.2023 and the liquidator received expression of interest and EMD for Burgul unit of the Corporate Debtor. However, the prospective bidder withdrew from the bidding process because of hindrance created by some vested interests, particularly in relation to have access to this unit.

The approach road to the Burgul unit was from the sub way/National Highway No.7, which was being used by the Corporate Debtor as well as the resolution professional and former liquidator.

Blocking of the passage was discussed by the SCC members in 12^th SCC Meeting and it was also brought to the notice of Mr.Arun Agarwal, Promoter, Suspended Board member and shareholders, who informed that the land over which the said passage exists is owned by a temple and earlier they had arrangements with the owners of the land since 90’s to use it.

Keeping in view the hindrances created on the passage, the liquidator and the SCC members decided to break some portion of the boundary wall of the Corporate Debtor on the north side to get access to the unit. When on 23.12.2023, the liquidator made all arrangements to break the wall and erect gate, the retired/ex-workmen/employees started dharna, erected tent and started shouting slogans. They did not allow the liquidator and his team to break the wall.

The employees and workmen have not only physically stopped the work, but also filed two IAs 908 of 2023 and 1288 of 2023 to stop the third sale notice dated 22.12.2023 and further praying for status quo on the liquidation process.

As the liquidation process is to be completed in a time bound manner, the liquidator approached this Authority for getting police help so that the obstruction on the passage leading to the Burgul unit of the Corporate Debtor is cleared.

We have heard the submissions of the liquidator and also gone through the entire records.

One of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up of the insolvency process for maximization of value of assets. This avowed objective will be defeated if the situation like the present one is allowed to be continued with impunity. To achieve the goal set by the Parliament, the hooliganism created by vested interests is to be dealt with iron hands.

There was no problem until Burgul unit was under the control of the Corporate Debtor or RP or the previous liquidator. The trigger was when the present liquidator started the process of selling the property by issuing sale notice in the newspaper. The first sale notice was unsuccessful because no bid was received. In pursuance of the second sale notice, the prospective bidder withdrew because of issue relating to approach to the Burgul unit of the Corporate Debtor. When the third sale notice was issued, the matter became open as the retired/ex-workmen/employees stopped the liquidator from entering into the premises of the Corporate Debtor on one pretext or the other. They even filed 2 IAs for stopping the liquidation process and further stopping the sale of the Corporate Debtor.

In democracy, it is not Jungle Law but Rule of Law which prevails. Rule of Law means that all entities, including the government, must adhere to the supremacy of the law. Nobody has any right to take the law in his own hands by creating obstacles in the lawful activities. After the CIRP was initiated, it is for this Authority to see what is best in the interest of the stakeholders. The RP or liquidator only steps into the shoes of the previous management. Therefore, new regime can’t be asked to use some other passage and if somebody has any right to such passage, it is to be decided by this Authority whenever interested party raises such issue. Suddenly, access to such passage can’t be denied on ‘whims and fancies’ of certain individuals.

The purpose behind stopping the liquidator or his team to enter the Burgul unit is to stop the sale of the Corporate Debtor. Therefore, persons with vested interests first dug the passage by putting up a board that ‘this land belongs to some third person’ and when the liquidator started looking for alternative passage by breaking the wall of the unit, their henchmen etc, got the work stopped.

Having regard to the facts and circumstances, we are of the considered view that granting police help necessary for the ends of justice or to prevent abuse of process of law. Every court/tribunal is constituted for the purpose of doing justice according to law and must be deemed to possess, as a necessary corollary, and as inherent in its very constitution, all such powers as may be necessary to do the right and to undo the wrong in the course of the administration of justice. Unless this is done, the rule of law will not prevail and orders would not be effectively implemented.

The situation objectively warrants such an exercise of power. Granting of police assistance in implementing the order of this Authority would uphold the dignity and effectiveness of law. The special procedure for police help is required in the circumstances because there are reasonable grounds to suppose/believe that the execution of order of this Authority will not be effected without serious danger to public peace, apprehension of violence or obstruction from vested interests.

To behold the majesty of law, it is decided that police protection be provided to the liquidator to have access to the Burgul unit of the Corporate Debtor in one of the two ways:

The Superintendent of Police and Station House Officer, Shadnagar Police Station # 3695+534, Shadnagar, Telangana – 509 216 are directed to ensure compliance of the above directions.

With the above directions, IA No.191/7/HDB/2024 in CP(IB) No.166/7/HDB/2019 is allowed.