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Judgment
ORDER
Per: K. Biswal, Member (Judicial)
This Application has been filed on 13.12.2023 by Mr. Raghunathan Krishnasamy, Resolution Professional of ROYALOAK FURNITURE INDIA LLP (“Corporate Debtor/CD”) under Section 33 of the Insolvency and Bankruptcy Code, 2016 (“Code”) seeking an order of Liquidation in the matter of M/s ROYALOAK FURNITURE INDIA LLP and appoint the Liquidator for initiation of Liquidation process of the Corporate Debtor etc.
CP (IB) 36/BB/2021 filed under Section 10 of the Code, 2016 by the Corporate Debtor to initiate Corporate Insolvency Resolution Process (“CIRP”) which was admitted on 8.04.2021 and vide the same order this Tribunal has appointed the Applicant viz., Mr. Raghunathan Krishnaswamy as an Interim Resolution Professional (“IRP”) of the CD.
It is stated that the IRP made a public announcement on 17.07.2021 in the prescribed form about the commencement of CIRP against the CD in accordance with the provisions of Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Claims were invited by public announcement and the last date for submission of claims was 30.07.2021. The RP verified the claims and constituted the Committee of Creditors (“COC”) constituting of the following persons/entities.
It is submitted that First Media print advertisement for Form G was released on 15.11.2021 and second advertisement on 07.02.2022 inviting Resolution Plans. The applicant states that various resolution plans were put forth before the COC and the Resolution Plan made by Resolution Applicant Shri. D Suresh and other Consortium members were found to be the most suitable for the CD. During the 6th meeting of the CoC held on 07.04.2022, the COC approved the resolution plan with 100% voting share of the Financial Creditors.
It is submitted that an Application for Approval of the Resolution Plan was filed before the Hon’ble National Company Law Tribunal, Bangalore on 26.05.2022 and IA No. 199/2023 vide order dt.15.09.2023 the same was rejected on the ground that various requirements under Section 30(2) of the Code read with Regulation 38 were not fulfilled and there was an issue regarding the “Terms of the Resolution Plan and its implementation: which is a mandatory requirement under Regulation 38 (2) (a) of the IBBI (Insolvency Resolution Process for Corporate Persons) 2016 along with non-satisfaction of Source of Funds in light of Regulations 38 (b)(c). Further, the due diligence report for ascertaining capability of the Resolution Applicant to implement the Resolution Plan has not been furnished in light of Regulation 38 (3)(e) due to which the Resolution Plan failed to meet the requirements specified by the Board and contravened with the provisions of the law.
It is submitted that after rejection of the Resolution Plan by the Hon’ble NCLT Bengaluru, the COC meeting was again held on 11.10.2023 and the outcome was to opt for liquidation.
It is submitted that the COC left with no other option had to opt for one such option rather than the Resolution plan approved earlier was the best option for the CD.
It is submitted that in the meeting held on 11.10.2023 the COC in its commercial wisdom chose to liquidate the CD. The COC were of the opinion that no resolution applicant or no other plans best suitable for the CD would be available, hence, the COC has voted unanimously for liquidating the CD. Thus, 100% of the COC has passed the resolution for liquidating the CD. The relevant excerpt from the sixth COC meeting is produced below:
“The members of the meeting after the elaborate discussion of the subject matter and member’s exchange of points of merits and limits finally concluded jointly that move for filing the petition before this Hon’ble NCLT Bengaluru Bench for “Corporate Liquidation Process” and CS Raghunathan Krishnasamy will do the necessary filing process in this regard.”
We have carefully considered the submissions made in the application by the Resolution Professional and have also perused the materials on record.
The relevant provisions of Section 33 sub-section (1) and sub-section (2) of the Code are perused hereunder:
“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 Petition under Section 10 of the Code was admitted on 08.04.2021. Further, the Resolution Plan was rejected by this Tribunal on 15.09.2023. Thereafter, in the sixth COC meeting held on 11.10.2023, the COC members unanimously approved the liquidation of the CD on account of rejection of the resolution plan. The incumbent application for initiation of liquidation process was filed by the applicant on 13.12.2023. Since the Adjudicating Authority has rejected the Resolution Plan for it being contingent and uncertain for implementation, the provisions of Section 33(1) (b) of the Code will be attracted. Thus, we are considering the present application under Section 33(1) (b) of the Code.
Appointment of Liquidator – it is submitted that the COC members in the sixth meeting held on 11.10.2023 unanimously selected CS Raghunathan Krishnasamy as the Liquidator of the CD as per Section 34 of the Code. Additionally, the applicant/RP has given his written consent as per FORM AA, Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016 to act as the Liquidator of the CD. In light of the above factual matrix, and in compliance with Section 34 of the Code, Mr. Raghunathan Krishnasamy with Registration No. IPA/002/IPN-00419/2017018/11200 is appointed as the Liquidator of the CD.
Regulations 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/201920/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 as per the resolution passed in the CoC meeting dt.31.10.2023 at Page @44 is according to the Regulation 39B of the IBBI (Insolvency Resolution Process for Corporate Persons] Regulations 2016 and the estimated Liquidation cost excluding the Liquidators fee for the CD is Rs.2.00 lakhs.
b. Assessment of Sale as a going concern [Regulation 39C of the Insolvency Resolution Process for Corporate Persons) Regulations, 2016] – The members of the CoC did not approve the sale of the Corporate Debtor as a going concern as per Regulation 39C of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016. Therefore, the liquidator is thereby directed to refer to Regulation 32A of IBBI (Liquidation Process) Regulation, 2016 and take necessary action.
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 in reference to the Regulation 4(2) of the IBBI (Liquidation Process) Regulations, 2016.
Pending applications, if any, and its effects- it is stated that there is no pending application against or by the CD.
In view of the conditions provided under Section 33 (1) of the Code, the Corporate Debtor M/s. ROYALOAK FURNITURE INDIA LLP 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;
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
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
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.
That the announcement shall be published in accordance with Regulation 12 sub regulation 3 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation 2016.
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 thereafter.
The Liquidator shall file his written consent within one week from today.
Thus, I.A No. 859 of 2023 stands disposed of.
Copy of this order to 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.