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TMI Blog2024 (2) TMI 1187X X X X Extracts X X X X X X X X Extracts X X X X ..... Insolvency and Bankruptcy Code, 2016 ("IBC" in short) arising out of the common order dated 04.12.2023 (hereinafter referred to as "Impugned Order") passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court-II) in CP (IB)4058(MB)2019. By the impugned order, the Adjudicating Authority allowed I.A. No. 2947 0f 2023 filed by the Resolution Professional for initiating the liquidation of the Corporate Debtor under Section 33 of the IBC and dismissed I.A. No 2825 of 2023 filed by one of the prospective resolution applicants, Mayank Goyal praying for setting aside the resolution passed by the Committee of Creditors ("CoC" in short) of the Corporate Debtor in its 5th meeting for the initiation of liquidation process of the Corporate Debtor. Aggrieved by this common impugned order, one set of appeal vide Company Appeal (AT) (Insolvency) No. 147-148 of 2024 has been preferred by one of the prospective resolution applicants, Mayank Goyal. The other set of appeal has been filed vide Company Appeal (AT) (Insolvency) No. 182 of 2024 by one Suresh More. Aggrieved by the said impugned order, the present appeals have been preferred by the Appellants. 2. Coming to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresented before the Adjudicating Authority that SBI could not take possession of the land of the Corporate Debtor. The Adjudicating Authority had erred in passing the impugned order by relying on such wrong and misleading submissions made by the RP. It was also submitted that the RP created a wrong impression that the suspended management of the Corporate Debtor did not provide information with respect to the assets of the Corporate Debtor inspite of their assurance given to the IRP extending their full cooperation in the CIRP process. The RP had also misrepresented the Adjudicating Authority by stating that the Corporate Debtor did not hand over land, factory, plant and machinery to him. Even the annual accounts of the Corporate Debtor were handed over to the IRP. The failure on the part of RP to perform his duty of taking charge of the assets of the Corporate Debtor and tracing the other assets cannot be a valid ground for recommending liquidation. Thus, it was asserted that there was material irregularity in the conduct of CIRP by the IRP/RP which has been ignored by the Adjudicating Authority. 5. The Learned Counsel for the Respondent No. 1/RP refuting the contentions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Corporate Debtor were neither in possession of the Respondent No. 2 nor its custody with the RP and had been moved away by the suspended management, the Corporate Debtor was not capable of revival and hence CoC had rightly decided on its liquidation. Furthermore, since tracing the assets of the Corporate Debtor would have been a long-drawn process which would have entailed enhanced CIRP cost, the CoC was well justified in taking the decision to initiate liquidation. 8. We have duly considered the arguments advanced by the Learned Counsel for the parties and perused the records carefully. The decision of both the Appeals are based on the same set of facts and documents and hence for reasons of convenience taken together. 9. The short points which have come up for our consideration are (i) whether the statutory provisions of IBC provides scope for the CoC to consider approval of liquidation of the Corporate Debtor before inviting resolution plans; (ii) whether in the present facts of the case there were good reasons for the CoC to initiate liquidation of the Corporate Debtor in the exercise of its commercial wisdom and (iii) whether there existed any cogent ground for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt upon the CoC to complete the steps for resolution of the Corporate Debtor before exercise of its jurisdiction to pass an order of liquidation of the Corporate Debtor. Such a decision can be taken "any time" during the corporate insolvency resolution process as long as it is before confirmation of resolution plan. The very fact that the words "any time" has again been used in the Explanation clause under Section 33(2) which was inserted later by an amendment vide Act No. 26 of 2019 manifestly reinforces the legislative intention empowering the CoC to take decision to liquidate the Corporate Debtor any time after its constitution and before confirmation of the resolution plan including at any time before the preparation of the information memorandum. Thus, in terms of the statutory framework of the IBC, the decision on liquidation having been taken by the CoC in the present case before taking up any resolution plan for consideration cannot be debunked by the Appellants as being dehors the statutory provisions. 13. Coming to the findings of the Adjudicating Authority in this regard, we notice that at para 8 of the impugned order, the following has been noted : "8. Section 33(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation " 17. It is also the case of the Appellants that the decision of the CoC for liquidation of the Corporate Debtor was unsustainable in law since the there were no good reasons for initiating liquidation. It was asserted that the CoC had initially decided that RP would file application to take possession of the assets of the Corporate Debtor including land, factory, plant and machinery; file PUFE applications and also application under Section 19 to secure cooperation of the suspended management and also went ahead with publishing Form-G inviting resolution plans but then the CoC for unexplained reasons abruptly turned around this decision and recommended liquidation. 