The National Company Law Appellate Tribunal (NCLAT), Chennai Bench comprising Justice M. Venugopal, Judicial Member and Ms. Shreesha Merla, Technical Member was recently hearing an appeal. The NCLAT Chennai bench set aside the order of liquidation and directed the Adjudicating Authority to give the appellant another opportunity to settle the matter and revive the corporate debtor, emphasizing the objective of reviving the company as a going concern.
Brief: This appeal was filed against the 'Impugned Order' dated 18.04.2023, passed by the Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench-II). The order allowed the application seeking liquidation of the corporate debtor company. The suspended director of the corporate debtor company appealed against this decision.
The Corporate Insolvency Resolution Process (CIRP) was initiated against the corporate debtor company on 05.09.2019, following a Section 7 application filed by the State Bank of India (SBI). Various extensions were granted for the submission of the resolution plan, but the plan submitted was not accepted by the Committee of Creditors (CoC) due to non-compliance with the conditions.
During the 18th CoC meeting, it was informed that a One Time Settlement (OTS) proposal had been received for one of the corporate guarantors of the corporate debtor. An application was filed under Section 12-A of the Insolvency and Bankruptcy Code, 2016, seeking consideration of the OTS proposal. However, the Adjudicating Authority dismissed the application, stating that it was not maintainable as there were no pending resolution plans before the Resolution Professional (RP) and the CoC.
Since there were no resolution plans pending, the Adjudicating Authority allowed the application for liquidation under Section 33(1).
The appellant argued that there were differences in the valuation of the company before and after the Covid-19 pandemic. They also claimed to have made efforts to settle the debts through financial assistance and an OTS proposal. They cited previous judgments emphasizing the objective of the Insolvency and Bankruptcy Code to revive the corporate debtor and avoid liquidation.
The liquidator contended that the appellant had been given multiple opportunities for settlement, but no agreement was reached, justifying the order of liquidation.
After considering the arguments and submissions of both parties, the National Company Law Appellate Tribunal (NCLAT) reviewed the facts of the case. The NCLAT noted that the Adjudicating Authority had allowed the liquidation application based on the expiry of the CIRP period and the absence of pending resolution plans.
However, the NCLAT also took into account the appellant's contentions regarding the efforts made to settle the debts through financial assistance and the OTS proposal. The appellant argued that the company's valuation had been affected by the Covid-19 pandemic and emphasized the importance of reviving the corporate debtor as a going concern.
Considering the principles laid down by the Supreme Court in previous judgments, the NCLAT acknowledged that liquidation should be the last resort, and every attempt should be made to revive the corporate debtor. The NCLAT recognized the significance of preserving the wider public interest in resolving corporate insolvencies, rather than solely focusing on recovering outstanding debts.
In light of these considerations, the NCLAT set aside the order of liquidation passed by the Adjudicating Authority. The NCLAT directed the Adjudicating Authority to give another opportunity to the appellant to settle the matter and revive the corporate debtor, in line with the principles of the Insolvency and Bankruptcy Code.
In conclusion, the NCLAT allowed the appeal and set aside the order of liquidation. The case was remitted back to the Adjudicating Authority for further proceedings, providing the appellant with an opportunity to pursue a settlement and revive the corporate debtor company. Explore Judgment