2021 (1) TMI 148 - Tri - Companies Law

Dissolution of company - Oppression and Mismanagement - Sections 241 and 242 of the Companies Act 2013 - HELD THAT - On hearing the counsel for the Applicant as well as the Regional Director and having perused the pleadings and the documents attached we are satisfied and of the considered view that the dissolution of IIPL USA is the best option for resolution of IIPL USA in the given scenario and the same needs to be approved and recorded. The proposal to file Application(s) for initiating the dissolution process of IIPL USA in accordance with the laws of the USA is taken on record - Application allowed.

Summary

Issues Involved:
1. Mismanagement allegations against IL&FS.
2. Supersession of IL&FS Board of Directors and appointment of a new Board.
3. Preparation and submission of a Resolution Framework by the new Board.
4. Process for dissolution of IIPL USA LLC.
5. Approval and supervision of the Resolution Process by Hon'ble Justice D. K. Jain (Retd.).
6. Compliance with NCLAT orders regarding the resolution of IL&FS and its group entities.
7. Financial and operational status of IIPL USA.
8. Proposal for the closure and dissolution of IIPL USA.

Issue-wise Detailed Analysis:

1. Mismanagement Allegations Against IL&FS:
The Union of India filed CP No. 3638 of 2018 against IL&FS under Sections 241 and 242 of the Companies Act, 2013, alleging mismanagement within the company. This led to the supersession of the IL&FS Board by the Tribunal on 01/10/2018.

2. Supersession of IL&FS Board of Directors:
The Tribunal superseded the IL&FS Board and constituted a new Board with six Directors on 01/10/2018, later adding three more Directors. The new Board was tasked with furnishing a roadmap for the Tribunal's consideration.

3. Preparation and Submission of a Resolution Framework:
The new Board submitted periodic progress reports and proposed a Resolution Framework on 17/12/2018. The framework recommended an 'Asset Level Resolution' for IL&FS Group, including the potential winding up of non-operational entities.

4. Process for Dissolution of IIPL USA LLC:
The application sought the Tribunal's approval for initiating the dissolution process of IIPL USA, an Offshore IL&FS Entity, in accordance with US laws. This was part of the broader resolution strategy for IL&FS Group entities.

5. Approval and Supervision by Hon'ble Justice D. K. Jain (Retd.):
NCLAT permitted the engagement of Hon'ble Justice D. K. Jain (Retd.) to supervise the Resolution Process. The resolution of Offshore IL&FS Entities, including IIPL USA, was to be supervised by Justice Jain and presented to the Tribunal.

6. Compliance with NCLAT Orders:
NCLAT orders dated 11/01/2019, 04/02/2019, and 12/03/2020 outlined the process for resolving IL&FS Group entities. These orders mandated the formation of a Committee of Creditors (CoC) and set deadlines for concluding the resolution process.

7. Financial and Operational Status of IIPL USA:
IIPL USA, incorporated on 12/11/2013, provided bid support services and was involved in engineering and maintenance services in North America. Efforts to sell IIPL USA's non-core assets were approved, and the entity vacated its office premises by 31/03/2020. All contracts and employee dues were settled, and IIPL USA held a net cash balance of USD 652,763.84 as of 09/09/2020.

8. Proposal for Closure and Dissolution of IIPL USA:
The proposal for the dissolution of IIPL USA was approved by the Boards of IIPL USA, IIPL, ITNL, and the New Board. Justice D. K. Jain (Retd.) also approved the proposal, subject to its presentation before the Tribunal. The dissolution process was to be conducted in accordance with US laws.

Conclusion:
The Tribunal, after hearing the counsel for the Applicant and the Regional Director, and reviewing the documents, concluded that the dissolution of IIPL USA was the best option for resolution. The Tribunal approved the proposal to file applications for initiating the dissolution process of IIPL USA in accordance with US laws and granted the Applicant's request for exemption from affixing the stamp on the affidavit and notarizing the application.