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Judgment
ORDER
As per the records, it is seen that the Liquidator/Appellant herein has preferred an application filed before the learned Adjudicating Authority for the purposes of seeking voluntary liquidation of M/s. Fuji Lio Trading Private Limited, having its registered office in Chennai, Tamil Nadu, by invoking provisions contained under Section 59 of the I & B Code, 2016. Section 59 of the I & B Code contemplates that Voluntary Insolvency could be a process that would be permissible, subject to the condition of satisfying the parameters prescribed under Section 59 of the I & B Code, 2016. In the instant case, upon initiation of the application under Section 59 by the liquidator for its voluntary liquidation, the said proceeding was taken up before the learned Adjudicating Authority and the learned Adjudicating Authority having considered the fact, that the company being sought to be liquidated, is a company which stood incorporated on 11.11.2011 under the provisions of the Companies Act, that it was to act as a communication channel for ‘Futee Origin Corporation’, and its group of companies to promote their business activities in India, to identify channel partners for marketing of products of the said companies and to promote technical collaboration and joint ventures with Indian Companies, that in light of slow growth of business without any expansion plan, the company decided to close down its operations, that the Board of the Company in its meeting, held on 23.09.2019 resolved to initiate voluntary liquidation of the Company as per the provisions contained under Section 59 of the I & B Code, 2016, that the EGM of the Company on 22.10.2019 resolved unanimously to appoint a liquidator to conduct voluntary liquidation under Section 59 of the I & B Code, that the liquidator/Appellant herein conducted voluntary liquidation process in accordance with the IBBI (Voluntary Liquidation Process) Regulations, 2017, and that the relevant compliance as mandated by Section 59 of the Code read with IBBI (Voluntary Liquidation Process) Regulations, 2017 are listed in the Application, has observed that (i) the Audit report has been filed without the UDI number and when asked for a fresh report, the Appellant has submitted the same Audit Report with UDI Number written by hand and (ii) the affidavit is respect of the Original Solvency declaration is found to be signed using whiteners and hence the same cannot be relied upon for the said proceedings. With the above observations, the Ld. Adjudicating Authority has gone ahead to conclude that the counsel for the Appellant has not exercised due diligence while filing the relevant documents and accordingly dismissed the application with costs of Rs.5,000/-.
For a better understanding of the issue, it will be worthwhile to extract Section 59 of the Code, which is placed below:
“59.Voluntary liquidation of corporate persons.—(1) A corporate person who intends to liquidate itself voluntarily and has not committed any default may initiate voluntary liquidation proceedings under the provisions of this Chapter.
(2)The voluntary liquidation of a corporate person under sub-section (1) shall meet such conditions and procedural requirements as may be specified by the Board.
(3)Without prejudice to sub-section (2), voluntary liquidation proceedings of a corporate person registered as a company shall meet the following conditions, namely—
(a)a declaration from majority of the directors of the company verified by an affidavit stating that—
(i)they have made a full inquiry into the affairs of the company and they have formed an opinion that either the company has no debt or that it will be able to pay its debts in full from the proceeds of assets to be sold in the voluntary liquidation; and
(ii)the company is not being liquidated to defraud any person;
(b)the declaration under sub-clause (a) shall be accompanied with the following documents, namely—
(i)audited financial statements and record of business operations of the company for the previous two years or for the period since its incorporation, whichever is later;
(ii)a report of the valuation of the assets of the company, if any prepared by a registered valuer;
(c)within four weeks of a declaration under sub-clause (a), there shall be—
(i)a special resolution of the members of the company in a general meeting requiring the company to be liquidated voluntarily and appointing an insolvency professional to act as the liquidator; or
(ii)a resolution of the members of the company in a general meeting requiring the company to be liquidated voluntarily as a result of expiry of the period of its duration, if any, fixed by its articles or on the occurrence of any event in respect of which the articles provide that the company shall be dissolved, as the case may be and appointing an insolvency professional to act as the liquidator:
Provided that the company owes any debt to any person, creditors representing two-thirds in value of the debt of the company shall approve the resolution passed under sub-clause (c) within seven days of such resolution.
(4)The company shall notify the Registrar of Companies and the Board about the resolution under sub-section (3) to liquidate the company within seven days of such resolution or the subsequent approval by the creditors, as the case may be.
(5)Subject to approval of the creditors under sub-section (3), the voluntary liquidation proceedings in respect of a company shall be deemed to have commenced from the date of passing of the resolution under sub-clause (c) of sub-section (3).
(6)The provisions of Sections 35 to 53 of Chapter III and Chapter VII shall apply to voluntary liquidation proceedings for corporate persons with such modifications as may be necessary.
