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Judgment
Per: Shri Raghu Nayyar, Technical Member
This Application bearing IA No. 228/JPR/2020 is filed by the Resolution Professional ('Applicant' / 'RP') for M/s Kishorilal Sudesh Kumar Metals Private Limited ('Corporate Debtor') under Section 33 of the Insolvency and Bankruptcy Code, 2016 ('IBC' / 'Code') for initiation of liquidation proceedings against the Corporate Debtor.
The Adjudicating Authority vide order dated 30.01.2020 had admitted the application filed by Mr. Raghav Aggarwal, the Financial Creditor of the Corporate Debtor under Section 7 of the Code for initiation of Corporate Insolvency Resolution Process ('CIRP') and as a consequence thereof appointed Mr. Hansraj Mutreja as Interim Resolution Professional ('IRP').
In compliance with provisions of the Code, the IRP constituted the CoC. The (1^{\text{st}}) meeting of the CoC was held on 07.03.2020, wherein the CoC resolved to appoint the IRP i.e., Mr. Hansraj Mutreja, as the RP of the Corporate Debtor. Copy of Minutes of (1^{\text{st}}) CoC meeting is enclosed as Annexure-IV of the Application. In the minutes of (2^{\text{nd}}) CoC meeting held on 11.07.2020, it was stated that the RP had appointed registered valuers to determine fair and liquidation values in accordance with Regulation 27 and 35 of the CIRP Regulations, 2016.
It is submitted that in the 3rd CoC meeting held on 04.08.2020, the RP informed the members about various provisions of the Code and the compliances that were required to be undertaken in accordance with law to proceed with inviting Resolution Plans. However, the members decided that since the Corporate Debtor was not in operation from past almost more than 19 years and no asset except Plot No. E-909 RIICO, Industrial Area, Bhiwadi was in the name of the Corporate Debtor, there is no possibility for a resolution plan. Therefore, the CoC unanimously decided to liquidate the Corporate Debtor. It was further decided that the present RP be appointed as the Liquidator. Copy of the minutes of 3rd meeting of CoC is annexed as Annexure VIII of the Application.
We have carefully heard and considered the arguments of the learned counsel for the RP; and have also perused the records and taken into consideration the above facts in relation to the affairs of the Corporate Debtor. The provisions of Section 33 of IBC, 2016 are as follows: -
"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 creditor approved by not less than sixty-six percent of the voting share to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clause (i), (ii) and (iii) of clause (b) of Sub-Section (1)"
The Hon’ble National Company Law Appellate Tribunal (‘NCLAT’), in Praveen Kumar Nanda Kumar Vs. VSL Securities Pvt. Ltd. in CA No. 1/2020 in CA No. 308/2000, dated 09.06.2020, observed as under: -
> “Likewise, the decision of the COC recommending liquidation of the corporate debtor after proper evaluation of the assets and liabilities of corporate debtor with no Resolution Plan forthcoming would be a business decision falling within the domain of commercial wisdom of the COC which is not amenable to judicial review.” However, it is to be seen whether the relevant application is filed within stipulated time lines and as per applicable procedure.
Prescribed period for filing application - In the present case, the Application under Section 9 of the Code was admitted on 30.01.2020 and the period of 180 days was ending on 28.07.2020. It is noted that the CoC resolved to liquidate the Corporate Debtor on 04.08.2020 and as a consequence thereof, the instant application is filed by the RP on 21.08.2020.
In view of emerging situation of COVID-19 pandemic, the Hon’ble National Company Law Appellate Tribunal in Suo Moto-Company Appeal (AT) (Insolvency) No. 01 of 2020 vide order dated 30.03.2020, observed as under:
“Upon requests for urgent listing of cases having been made telephonically to Registrar of this Appellate Tribunal from various persons, who were unable to physically file the same on account of complete lockdown declared by Government with effect from 25th March, 2020, we take suo moto cognizance of the unprecedented situation arising out of spread of COVID19 virus declared a pandemic. Having regard to the hardships being faced by various stakeholders as also the legal fraternity, which go beyond filing of Appeals/ cases, which has already been taken care of by the Hon’ble Apex Court by extending the period of limitation with effect from 15th March, 2020 till further order/s in terms of order dated 23rd March, 2020 in Suo Motu Writ Petition (Civil) No(s).03/2020, inasmuch as certain steps required to be taken by various Authorities under Insolvency and Bankruptcy Code, 2016 or to comply with various provisions and to adhere to the prescribed timelines for taking the ‘Resolution Process’ to its logical conclusion in order to obviate and mitigate such hardships, this Appellate Tribunal in exercise of powers conferred by Rule 11 of National Company Law Appellate Tribunal Rules, 2016 r/w the decision of this Appellate Tribunal rendered in “Quinn Logistics India Pvt. Ltd. vs. Mack Soft Tech Pvt. Ltd. in Company Appeal (AT) (Insolvency) No.185 of 2018” decided on 8th May, 2018 do hereby order as follows: -
(1)That the period of lockdown ordered by the Central Government and the State Governments including the period as may be extended either in whole or part of the country, where the registered office of the Corporate Debtor may be located, shall be excluded for the purpose of counting of the period for 'Resolution Process under Section 12 of the Insolvency and Bankruptcy Code, 2016, in all cases where 'Corporate Insolvency Resolution Process' has been initiated and pending before any Bench of the National Company Law Tribunal or in Appeal before this Appellate Tribunal."
