CoC under IBC can Liquidate Corporate Debtor any Time after its Constitution or Before Resolution Plan is Confirmed: NCLT [Read Order]
The bench held that the CoC holds wide powers to decide on liquidation, even immediately after its constitution, subject to compliance with the statutory scheme.
NCLT – CoC – IBC – Insolvency and Bankruptcy Code – Committee of Creditors – National Company Law Tribunal – taxscan
NCLT – CoC – IBC – Insolvency and Bankruptcy Code – Committee of Creditors – National Company Law Tribunal – taxscan
The Delhi bench of the National Company Law Tribunal has held that the Committee of Creditors ( CoC ) under the Insolvency and Bankruptcy Code, 2016 ( IBC ) can decide to liquidate the Corporate Debtor, any time after its constitution and before confirmation of the resolution plan.
The Applicant submitted that the Adjudicating Authority had initiated the Corporate Insolvency Resolution Process against M/s 5 Core Acoustics Private Limited ( 'Corporate Debtor' ) being an application filed under Section 9 of the Code by M/s Tri-wall Pak Private Limited ( 'Operational Creditor' ) and appointed Mr. Radhey Shyam Yadav as the Interim Resolution Professional of the Corporate Debtor who was later confirmed as the Resolution Professional of the Corporate Debtor in the 1st CoC meeting held on 15.12.2022.
In compliance of the Section 15 of the Code read with Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 made public announcement in Financial Express (English Edition) and Jansatta ( Hindi Edition ) on 23.11.2022. 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.
Referring to Section 33(2) of the IBC, the NCLT bench 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.
The bench 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.
The two member bench of Mahendra Khandelwal (Judicial Member) and Dr Sanjeev Ranjan (Technical Member) 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.
The NCLT granted the application for the liquidation of M/s 5 Core Acoustics Private Limited and Radhey Shyam Yadav, the Resolution Professional, was relieved from his assignment.
To Read the full text of the Order CLICK HERE
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