Mr. Sreedhar Tripathy Director Of ... vs Gujarat State Financial Corporation

Sreedhar Tripathy ...Appellant

Versus

Gujarat State Financial Corporation & Ors. ...Respondents

Present: For Appellant: Mr. Rajesh Bohra, Advocate.

For Respondents:

ORDER

12.10.2022: Heard learned counsel for the Appellant. This Appeal has

been filed against order dated 23.06.2022 by which order the Adjudicating

Authority has directed for liquidation of the Corporate Debtor. Learned

counsel for the Appellant challenging the order contends that present is a case

where decision of the CoC has been arbitrarily taken. It is submitted that the

CoC never wanted to continue with the CIRP and after having been

constituted, after admission of Section 10 application assets, were never

handed over to the Resolution Professional, hence, Resolution Professional

could not draw Information Memorandum and issue EOI.

2. We have considered the submissions of learned counsel for the

Appellant and perused the record.

3. The Appellant himself has brought on record the Minutes of CoC

meeting dated 05.04.2021 as Annexure A-12. The CoC initially, at Agenda -2-

Item 1, took a decision for withdrawal under Section 12A and while taking

decision following reasons were given:-

"Reasons shared by CoC for Resolutions: The representatives of the COC conveyed to RP that since the Corporate Debtor was non-functional and completely shut since the year 2002, its machinery has almost become scrap with some land and building which is also in a dilapidated condition, plus it is not a going concern since last about 19 years and there is also no possibility of it being a going concern in near future. Therefore, in such circumstances, continuation of CIRP would only involve more expenses and cost without any corresponding advantage."

4. However, the withdrawal by the CoC is not permissible under Section

10 since it was application by the Corporate Debtor itself on which IBC

proceeding was initiated, hence, the CoC in Agenda Item 2 took decision for

liquidation of the Corporate Debtor. The decision of the CoC at Agenda Item

2 is as follows:-

"AGENDA: - 2

To pass Resolution for Liquidation of Corporate Debtor

The COC again unanimously with 100% voting share passed Resolution to liquidate the CD as follows:

Company Appeal (AT) (Insolvency) No. 1062 of 2022 -3-

"RESOLVED THAT the Committee of Creditors unanimously decide for the liquidation of Mon Acriglass Industries Limited in eh event the Hon'ble Adjudicating Authority is pleased not to allow withdrawal from CIRP on an application to be filed pursuant to a separate resolution passed by the Committee of Creditors.

RESOLVED FURTHER THAT the Resolution Professional be and is hereby authorised to make an appropriate application seeking an order of liquidation of the Corporate Debtor as per the provisions contained in Sec. 33(2) of the Insolvency and Bankruptcy Code, 2016""

5. The grievance of the Appellant is that CoC's decision is arbitrary

decision, it cannot be said to be decision taken in commercial wisdom of the

CoC.

6. Section 33 Sub-section (2) of the I&B Code which deals with initiation

of liquidation, is as follows:-

"2. Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors 1[approved by not less than sixty-six per cent. of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses

(i), (ii) and (iii) of clause (b) of sub-section (1).

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2[Explanation. - For the purpose of this sub-section, it

is hereby declared that the committee of creditors may take the decision to liquidate the corporate debtor, any time after its constitution under sub- section (1) of section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum.]"

7. The Explanation under Section 33 (2) has been inserted by Act of 26 of

2019 contains the legislative declaration and intention. The CoC in the

Legislative Scheme has been empowered to take decision to liquidate the

Corporate Debtor, any time after its constitution and before confirmation of

the resolution plan. The power given to the CoC to take decision for liquidation

is very wide power which can be exercised immediately after constitution of

the CoC. The reasons which has been given in Agenda Item 1, it is made clear

by the CoC that the Corporate Debtor is not functioning for last 19 years and

all machinery has become scrap, even the building is in dilapidated condition

and the CIRP will involve huge costs. We are not convinced with the

submission of learned counsel for the Appellant that the CoC's decision is an

arbitrary decision. CoC is empowered to take decision under the statutory

scheme and when in the present case the decision of the CoC for liquidation

has been approved by the Adjudicating Authority, we see not good ground to

interfere at the instance of the Appellant. However, we make it clear that the

decision taken by the CoC was in the facts of the present case and it cannot

be said that whenever decision is taken for liquidation the same is not open to

judicial review by the Adjudicating Authority and this Appellate Tribunal. It

Company Appeal (AT) (Insolvency) No. 1062 of 2022 -5-

depends on the facts of the each case as to whether the decision to liquidate

the Corporate Debtor is in accordance with the I&B Code or not. With these

observations, the Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

[Barun Mitra] Member (Technical) Archana/nn

Company Appeal (AT) (Insolvency) No. 1062 of 2022