Thereafter, the Insolvency and Bankruptcy Board of India, inserted Regulation 40C to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, vide notification dated 29.03.2020 and the same is as under: -
“40C. Special provision relating to time-line
Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of COVID-19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process”
Similarly, the Insolvency and Bankruptcy Board of India, vide notification dated 20.04.2020, inserted Regulation 47 A to the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 and the said regulation reads as under: -
“Exclusion of period of lockdown
47A. Subject to the provisions of the Code, the period of lockdown imposed by the Central Government in the wake of Covid-19 outbreak shall not be counted for the purpose of computation of the timeline for any task that could not be completed due to such lockdown, in relation to any liquidation process.”
As per Notification No. IBBI/2020-21/GN/REG059 dated 20.04.2020, the period of lockdown is excluded for the purpose of calculating the timelines in CIR Process. Hence, after considering exclusion of lockdown period till 30.06.2020, the present application is filed within the prescribed period. In view thereof the Application under consideration is taken up under Section 33(2) of the Code.
Appointment of Liquidator and fee to be paid— Section 34(1) of the Code provides that where the Adjudicating Authority passes an order for liquidation of the Corporate Debtor under Section 33, the resolution professional appointed for the corporate insolvency resolution process shall, subject to submission of written consent act as the Liquidator for the purpose of liquidation. The relevant provisions of Sections 34(1) of the Code are as follows: -
> “(1) Where the Adjudicating Authority passes an order for liquidation of the corporate debtor under Section 33, the resolution professional appointed for the corporate insolvency resolution process under Chapter II shall, subject to submission of written consent by the resolution professional to the Adjudicating Authority in specified form, shall act as the liquidator for the purpose of liquidation unless replaced by the Adjudicating Authority under sub-section (4).”
The CoC had resolved to appoint the present RP Mr. Hansraj Mutreja as the Liquidator. It is seen that he is eligible to be appointed as Liquidator and we do not find any reason to replace the existing RP. Mr. Hansraj Mutreja, Resolution Professional with IBBI Registration No. IBBI/IPA-002/IP-N00221/2017-18/10637 has filed his consent in format / Form -AA dated 05.08.2020 as Annexure D, vide Diary No. 1373/2021 dated 14.07.2021. The credentials of the proposed Liquidator have been checked from IBBI website (www.ibbi.gov.in) and nothing adverse is found on record. Therefore, Mr. Hansraj Mutreja is appointed as the Liquidator.
It is seen that Regulation 39B, 39C and 39D in the CIRP Regulations, 2016 have been inserted by Notification No. IBBI/2019-20/GN/REG/048 dated 25.07.2019. Relevant aspects in this respect are examined hereunder.
Liquidation Cost (Regulation 39B of CIRP Regulations, 2016) - The RP apprised the CoC in the 4th meeting dated 05.07.2021 about Regulation 39B of CIRP Regulation, 2016 and estimated the liquidation cost to be at Rs. 6,00,000/-. The CoC with 69.69% voting rights approved the estimated liquidation cost. The Liquidator is, therefore, directed to take necessary action under Region 2A of the IBBI (Liquidation Process) Regulations, 2016 regarding contributions to liquidation costs.
Assessment of Re as a going concern (Regulation 39C of CIRP Regulations, 2) - The RP apprised the CoC in its 4th meeting about Regulation 39C CIRP Regulations, 2016. The members of CoC discussed and resolved the Corporate Debtor as a going concern, as first option, or sell the balance(s) of the Corporate Debtor as a going concern, as second option, before storing other options as per Regulation 32 & 32A of IBBI (Liquidation Process) Regulations, 2016 and Regulation 39C of CIRP Regulations, 2016, if an order of liquidation is passed by the Adjudicating Authority.
Fees of the Liquidator (Regulation 39D of CIRP Regulations, 2016) –In the 4th meeting of the CoC, the members with 69.69% voting rights resolved that the consolidated fees of the Liquidator will be fixed at Rs. 2,00,000/- and travelling, hotel charges and other expenses as per actuals.
In view of the satisfaction of the conditions provided under Section 33 of the Code, the Corporate Debtor, M/s Kishori Lal Sudesh Kumar Metals Private Limited is directed to be liquidated in the manner as laid down in Chapter III of the Code. The contextual directions inter-alia include: -
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 by or 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; and
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
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
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
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 provisions of Section 19 of the Code shall apply in relation to liquidation process as they apply in relation to CIR process with the substitution of references to the Liquidator for references to the Interim Resolution Professional; and
The Liquidator shall publish public announcement in accordance with Regulation 12 of the IBBI (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 stakeholders to submit their claims as on the liquidation commencement date and provide the last date for submission of claim which shall be 30 days from the liquidation commencement date; and
In accordance with Regulation 13 of the IBBI (Liquidation Process) Regulations, 2016, the Liquidator shall file his preliminary report within 75 days and shall file regular progress reports as per Regulation 15.
Pending Applications, if any, and its / their effect- No applications are pending in this case.
In view of the foregoing, IA No. 228/JPR/2020 is disposed of. Copy of this order be supplied to the counsel for the Liquidator as well as to the Registrar of Companies forthwith. The Registry is also directed to send a copy of this order to the Liquidator at his e-mail address.