Resolution Professional Can File Liquidation Application U/S 33 Of IBC If CIRP Period Expires Without Approved Resolution Plan: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Rakesh Kumar Jain (Judicial Member) and Mr. Naresh Salecha (Technical Member) has held that when the extended Corporate Insolvency Resolution Process (CIRP) period has expired and no resolution plan has been approved, it is incumbent upon the Resolution Professional to file an application for the liquidation of the corporate debtor. A discussion regarding the filing of a liquidation application and the Committee of Creditors (CoC)'s request to nominate a liquidator is sufficient for the purposes of Section 33 of the Insolvency and Bankruptcy Code, 2016 (Code). Brief Facts: This appeal has been filed by Subh Laxmi Investment Advisory Pvt. Ltd. (unsuccessful resolution applicant) against National Company Law Tribunal (NCLT) Ahmedabad Bench order dated 03.05.2024, allowing the Resolution Professional (RP)'s application under Section 33(2) of the Code for liquidation of M/s Sintex Plastics Technologies Ltd (Corporate Debtor) and appointing Mr. Bimal Ashok Desai as liquidator. M/s Asset Reconstruction Company (India) Pvt. Ltd. filed a petition under Section 7 of the Code bearing CP (IB) No. 175/Ahm/2022 against the CD which was admitted on 21.02.2023 and Mr. Kshitiz Chhawchharia was appointed as the Interim Resolution Professional (IRP) of the CD. The RP issued a provisional list of eligible Prospective Resolution Applicants (PRAs) on 01.09.2023 which consisted of seven PRAs out of eight PRAs who had submitted their Expression of Interest (EOI). The RP confirmed the inclusion of the Appellant in the final list of the PRAs and subsequently shared the information memorandum, evaluation matrix and a request for resolution plan to the Appellant on 07.09.2024. However, the RP on 26.03.2024 intimated the Appellant that resolution plan has not been approved by the CoC and asked to provide the bank account details for refund of EMD. The application was filed for liquidation because the CoC did not approve any of the resolution plans and the CIRP period of the Corporate Debtor was over on 30.03.2024 which was inconformity with the provisions of Section 33 of the Code. Contentions: The Appellant submitted that the purpose for which the Code was introduced was to facilitate debt ridden companies to be taken over as going concern by avoiding liquidation. It was further submitted that the CoC has misused the process because it has made liquidation as a recovery tool for securing payment of its debt and ignored the viable resolution plan submitted by the Appellant as it abstained from voting on the plans which were presented in the meeting because the CoC was not interested in revival of the Corporate Debtor. It was further contended that the sole CoC abstained from voting neither decided to cast its vote in favour or against the resolution, therefore, it cannot be counted as voting at all. Per contra, the Respondent submitted that since no resolution plan was approved by the CoC, the RP sent an email to the CoC on 27.03.2024 seeking consent for filing the liquidation application and the nomination of liquidator which was consented to by the sole member of the CoC and accordingly, erstwhile RP filed an application on 12.04.2024 for liquidation which was allowed. It was further submitted that CoC has not approved the filing of the application under Section 33 (1) of the Code is misconceived because there is no legal bar on the RP to file such an application. Observations: The Tribunal noted that there is no dispute that RBL Bank is the sole CoC member with 100% voting rights. Among three resolution plans, one was submitted by the Appellant. The CoC member abstained from voting, which is a valid mode under CIRP Regulations (vote in favour, against, or abstain). It further added that since the CoC did not vote in favour of the Appellant's plan, it was not rejected but remained unapproved therefore, it had exercised its commercial wisdom and chose to abstain from voting as has been held by the Hon'ble Supreme Court in the case of K. Sashidhar (Supra) that commercial wisdom of the CoC is paramount, therefore, the reason cannot be questioned by the Appellant. The Tribunal further observed that the Appellant's argument that the liquidation application was filed without the CoC's consent is untenable. In the 6th CoC meeting, the possibility of liquidation was discussed, and the CoC sought a recommendation for the nomination of a liquidator. It further added that the erstwhile RP subsequently emailed the CoC seeking consent to file the liquidation application and nominate a liquidator, to which the sole CoC member consented by a returning email. Additionally, it observed that after three extensions, the CIRP period expired on 30.03.2024 which necessitated the RP to file a liquidation application under Section 33(1) of the Code...

Resolution Professional Can File Liquidation Application U/S 33 Of IBC If CIRP Period Expires Without Approved Resolution Plan: NCLAT

Mohd Malik Chauhan

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