(7)Where the affairs of the corporate person have been completely wound up, and its assets completely liquidated, the liquidator shall make an application to the Adjudicating Authority for the dissolution of such corporate person.
(8)The Adjudicating Authority shall on an application filed by the liquidator under sub-section (7), pass an order that the corporate debtor shall be dissolved from the date of that order and the corporate debtor shall be dissolved accordingly.
(9)A copy of an order under sub-section (8) shall within fourteen days from the date of such order, be forwarded to the authority with which the corporate person is registered.”
The Appellant who was thus appointed as a liquidator for the purposes of conducting a voluntary liquidation under Section 59 of the I & B Code, 2016, states that he had completed the process of the liquidation strictly in accordance with IBBI (Voluntary Liquidation Process) Regulations, 2017, strictly in adherence to the provision contained under Section 59 of the I & B Code, 2016, by resorting to various stages, such as, holding of the Board's Meeting for approving the voluntary liquidation, holding of the Extraordinary General Meeting(EFM), and scrutinizing of the Audited Financial Statements for the respective years prior to the consideration of an application under Section 59 of the I & B Code, 2016. He has submitted that the EGM held on 22.10.2019, approved the voluntary liquidation as contemplated under Section 59(3)(c) of the I & B Code, to be read with Regulation 3(1)(c) of the Voluntary Liquidation Regulations and that the proposed voluntary liquidation by the EGM was also approved by the creditors. He has further submitted that despite of the aforesaid processes having been completed as observed in Para 6 of the Impugned Order, the Application under Section 59 of the I & B Code, 2016, has been rejected with a cost of Rs.5,000/- for the reason being that the declaration of solvency by way of an affidavit as submitted by him has been disfigured, whitener has been used at certain place and hence the said document cannot be taken as an authentic one to be taken on record in the said proceedings and that the Appellant/Liquidator has not been diligent in filing the relevant documents. He has further submitted that he was not given any opportunity to claim about the status of the document, which is against the principles of natural justice.
He has further submitted that there was no intention on his part to tinker with the document, that the directors Ms. Garima Dua and Ms. Sonal Verma inadvertently signed each other’s declaration and on finding out the same, re-signed the documents after correcting the documents with whitener which cannot be described as mala fide so as to warrant rejection of the Application, that he could have explained the same to Ld. Adjudicating Authority, but he was not given any opportunity, which violates the principle of natural justice.
Initially, when this Company Appeal was preferred by the liquidator, as against the Impugned Order dated 10.04.2024, Ms. Garima Dua and Ms. Sonal Verma, whose affidavits were declined to be accepted, were not made as a party. Hence by virtue of an order of this Tribunal dated 12.08.2024, they were directed to be impleaded by the Appellant. Accordingly, the Appellant filed the Impleadment Application, and the said Impleadment Application, being IA No. 1230/2024, was allowed by an order dated 07.02.2025. The aforesaid Respondents, Ms. Garima Dua and Ms. Sonal Verma, have participated in the proceedings through their counsel and supported the submissions of the Appellant/Liquidator. They have also submitted that they had filed the affidavit which was found to be defective, due to which the application was rejected and prayed for, that a leave may be granted to them to enable them to file a fresh declaration in the shape of an affidavit, for the purposes of consideration of the application under Section 59 of the I & B Code, 2016, for which the Appellant has been appointed as the liquidator. Having considered the consensus extended by the parties to the Appeal and having given a thoughtful consideration to the arguments extended, we are of the view that Company Appeal (AT) (CH) (Ins) No.288/2024 would stand ‘allowed’ and the Impugned Order dated 10.04.2024 would hereby stand quashed with the following directions.
Within three weeks from the date of uploading of this Judgment, Ms. Garima Dua and Ms. Sonal Verma, will be filing a fresh affidavit by way of a declaration in support of the proceedings of voluntary liquidation, which will be treated to be in furtherance of the order of Ld. Adjudicating Authority dated 10.01.2024.
Upon submission of the aforesaid affidavit to be filed by Ms. Garima Dua and Ms. Sonal Verma, the same would be taken into consideration by the learned NCLT and the application preferred under Section 59 of the I & B Code, 2016 for voluntary liquidation, would be reconsidered as fresh exclusively on its own merits without being influenced by any of the observation, which has been made by us in today's order, or in the Impugned order which is subject to challenge before this Appellate Tribunal.
Subject to the aforesaid directions, the Impugned Order would stand quashed, and the necessary action is requested to be taken by the learned NCLT, Chennai, as contemplated under Section 59 of the I & B Code, 2016.