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Voluntary Initiation Of CIRP By Bihar State Construction Corp., NCLAT Delhi Approves

Pallavi Mishra
30 Sep 2022 4:30 AM GMT
Voluntary Initiation Of CIRP By Bihar State Construction Corp., NCLAT Delhi Approves
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The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, comprising of Shri Anant Bijay Singh (Judicial Member) and Ms. Shreesha Merla (Technical Member), while adjudicating an appeal filed in Bihar State Construction Corporation Ltd. Employee Union v Bihar State Construction Corporation Ltd., has upheld the Adjudicating Authority's decision to initiate Corporate...

The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, comprising of Shri Anant Bijay Singh (Judicial Member) and Ms. Shreesha Merla (Technical Member), while adjudicating an appeal filed in Bihar State Construction Corporation Ltd. Employee Union v Bihar State Construction Corporation Ltd., has upheld the Adjudicating Authority's decision to initiate Corporate Insolvency Resolution Process ("CIRP") against Bihar State Construction Corporation Ltd. ("BSCCL"). BSCCL had moved a petition under Section 10 of IBC seeking initiation of its own insolvency process for being unable to pay debt amounting to Rs. 104,16,98,874/- as on 31.03.2016. Mr. Nitesh Kumar More has been appointed as the Interim Resolution Professional.

Background Facts

BSCCL is a Bihar State Government owned public company and was incorporated in 1974. BSCCL is engaged in civil engineering works. In 2002, BSCCL's financial position had become worst and employees had moved before the Patna High Court seeking payment of their wages and salary. The High Court had directed BSCCL to pay the lawful dues of the employees within 4 months. Failing which, the State Government must initiate winding up proceedings against BSCCL.

In 2013, the Board of Directors decided to wind up BSCCL as no business was being conducted by the company. Accordingly, in 2017 BSCCL filed a petition under Section 10 of Insolvency and Bankruptcy Code, 2016, seeking voluntary initiation of CIRP. Objections to the Section 10 petition were filed by employees of BSCCL ("Appellants"). However, the Adjudicating Authority vide an order dated 16.10.2019 allowed the petition under Section 10 and initiated CIRP against BSCCL. Mr. Nitesh Kumar More was appointed as the Interim Resolution Professional.

Contention Of Appellant

The Appellants contended that BSCCL had not complied with Section 10(3)(c) of IBC which requires a special resolution to be passed by shareholders of Corporate Debtor, approving filing of petition. Further, the company petition was filed for voluntary winding up of the BSCCL, which is completely different from the provisions of Section 10 of IBC. State of Bihar was bifurcated in 2000, hence State of Jharkhand was a necessary party since it is also a shareholder of the BSCCL. The assets and liabilities were to be divided between both the States after bifurcation.

Contentions Of BSCCL

BSCCL contended that till date bifurcation of Assets and Liability between Jharkhand and Bihar had not taken place. Further, the Resolution Professional in its Status Report dated 30.10.2021 had stated that the CoC has rejected to reissue Form G again, as no Expression of Interest was received. The company was not carrying any business and has huge losses also. Hence, CoC decided to liquidate BSCCL and an application has been filed for liquidation before the Adjudicating Authority.

Decision Of NCLAT

The Bench opined that BSCCL was not carrying any business and has huge losses therefore, the Adjudicating Authority has rightly admitted the Petition filed under Section 10 of IBC. The Bench upheld the initiation of CIRP and appeal was dismissed.

Case Title: Bihar State Construction Corporation Limited Employee Union v Bihar State Construction Corporation Limited

Case No.: Company Appeal (AT) (Insolvency) No. 1493 of 2019

Click Here To Read/Download Order

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