Siva Rama Krishna Prasad vs Krishna Industries Corporation Ltd & ...

Siva Rama Krishna Prasad ...Appellant

Versus

S Rajendran, Official Liquidator of M/S Krishna Industrial Corporation Ltd. & Ors. ...Respondents

W ith Company Appeal (AT) (Insolvency) No. 752 of 2020

IN THE MATTER OF:

Dr. Siva Rama Krishna Prasad ...Appellant

Versus

Krishna Industrial Corporation Ltd. & Ors. ...Respondents

Present: For Appellant: Mr. B. B. Sawhney, Mr. Srikaanth S. Iyyer and Mr. Vishnu Kumar, Advocates. For Respondents: Ms. Varsha Banerjee, Advocate for R-2.

(04.09.2020)

BANSI LAL BHAT, J.

Both the appeals arise out of the Corporate Insolvency Resolution Process

initiated by the Financial Creditor viz. 'Maximus Asset Reconstruction Company

Limited' against the Corporate Debtor viz. 'M/s Krishna Industrial Corporation

Cont'd...../ -2-

Limited' pursuant to passing of order of admission in application under Section 7

of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the I&B

Code). Same are proposed to be disposed of by a common judgment as impugned

orders in both appeals dated 27th July, 2020 passed separately are interwoven and

interconnected.

2. For better comprehension of the issue involved, we firstly deal with Company

Appeal (AT) (Insolvency) No. 751 of 2020. Mr. S. Rajendran, Resolution Professional

filed MA/376/2020 before the Adjudicating Authority (National Company Law

Tribunal), Division Bench-I, Chennai under Section 33(2) of the I&B Code seeking

liquidation of the Corporate Debtor on the ground that no resolution plan was

received during the Corporate Insolvency Resolution Process period and the

promoter group had failed to provide concrete information about the prospective

investor qua its plan for resolution/settlement. Company Appeal (AT) (Insolvency)

No. 752 of 2020 has been preferred by Shri Siva Rama Krishana Prasad - erstwhile

Promoter/Director of Corporate Debtor, who had filed application under Section

60(5)(c) of the I&B Code seeking relief in the nature of keeping the liquidation

application filed by the Resolution Professional in abeyance, pending disposal of

application, on the ground that the debt-asset ratio in relation to the Corporate

Debtor was very less and the Applicant was willing and able to settle the claims of

Creditors of the Corporate Debtor. On consideration of the erstwhile Promoter's

application, the Adjudicating Authority obse rved that the erstwhile Promoter had

Company Appeal (AT) (Insolvency) No. 751 of 2020 & 752 of 2020 -3-

not put forth any concrete proposal of settlement before the Financial Creditor and

had also failed to provide required information in regard to the Investor. Thus, the

prayer for deferring the consideration of Resolution Professional's application for

liquidation of the Corporate Debtor was found to be devoid of merit and came to be

dismissed in terms of impugned order. The Adjudicating Authority, taking note of

the fact that the Committee of Creditors had unanimously decided to liquidate the

Corporate Debtor as no Expression of Interest was received even after extension of

time coupled with the fact that the outlook for the industry was negative, passed

the liquidation order impugned in Company Appeal (AT) (Insolvency) No. 751 of

2020.

3. After hearing learned counsel for the parties in both the appeals in respect to

both impugned orders of same date, we are of the considered opinion that the

Expression of Interest floated by the Resolution Professional having not evoked

response from any viable prospective Resolution Applicant even within the extended

period and there being no resolution plan before the Committee of Creditors for

consideration, there was no option left with the Adjudicating Authority but to allow

pushing of the Corporate Debtor into liquidation notwithstanding the fact that the

erstwhile Promoter/Ex-Director of the Corporate Debtor had proposed settlement

plan and was persuading the Financial Creditor to consider the settlement proposal

despite failing to provide the concrete information in regard to the proposed

Investor. Admittedly, the proposed settlement would involve sale of assets of the

Company Appeal (AT) (Insolvency) No. 751 of 2020 & 752 of 2020 -4-

Corporate Debtor which depended upon a variety of factors including sound

financial position of the proposed Investor and its ability to raise the funds, more

so, when operations of the Corporate Debtor were lying defunct. Besides, the

settlement proposal cannot be thrust upon the Committee of Creditors as decision

in regard to its viability and feasibility exclusively lies within the domain of

commercial wisdom of Committee of Creditors. That apart, in absence of a

resolution plan, the Committee of Creditors would have no option but to

recommend liquidation of the Corporate Debtor.

4. It is significant to take note of the explanation added to sub-section (2) of the

I&B Code as inserted by Act 26 of 2019 w.e.f. 16 th August, 2019 which provides

that the Committee of Creditors may take the decision to liquidate the Corporate

Debtor at any time after its constitution and before the confirmation of the

Resolution Plan, including at any time prior to preparation of the information

memorandum. Primacy in this regard lies with the Committee of Creditors who can

even recall its recommendation for confirmation of Resolution Plan already

approved by the Committee of Creditors but, undoubtedly, before confirmation of

resolution plan by the Adjudicating Authority. The law as enshrined in Section

33(2) only enjoins upon the Resolution Professional to intimate the Adjudicating

Authority that the Committee of Creditors has, by requisite majority, decided to

liquidate the Corporate Debtor, provided the Resolution Plan earlier approved by

the Committee of Creditors has not been confirmed by the Adjudicating Authority.

Company Appeal (AT) (Insolvency) No. 751 of 2020 & 752 of 2020 -5-

Thus, it is manifestly clear that even after recommending a Resolution Plan for

approval of the Adjudicating Authority, the Committee of Creditors can retract it

and withdraw the decision in regard to approval of such Resolution Plan by the

Committee of Creditors.

5. The Adjudicating Authority has rightly observed that even after pushing the

Corporate Debtor into liquidation, Promoter/Ex-Director of the Corporate Debtor

can take recourse to Section 230 of the Companies Act, 2013 by submitting a

scheme for revival of the Corporate Debtor, subject of course to eligibility of the

applicant.

6. For the foregoing reasons, we find no merit in these appeals. Same being

devoid of merit stand dismissed. No orders as to costs.

[Justice Bansi Lal Bhat] Acting Chairperson

[V. P. Singh] Member (Technical)

[Dr. Alok Srivastava] Member (Technical) am/gc

Company Appeal (AT) (Insolvency) No. 751 of 2020 & 752 of 2020