The NCLAT New Delhi held that in every effort to be made to revive the Corporate Debtor, liquidation should be the last resort.
The National Company Law Appellate Tribunal (NCLAT), New Delhi bench comprising Chairperson Justice Ashok Bhushan and Technical Member Mr. Barun Mitra was hearing an Appeal and held that one more opportunity is given for the revival of the Corporate Debtor, for which Resolution Professional may issue a fresh Form G and take steps for considering willing Resolution Applicants including the Appellants before us, who have filed the Resolution Plan on the strength of registration of the Corporate Debtor as MSME dated 30.08.2021. The opportunity for the Resolution Professional and the CoC has to be a time-bound opportunity to make one more effort to revive the Corporate Debtor, the liquidation being the last resort.
In the present case, the Appeal has been filed against the order passed by the Adjudicating Authority, wherein the AA dismissed the IA filed by the Resolution Professional for approval of the Resolution Plan and has directed for liquidation of the Corporate Debtor.
The Adjudicating Authority in the impugned order has held that Appellants were not eligible to submit the Resolution Plan under Section 29A read with Section 240A since the date when the application for submitting EOI was issued, the Appellants were not eligible.
It was further observed by the Adjudicating Authority that registration of the Corporate Debtor cannot operate retrospectively making them eligible.
The Adjudicating Authority held that the Appellants’ Resolution Plan was not in compliance with the Code and CIRP Regulations. After coming to the said conclusion, the approval of the Resolution Plan was set aside and the order of liquidation was passed.
The Appellate Authority noted that Form G was issued by the Resolution Professional on 19.08.2020 in pursuance of which two Resolution Applicants filed the Resolution Plan which was considered but not approved by the CoC and Resolution was also passed by the CoC on 05.06.2021 for liquidation and an application was filed for liquidation by the Resolution Professional on 02.07.2021, on which application notices were issued and it was only at that stage when Appellants have filed I.A. No. 4388/2021 seeking direction to permit the Appellants–Suspended Directors to submit Resolution Plan for the revival of the Corporate Debtor. The Adjudicating Authority passed an order on 28.09.2021.
The Appellate Tribunal observed that the order passed by the Adjudicating Authority, it was clear that the Adjudicating Authority also extended the CIRP period and directed the Resolution Professional to call a lender meeting to take an appropriate decision and deliberate on whether more Resolution Applicants can be invited. After the order of the Adjudicating Authority dated 28.09.2021, a meeting of the CoC took place on 20.10.2021, where it was decided to consider the Resolution Plan submitted by the Appellants. However, CoC did not decide to issue any fresh Form G and invite any other Resolution Applicants, which act of the CoC has been adversely commented on by the Adjudicating Authority.
The NCLAT bench noted that the Adjudicating Authority has rightly taken the view that the order dated 28.09.2021 of the Adjudicating Authority directing consideration of the Resolution Plan of the Appellants was required but the CoC has to consider other Resolution Applicants also.
The registration of MSME of Corporate Debtor was obtained on 30.08.2020 which was much after the issuance of Form G. The Appellate Authority were of the view that the Adjudicating Authority vide order dated 28.09.2021 gave an opportunity to the Resolution Professional and the CoC to take steps to revive the Corporate Debtor. The Adjudicating Authority is right in its observation that the CoC ought to have taken steps in accordance with the provisions of CIRP Regulations.
In the present case, the NCLAT bench was of the view that the order dated 28.09.2021 was not followed in its true spirit resulting in the non-approval of the Resolution Plan approved by the CoC on 30.12.2021.
The Appellate Authority noted that the decision of the Adjudicating Authority not approving the resolution of the CoC dated 30.12.2021 approving the Resolution Plan cannot be faulted and affirmed the order of the Adjudicating Authority insofar as it disapproved the CoC decision dated 30.12.2021 and reject I.A. No. 1528/2022 seeking approval of the Resolution Plan.
The NCLAT New Delhi bench noted that one more opportunity is given for the revival of the Corporate Debtor, for which Resolution Professional may issue a fresh Form G and take steps for considering willing Resolution Applicants including the Appellants before us, who have filed the Resolution Plan on the strength of registration of the Corporate Debtor as MSME dated 30.08.2021. The opportunity for the Resolution Professional and the CoC has to be a time-bound opportunity to make one more effort to revive the Corporate Debtor, the liquidation being the last resort.
The Bench upheld the order of the Adjudicating Authority directing for liquidation of the Corporate Debtor in abeyance to make one effort for revival, failing which the liquidation order shall stand revived.