Vipul Ganda is an Independent Litigation Counsel with over 14 years of experience and a proven track record in Litigation and Dispute Resolution.
Sunil S. Kakkad Versus Atrium Infocom Pvt. Ltd. and Ors.
Court / Forum : National Company Law Appellate Tribunal
Citation : Company Appeal (AT) (Insolvency) No. 194 of 2020 Coram : Justice Jarat Kumar Jain, Member (Judicial), Mr. Balvinder Singh, Member (Technical) and Mr. V. P. Singh Member (Technical) Subject : Section 33 of the Insolvency and Bankruptcy Code, 2016 Date of Decision : Aug 10, 2020
The Hon’ble Adjudicating Authority vide order dated July 10, 2019 in CP No. 181/NCLT/AHM/2019 initiated Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor.
In the second meeting of the Committee of Creditors (“CoC”), it was resolved to defer the publishing of Expression of Interest till next CoC meeting. In the third meeting of the CoC dated September 21, 2019, the CoC passed a resolution for liquidation of Corporate Debtor as the Corporate Debtor was not functioning for the last 5 years and there was no possibility of resolution plan. Further, with 100% voting share, it was resolved to apply for initiation of liquidation of the Corporate Debtor.
Based on the decision of CoC, the Resolution Professional applied for liquidation of Corporate Debtor and the Hon’ble Adjudicating Authority vide order dated December 5, 2019 (“Impugned Order”) allowed the application of Resolution Professional.
Aggrieved by the Impugned Order under sections 33 (1), 33 (2) and 33 (3) of the Insolvency and Bankruptcy Code, 2016 (“Code”), the Appellant preferred Appeal before Hon’ble National Company Law Appellate Tribunal (“NCLAT”).
Whether the Resolution Professional, with the approval of CoC with 66% vote share, can directly proceed for liquidation of Corporate Debtor without taking any steps for resolution of Corporate Debtor?
The Hon’ble NCLAT referred to section 33 (2) of the Code and the explanation added to the said subsection which provides that if during CIRP but before confirmation of the resolution plan, the CoC decides with minimum 66% majority to dissolve the Corporate Debtor and such decision is intimated to the Adjudicating Authority, then the Adjudicating Authority has to pass the liquidation order under sub-clauses (i), (ii) or (iii) of clause (b) of section 33 (1). Further, such decision can be taken by CoC at any time after its constitution under section 21 (1) and before confirmation of resolution plan and this period also includes any time before the preparation of information memorandum.
The Resolution Professional in the present matter had sought approval for inviting expression of interest for submission of resolution plan and for fixing eligibility criteria for resolution applicant. However, the CoC passed a resolution to defer the matter. Also, in 3rd CoC meeting, Agenda item No 5 was for the approval of Expression of Interest for inviting Resolution Plan, fixing eligibility criteria for Resolution Applicant and for fixing the last dates for submission of Resolution Plan, but the CoC with requisite majority decided to liquidate the Corporate Debtor.
The Hon’ble NCLAT held that aforesaid decision of CoC to liquidate the Corporate Debtor is based on the commercial wisdom of the CoC and is non-justiciable as per the law laid down by the Hon’ble Supreme Court in the case of K. Sashidhar v. Indian Overseas Bank (2019) 12 SCC 150.
Accordingly, the Hon’ble NCLAT dismissed the Appeal.