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Judgment
Per: Bidisha Banerjee, Member (Judicial)
This Court is convened through hybrid mode.
Ld. Counsel appearing on behalf of the resolution professional were heard in extenso.
This application IA(IBC)(Liq.)/31(KB)2024 has been preferred to seek the following reliefs, inter alia: -
(a)An Order be passed for the initiation of the liquidation process of the Corporate Debtor.
(b)An Order be passed for appointment of existing RP Ms. Rachna Jhunjhunwala having registration number IBBI/IPA-001/IP-P00389/2017- 18/10707 as the liquidator.
(c)Such further or other Order or Orders be passed and/or direction or directions be given as this Hon'ble Tribunal may deem fit and proper.
Factual matrix of the case is as under: -
The petition being C.P. (IB)/100(KB)2019 had been filed by the Operational Creditor (in short "OC"), i.e., Lomat International NV against the Corporate Debtor (in short "CD"), i.e., Wearit Global Limited under Section 9 of IBC, 2016 for initiating Corporate Insolvency Resolution Process (in short “CIRP”) with respect to the CIRP of the Corporate Debtor (CD) was commenced on 08th April, 2022 passed by this Tribunal, wherein the Applicant was appointed as the Interim Resolution professional.
After her appointment as the Resolution Professional of the Corporate Debtor, the Applicant performing her duties under the prescribed Code and the Regulations. The Resolution Professional made public announcement through Form – A on 11.04.2022, wherein it was mentioned that the Corporate Insolvency Resolution Process (CIRP) was concluded on 5th October, 2022. Thereafter, an Appeal was preferred by a shareholder of the Corporate Debtor, namely, SPBP Holdings Pvt Ltd., before the Hon’ble National Company Law Appellate Tribunal (in short “NCLAT”, New Delhi) challenging the Order of admission dated 8th April, 2022 passed by this Bench. The Hon’ble NCLAT, by an Order dated 19th April, 2022, stayed the Constitution of the Committee of Creditors (in short “CoC”) pending the disposal of the appeal.
Thereafter, by an Order dated 4th October, 2023, the Hon’ble National Company Law Appellate Tribunal dismissed the aforementioned appeal filed by the shareholder of the Corporate Debtor. In its Order, the Hon’ble Tribunal specifically directed the Applicant to take immediate and appropriate steps to Constitute the Committee of Creditors (CoC) in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016.
Furthermore, the Applicant was instructed to proceed with the CIRP of the Corporate Debtor as per the applicable legal framework without any further delay so accordingly the IRP has constituted the Committee of creditors on 05.10.2023 and conducted the 1st COC meeting on 12.10.2023.
The initial 180-days period designated for the CIRP of the Corporate Debtor commenced on April 8, 2022, with an expected conclusion date of October 5, 2022 as mentioned in the Form – A published by the Applicant. This timeframe was established to allow for the comprehensive assessment and formulation of a viable resolution plan aimed at reviving the CIRP of the corporate debtor.
By an Order dated 8th November, 2023 this Tribunal granted the requested exclusion for a period of 533 days from the CIRP period. This extension allowed the RP to adjust the timeline and continue the CIRP in accordance with the revised schedule. As a consequence of the exclusion of 533 days granted by this Bench, the revised 180 days period for the CIRP was rescheduled to conclude on 21st March, 2024, replacing the original deadline of 5th October, 2022. This adjustment provided the necessary time to complete the CIRP in accordance with the new timeline.
The Resolution Professional issued a public notice in the form of Form – G on 20th November, 2023, which was published in newspapers, including Financial Express (Kolkata), Aajkal (Kolkata), Free Press (English), and Nav Bharat (Kolkata) inviting Expression of Interest (EoI) from prospective resolution applicants to participate in the resolution process for the Corporate Debtor. The deadline for submission of EoIs was 20th December, 2023 and the last date for submission of a final Resolution Plan was fixed for 18th February, 2024.
Pursuant to the publication of Form – G, the undersigned received Expression of Interest (EoIs) from four entities, namely, Anuj Goyel, S. D. Polytech Pvt. Ltd., Ayush Spintex Pvt. Ltd. and Manish Kumar, despite these EoIs, no resolution plan was received from any of the prospective resolution applicants within the stipulated deadline.
Accordingly, the undersigned filed an application before this Tribunal requesting for a period of 90 days extension of the CIRP period. On 22nd March, 2024, this Tribunal granted extension of 90 days and the revised deadline for the conclusion of the CIRP was 19th June, 2024, allowing the Resolution Professional and Stakeholders to continue the resolution of the Corporate Debtor.
