The Chennai Bench of the National Company Law Tribunal (NCLT) has held that Adjudicating Authority is obligated to initiate the ‘ Liquidation Process’ u/s 33(1) of the I&B Code when ‘Committee of Creditors’ rejected the resolution plan.
The ‘Trivandrum International Health Services Ltd.’ who was a ‘Corporate Debtor’ was admitted into the Corporate Insolvency Resolution Process vide ‘Impugned Order’ dated 07.02.2020 under Section 7 of the I & B Code, 2016, passed by the ‘Adjudicating Authority.
Dr C. Bharath Chandra, the ‘Appellant’ and the ‘Promoter’ and ‘Erstwhile Director of the ‘Corporate Debtor’, along with two other co-applicants, had submitted a ‘Resolution Plan’ for the revival of the ‘Corporate Debtor’ which could not be proceeded since, the ‘Appellant’ failed to furnish the ‘Performance Bank Guarantee’, which was a pre-requisite.
The Appellant stated that the ‘Committee of Creditors’, evaluated the ‘Resolution Plans’ of both the parties at their 21st Meeting held on 19.02.2022 and were divided on the vote and neither plan received the 66% minimum votes required to be approved by the ‘Committee of Creditors’ with one ‘Financial Creditor’(holding 48.11% voting share) for the ‘Resolution Plan’ in favour of the ‘Appellant’ herein and the other two Financial Creditors (holding the balance 51.89% of voting share) for the ‘Resolution Plan’ submitted by the1stRespondent. The ‘Committee of Creditors’ passed the resolution rejecting both the ‘Resolution Plans’.
It was observed that if a rejected plan is placed before the ‘Adjudicating Authority, the ‘Adjudicating Authority is expected to initiate the `Liquidation’ process under section 33(1) of I & B Code, 2016.
The NCLT bench consisting of Naresh Salecha, Member (technical)observed that since the ‘Committee of Creditors’ did not approve the plan by a vote of not less than 66% as required under Section 30 (4) of the I & B Code, 2016, hence, it is considered that the Resolution Plan has failed. If a rejected plan is placed before the ‘Adjudicating Authority, the ‘Adjudicating Authority is expected to do nothing more, but initiate `The liquidation’ process under section 33(1) of I & B Code, 2016.
The Tribunal observed that the ‘Appellant’ was given all possible opportunities to submit the `Resolution Plan’, including the extension of time, replacement of co-applicant and opportunity to submit joint `Resolution Plan’ with the other `Resolution Applicant’ namely, `M/s Sabine Hospital and Research Centre, etc.
It was held that the ‘Adjudicating Authority’ has no jurisdiction and/ or authority to analyse or evaluate the decision of the ‘Committee of Creditors’ to enquire into the justness of the rejection of the `Resolution Plan’ by the dissenting `Financial Creditors’. While dismissing the appeal, the ‘Impugned Order’ dated 02.06.2022 was upheld by the Tribunal.
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