CoC Is Empowered To Liquidate Corporate Debtor Any Time After It's Constitution Or Before Resolution Plan Is Confirmed: NCLT Delhi
The National Company Law Tribunal Court V, New Delhi bench of Mahendra Khandelwal (Judicial Member) and Dr Sanjeev Ranjan (Technical Member) has held that CoC in the legislative scheme of the Insolvency and Bankruptcy Code, 2016 is empowered to take the decision to liquidate the Corporate Debtor, any time after its constitution and before confirmation of the...
The National Company Law Tribunal Court V, New Delhi bench of Mahendra Khandelwal (Judicial Member) and Dr Sanjeev Ranjan (Technical Member) has held that CoC in the legislative scheme of the Insolvency and Bankruptcy Code, 2016 is empowered to take the decision to liquidate the Corporate Debtor, any time after its constitution and before confirmation of the resolution plan.
Brief Facts:
The matter pertained to the liquidation of Corporate Debtor, M/s 5 Core Acoustics Private Limited. The Corporate Insolvency Resolution Process was initiated against the Corporate Debtor on 16.11.2022, and Mr Radhey Shyam Yadav was appointed as the Resolution Professional. Despite efforts by the Resolution Professional to contact the Corporate Debtor's directors and statutory auditor, they could not be located. Bailable warrants were issued against the directors, but their whereabouts remained unknown. The absence of operations and assets led the Committee of Creditors (CoC) to resolve for liquidation in the 2nd CoC meeting with a 100% voting share.
In the subsequent 3rd CoC meeting, it was decided to appoint Rajeev Lochan as the Liquidator, following a recommendation from the Insolvency and Bankruptcy Board of India (IBBI). Radhey Shyam Yadav, the existing Resolution Professional, was not retained as the Liquidator, contrary to the CoC's initial proposal. Radhey Shyam Yadav approached the National Company Law Tribunal Court V, New Delhi (“NCLT”) for the Tribunal's approval for the liquidation of the Corporate Debtor under Section 33(2) of the IBC, and the appointment of Rajeev Lochan as the Liquidator.
Observations by the NCLT:
The NCLT referred to Section 33(2) of the IBC and noted that the provision mandates the Adjudicating Authority to pass a liquidation order upon receiving intimation from the resolution professional regarding the decision of the CoC to liquidate the corporate debtor, provided the decision is approved by not less than sixty-six per cent of the voting share of the CoC. It noted that the CoC, with a one hundred per cent voting share, unanimously approved the liquidation of the Corporate Debtor.
The NCLT referred to the decision of NCLAT in Sreedhar Tripathy vs. Gujarat State Financial Corporation and Ors., where it was held that the CoC holds wide powers to decide on liquidation, even immediately after its constitution, subject to compliance with the statutory scheme.
Considering the legislative intent and the commercial wisdom vested in the CoC, the NCLT found no grounds for interference with the decision of the CoC for liquidation. Moreover, the resolution for liquidation, passed unanimously with one hundred per cent voting shares, signified a clear consensus among the creditors. Additionally, the absence of any identifiable assets of the Corporate Debtor and the unknown whereabouts of its directors further supported the rationale for liquidation.
Therefore, the NCLT granted the application for the liquidation of M/s 5 Core Acoustics Private Limited. Consequently, Radhey Shyam Yadav, the Resolution Professional, was relieved from his assignment, and Rajeev Lochan was appointed as the Liquidator in accordance with Section 32(1) of the Code.
Case Title: M/S Tri-Wall Pak Private Limited Vs M/S 5 Core Acoustics Private Limited
Case Number: I.A. 2892/2023 IN COMPANY PETITION NO. (IB) – 468/ND/2020
Advocate for the Applicant: Mr. R.S. Yadav RP with Mr. Ashok Juneja, Adv.
Date of Judgment: 07.06.2024
Click Here To Read/Download Order or Judgment