In the 8th CoC meeting held on 3rd April, 2024, it was resolved that there should be a fresh publication of Form – G would be issued. Thereafter, the applicant issued a fresh Form – G on 5th April, 2024, inviting interested parties to submit their Expression of Interest (EoI) for participation in the resolution process of the Corporate Debtor. The Form – G was published in various newspapers, i.e., Financial Express (Kolkata), Aajkal (Kolkata), Free Press (English), and Nav Bharat (Kolkata), and the last date for submission of EoIs was 20th April, 2024, and the final date for submission of full Resolution Plan was 3rd June, 2024.
Following EoIs were received from the following five entities, namely, 1) Ayush Spintex Pvt. Ltd; 2) Satyam Spinners Pvt. Ltd; 3) Resurgent India Limited; 4) Somanur Kalpana Cotton (I) Pvt. Ltd; 5) Siddharth Fibre, but no resolution plan was submitted by any of the applicants.
That the critical circumstances impacting the CD's operations and financial health which lead to the lock out at the factory premises of the CD are as under: -
Labour Issues: Attendance irregularities and growing unrest among labourers had disrupted regular operations at the factory premises.
Production Halt: The factory had not been engaged in self-production since a very long period of time, instead solely leading to financial challenges.
Unpaid Dues: Outstanding payments related to previous job work remain unresolved, further straining financial resources.
Electricity Disconnection: Disconnection of electricity supply at the factory premises by the Electricity department was hindering operational continuity.
Security Concerns: Instances of theft within the factory premises of the corporate debtor, i.e., WEARIT GLOBAL LIMITED, situated at Bheelgaon khasrabad had raised serious concerns regarding the safety of the assets present at the factory premises of the corporate debtor.
Attempt to run the factory on rental basis: That the RP with the consent of the CoC members made publication in various newspapers, namely, Nav Bharat (Hindi Newspaper), Ekdin (Bengali Newspaper) & Business Standard (English Newspaper) on 06.01.2024 informing as under:
"The Factory is located in the industrial area of Village-Bheelgaon, Tehsil - Kasrawad, Dist. - Khargone - 451228 (M.P.). The Company is going concern and involved in the manufacturing activity of various types of Cotton & Synthetic Yam with the installed capacity of the factory is 600 MT per Month with around 35000 spindles. The total manpower of the company at the plant is: The employee for whose PF payment is made in November - 2023 are 252 and casual were 376. As decided in the meeting of committee of creditors, any person interested in running the factory on rent with its existing infrastructure and manpower, may submit their proposal, along with their profile and commercial terms, with the RP by 06:00 P.M. on 21/01/2024 on email id [email protected] and the hard copy to Siddha Weston, 9 Weston Street, Suite No. 134, 1st Floor, Kolkata-700013. But no response was received by her in the subject matter.
Cost Management: Given the factory's continuous financial losses and inability to generate EBITA, it is imperative to mitigate such costs in order to control the overall CIRP cost.
In view of the above, RP wants to submit that there was no intension or act of the RP which led to close down of the factory whereas the essential elements required to run the factory, such as, raw material, labour and electricity were not available at the factory premises of the CD so the RP could not continue to the run the factory smoothly on continues basis and also could not restart the factory premises after lock out w.e.f. 10.04.2024. Accordingly, lockout was declared at the premises of the CD w.e.f. 10.04.2024.
By an Order dated 5th June, 2024, this Tribunal granted a relaxation regarding the net worth criteria applicable to the suspended director Manish Kumar for the submission of Expression of Interest (EoI). The Tribunal directed the Resolution Professional (RP) to accept EoIs and resolution plans from the suspended director.
Thereafter, in the 12th CoC meeting held on 15/06/2024 resolved to extend the deadline for the submission of resolution plans till 04:00 P.M. on 15th June, 2024. This extension was granted to accommodate the additional time needed for prospective resolution applicants to submit their plans under the revised criteria set by this Tribunal.
On 19th June, 2024, the Resolution Professional filed an application before this Tribunal seeking for the exclusion of 134 days from the CIRP timeline. This exclusion was granted by this Tribunal on 25th June, 2024.
On 15th June, 2024, only one resolution plan was received from Siddharth Fibre, which was not approved by the CoC, but in the voting of the 16th CoC meeting the CoC members with 100% voting resolved for the liquidation of the Corporate Debtor. Accordingly, CoC members comprising of Indian Bank with voting share 56.61%, Bank of Baroda with voting share 30.80%, Punjab National Bank with voting share 7.5% & authorized representative for ICDS with voting share 5.09% voted against the motion.
