CoC Resolution With 66% Voting Share Not A Pre-Condition For Liquidation When No Resolution Plan Received By The AA: NCLT Hyderabad
Udai Yashvir Singh
6 May 2023 12:55 PM GMT
The National Company Law Tribunal, Hyderabad Bench, comprising Smt. Telaprolu Rajani (Judicial Member) and Shri Charan Singh (Technical Member), while adjudicating an application under Section 33(1) of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in State Bank of India vs Suryajyothi Spinning Mills Ltd has held that a resolution by the CoC with 66% voting share for Liquidation...
The National Company Law Tribunal, Hyderabad Bench, comprising Smt. Telaprolu Rajani (Judicial Member) and Shri Charan Singh (Technical Member), while adjudicating an application under Section 33(1) of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in State Bank of India vs Suryajyothi Spinning Mills Ltd has held that a resolution by the CoC with 66% voting share for Liquidation of Corporate Debtor is not necessary when no resolution plan is received by the Adjudicating Authority.
Background Facts
Suryajyothi Spinning Mills Ltd (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) vide an order dated 05.09.2019. An Interim Resolution Professional was appointed and public announcements were made for invitation of claims from creditors. The Registered Valuers determined the Liquidation Value of the Corporate Debtor to be Rs. 113.72 crores. Invitation for Expression of Interest was issued by the Resolution Professional (“RP”). The CIRP period expired on 13.01.2021 and no Resolution Plan was received by the Committee of Creditors (“CoC”), hence the present petition for Liquidation was filed.
It was however contended by the suspended director of the Corporate Debtor that there was no coordination between the CoC and the RP. In the 18th meeting of the CoC on 11.01.2021, the CoC passed a resolution to seek extension of time to conduct CIRP. But the RP failed to follow the instructions under the resolution. The application for extension of time was filed belatedly and further the ground for extension was claimed to be that there was an OTS submitted by the Corporate Debtor. It was further contended that no resolution was passed by the CoC for Liquidation of the CD. A CoC resolution with 66% of voting share is a precondition for an order of Liquidation under section 33(1) of IBC, 2016.
On the contrary, the RP contended that the Liquidation of the Corporate Debtor can be ordered by the Tribunal even in absence of a resolution by CoC when there is no resolution plan pending before the CoC. The 66% condition under section 33(2) is only applicable when an application for Liquidation is filed during CIRP and when a resolution plan is pending. It does not apply when the maximum period permitted for completion of CIRP is over and no resolution plan is received.
Findings of the Tribunal
The Tribunal observed that the Tribunal has the power to order for Liquidation when no resolution plan is submitted. Thus the Adjudicating Authority only has to see whether any resolution plan has been presented before the Tribunal for approval prior to the order of Liquidation under Section 33(1)(a). It is immaterial whether the CoC has resolved for liquidation or whether there was no coordination between the RP and CoC for an order of Liquidation under Section 33(1)(a) when no resolution plan is received by the Adjudicating Authority.
It was further observed that dismissing the application and asking for a resolution to be passed by the CoC would defeat the object of IBC, 2016 which involves completion of CIRP within given timelines.
With the aforesaid observations, the Tribunal allowed the application for Liquidation of the Corporate Debtor.
Case:State Bank of India vs Suryajyothi Spinning Mills Ltd
Case No. ;IA No. 96 of 2021 in CP (IB) No. 166/7/HDB/2019
Counsels for the Applicants;Adv. Ayush J. Rajani
Counsel for the Respondent ;Adv. Sandhya Rani