18. It is the counter contention of the RP that though DM, Palghar had allowed the request of SBI to take possession of the assets of the Corporate Debtor in Palghar, it was discovered by SBI at the time of conducting valuation that the said asset was not constructed on demarcated land and the valuers were not permitted to take proper measurement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CD and therefore he does not have any information on the same. The IRP further informed that the records and books of accounts of the CD have not been handed over and that the same were also not available at the registered office of the CD located at Malad (west), Mumbai. IRP informed that he will be appointing of a transaction auditor for determination of avoidance transactions. The CoC took note of the same." "Item No. 9 - To take note of several plots shown in the name of the corporate debtor in the online resource: On conducting online search on https://bhulekh.mahabhumi.gov.in/, the IRP could identify certain plots shown in the name of M/s. Bil Energy Systems Ltd. The information regarding the same was shared in the CoC. ......... The Suspended Director ..... that he is not aware about the same and does not remember anything about these assets. He further informed that pursuant to the order of the CMM, he had handed over all the assets of the CD to SBI and that the IRP can take possession of the assets of the CD from SBI. The IRP requested SBI to clarify on the status of possession of assets of the CD. SBI clarified that they were never given any possession of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the IRP. All the COC members discussed on the need for taking over of the factory, Land, Plant and Machineries and decided that to file an application with Hon'ble NCLT, Mumbai at the earliest and 'Resolution Professional' agreed for the same. 4. SBI officials informed that the CD created security Interest over plant and Machineries and they told that there are no plant and machineries at factory and 'Resolution Professional' informed that as per the Precious Minutes written by the IRP, machineries already sold by the CD long back. SBI Officials asked about the sale proceeds and SBI Officials told no permission given for sale and no sale proceeds received and in case permission taken and sold leads to fraudulent transactions and lead fraud. 6. 'Resolution Professional' informed that the IRP has not done the required activities such as placing the Evaluation Matrix, Request for Resolution Plan (RFRP) which resulted in spite the IRP issued the Provisional List of PRAs and Objections period is over also, IRP has been not sent the very important documents like IM, Evaluation matrix and RFRP to the PRAs. SBI officials informed that due to non completion of take over of the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery owned by the Corporate Debtor appears to have been sold by the suspended management of the Corporate Debtor in 2015. The erstwhile management of the Corporate Debtor had not handed over any assets or accounts or other information relating to the Corporate Debtor nor is co-operating with IRP/'Resolution Professional'. As per the 'Resolution Professional', tracing of other assets owned by the Corporate Debtor is a cumbersome exercise and is a long- drawn process. In such a scenario, CoC took a decision to recommend liquidation of the Corporate Debtor mainly to contain the CIRP expenses and costs. Pursuing the CIRP, without any corresponding advantage, in the opinion of CoC is not likely to yield any advantage. 10. It is also pertinent to note that the Applicant has not made out a case by demonstrating how Corporate Debtor is better suited for revival as there is negligible assets, that too, not in the possession of 'Resolution Professional' and therefore no valuation could be done. The Corporate Debtor also stopped operation three years prior to the Insolvency Commencement Date." (Emphasis supplied) 22. The CoC minutes have clearly recorded that the SBI had admitted that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ev Bindal Liquidator in CA (AT) (Ins.) No. 13 of 2022 also cannot come to the aid of the Appellant since the facts are clearly distinguishable. In that case, resolution plan had been received from the Corporate Debtor which was a MSME but the plan was refused on the ground that no resolution plan was invited. It had been held that non- acceptance of Corporate Debtor as a registered MSME was a material irregularity committed in the CIRP process. The ratio of the judgment of this Tribunal in Gayatri Polyrub Pvt. Ltd. Vs Anil Kohli and Anr. in CA (AT) (Ins.) No. 650 of 2023 which has also been relied upon by the Appellants also does not come to their aid since the facts of the above case are different in that here resolution plans had already been submitted by resolution applicants before the CoC but was not approved. The resolution applicants had come up with an offer of enhanced value but liquidation order had been approved by the Adjudicating Authority. 25. In the present case, the CoC took a decision for liquidation of the Corporate Debtor after holding 5 meetings. This decision was taken by 100% vote share. Thus, this decision of the CoC conforms to the requirements laid down in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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