The CoC with 100% voted against the resolution, therefore the only resolution plan submitted by Siddhart Fibre under voting was not approved by the CoC members. Voting line was extended multiple times on the request of the COC members and finally concluded on 03.10.2024. Further it was Resolved that the liquidation of Wearit Global Limited under section 33 of the Insolvency and Bankruptcy Code, 2016 be and is hereby approved. Resolved further that Resolution Professional be and is hereby authorized to file liquidation application.
CoC members comprising of Indian Bank with voting share 56.61%, Bank of Baroda with voting share 30.80%, Punjab National Bank with voting share 7.5% & authorized representative for ICDS with voting share 5.09% voted in favour of the motion. In the 16th CoC meeting of the CD and the e-voting with 100% voted in favour of the resolution, therefore, the resolution for the filing of the Liquidation application was approved by 100% voting share.
It is pertinent to mention that 100% of the Committee of Creditors have voted in favour of initiating the liquidation process of the Corporate Debtor.
Compliance Form H is annexed herewith and marked as Annexure "M" to the application.
The RP Ms. Rachna Jhunjhunwala is annexing her consent form to act as the liquidator in the matter. The consent form is annexed and marked as Annexure "N" to the application.
The details/status of Section 66 or avoidance application filed/pending before this Tribunal for their adjudication is as under: -
| Sl. No. | Type of Transaction | Date of Filing with Adjudicating Authority | Date of Order of the Adjudicating Authority |
|---|---|---|---|
| 1 | Avoidance application under Section 43, 45, 66 | 03.05.2024 | The matter is pending before this Tribunal for their Adjudication. |
Hence, this application has been preferred filed before this Adjudicating Authority seeking initiation of Liquidation Process of the Corporate Debtor as per Section 33 of the Code.
The rival contentions were noted.
6. Analysis and Findings: -
We have considered the submission made by the Ld. Counsel and perused the record.
Section 33(2) of the Code enjoins the Adjudicating Authority to pass an order for liquidation of the Corporate Debtor when the CoC with 66% approves the Liquidation of Corporate Debtor.
Hence, we do find merit in the prayers made in IA(IB)(Liq.)/31(KB)2024, and deem it fit to order liquidation of the Corporate Debtor.
7. This Bench, therefore, hereby Orders as follows: -
a. Prayers as sought for in IA(IB)(Liq.)/31(KB)2024 filed by RP, is allowed and Wearit Global Ltd., the Corporate Debtor is ordered to be liquidated in terms of section 33(2) of the Code;
b. Mr. Vaibhav Khandelwal having registration no. IBBI/IPA-001/IP-P-02157/2020-2021/13348, email: [email protected]; is hereby appointed as Liquidator is hereby appointed as Liquidator as provided under section 34(1) of the Code subject to a valid Authorisation for Assignment (AFA) issued by the Insolvency Professional Agency (IPA) of which she is a professional member;
c. The Liquidator shall initiate liquidation process as envisaged under Chapter-III of the Code and the Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016.
d. Public Notice shall be issued in the newspapers stating that the Corporate Debtor is in liquidation.
e. All the powers of the Board of Directors, and of key managerial persons, shall cease to exist in accordance with section 34(2) of the Code. All these powers shall henceforth vest in the Liquidator.
f. The personnel of the Corporate Debtor are directed to extend all assistance and co-operation to the Liquidator as required by him in managing the liquidation process of the Corporate Debtor.
g. On initiation of the liquidation process but subject to section 52 of the Code, no suit or other legal proceeding shall be instituted by or against the Corporate Debtor save and except the liberty to the liquidator to institute suit or other legal proceeding on behalf of the Corporate Debtor with prior approval of this Adjudicating Authority, as provided in section 33(5) of the Code read with its proviso.
h. In accordance with section 33(7) of the Code, this liquidation order shall be deemed to be a notice of discharge to the officers, employees and workmen of the Corporate Debtor except to the extent of the business of the Corporate Debtor continued during the liquidation process by the Liquidator.
In terms of section 33(1)(b)(iii), the Liquidator shall file a copy of this Order with the Registrar of Companies, West Bengal, within whose jurisdiction the Corporate Applicant is registered.
In the aforesaid backdrop, the application bearing No. IA(IB)(Liq.)/31(KB)2024 shall stands disposed of in accordance with the above directions.
List the main C.P. (IB)/100(KB)2019 for reporting progress on 05.02.2025.
The Registry is directed to send e-mail copies of the Order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.
Urgent certified copies of this Order, if applied for with the Registry of this Adjudicating Authority, be supplied to the parties upon compliance with all requisite formalities.
File be consigned to records.