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2019 (4) TMI 1953 - AT - Insolvency and BankruptcyLiquidation Order - section 33(1) of IBC - CIRP not completed in the manner as it should have been completed and in fact no proper steps were taken to ensure that Resolution process is made successful - HELD THAT - It is found that no Resolution Plan was approved by the Committee of Creditors and 270 days have passed. The order of liquidation need not be interferd with - the liquidator needs to act in terms of this Appellate Tribunal s order passed in Y. SHIVRAM PRASAD AND ASSET RECONSTRUCTION COMPANY (INDIA) LTD. VERSUS S. DHANAPAL ORS. AND SERVALAKSHMI PAPER LTD. ORS 2019 (5) TMI 386 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI where it was held that Before approval of an arrangement or Scheme the Adjudicating Authority (National Company Law Tribunal) should follow the same principle and should allow the Liquidator to constitute a Committee of Creditors for its opinion to find out whether the arrangement of Scheme is viable feasible and having appropriate financial matrix. It will be open for the Adjudicating Authority as a Tribunal to approve the arrangement or Scheme in spite of some irrelevant objections as may be raised by one or other creditor or member keeping in mind the object of the Insolvency and Bankruptcy Code 2016. The appeal is disposed off.
Issues Involved:
1. Completion of the Corporate Insolvency Resolution Process (CIRP) 2. Liquidation Order and its Compliance 3. Application of Section 230 of the Companies Act, 2013 during Liquidation 4. Steps for Revival and Continuation of the Corporate Debtor Issue-wise Detailed Analysis: 1. Completion of the Corporate Insolvency Resolution Process (CIRP): The appellant argued that the CIRP was not completed as it should have been, implying that proper steps were not taken to ensure the success of the resolution process. However, it was found that no Resolution Plan was approved by the Committee of Creditors within the stipulated 270 days, necessitating the filing of an application under Section 33(1) of the Insolvency & Bankruptcy Code (I&B Code), 2016. 2. Liquidation Order and its Compliance: The Tribunal noted that due to the absence of an approved Resolution Plan and the expiry of the 270-day period, the order for liquidation was passed by the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi on 3rd April, 2019. The Tribunal expressed no inclination to interfere with the liquidation order but emphasized that the liquidator must act in accordance with the directions provided by the Appellate Tribunal in a previous order dated 27th February, 2019. 3. Application of Section 230 of the Companies Act, 2013 during Liquidation: The Tribunal highlighted that during the liquidation process, steps must be taken for the revival and continuation of the Corporate Debtor. This includes exploring compromise or arrangement with creditors or members under Section 230 of the Companies Act, 2013. The Tribunal referenced the Supreme Court's decisions in “Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors.” and “Meghal Homes Pvt. Ltd. vs. Shree Niwas Girni K.K. Samiti & Ors.” to underline that liquidation should be a last resort and efforts should be made to sell the business of the Corporate Debtor as a going concern. 4. Steps for Revival and Continuation of the Corporate Debtor: The Tribunal outlined a clear process for the liquidator to follow, which includes: - Verifying claims of all creditors. - Taking custody and control of all assets, property, effects, and actionable claims of the Corporate Debtor. - Carrying on the business of the Corporate Debtor for beneficial liquidation. - Taking steps under Section 230 of the Companies Act, 2013, to explore compromise or arrangement with creditors or members. - Selling the business of the Corporate Debtor as a going concern if compromise or arrangement fails. - Proceeding with the sale of the company's assets wholly or in parts only if revival efforts fail. The Tribunal emphasized that the liquidation process should ensure the maximization of the Corporate Debtor’s assets and balance the interests of all stakeholders, including Financial Creditors, Operational Creditors, Secured Creditors, and Unsecured Creditors. The Adjudicating Authority is empowered to overrule objections if the arrangement or scheme is beneficial for the revival of the Corporate Debtor. Conclusion: The appeal was disposed of with directions for the liquidator to proceed in accordance with the law and the specific steps outlined by the Tribunal to ensure the revival and continuation of the Corporate Debtor, prioritizing compromise or arrangement under Section 230 of the Companies Act, 2013, before resorting to liquidation.
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