Abhimanyu Mittal, RP of MKS Oil Pvt. Ltd. - Accordingly, this Authority is left with no option except to pass an order for Liquidation of the Corporate Debtor Company in the manner laid down in Chapter III of the Code considering the fact that the timeline for the completion of the Corporate Insolvency Resolution Process has already expired and no extension application has been approved by the CoC.

 NCLT ND (2025.09.15) in Abhimanyu Mittal, RP of MKS Oil Pvt. Ltd. [(2025) ibclaw.in 1938 NCLT, I.A. 5077/(ND)/2020 in Company Petition No. (IB) – 1587/(ND)/2019] held that;

• Accordingly, this Authority is left with no option except to pass an order for Liquidation of the Corporate Debtor Company in the manner laid down in Chapter III of the Code considering the fact that the timeline for the completion of the Corporate Insolvency Resolution Process has already expired and no extension application has been approved by the CoC.

Excerpts of the Orders,

# 1. This is an application filed by the Resolution Professional, Mr. Abhimanyu Mittal under Section 33(1)(a) read with Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (“Code”) read with the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (“Liquidation Regulations”), for issuance of directions for liquidation of Corporate Debtor, M/s M K S Oil Private Limited.

# 2. The applicant in the present application has prayed for the following reliefs: –

i. Condone the delay of filing the Liquidation Application, if any.

ii. Pass an order for liquidation of the corporate debtor as referred under sub-Section (2) of section 33 of the Insolvency and Bankruptcy Code, 2016;

iii. Pass any other or further order(s) as this Hon’ble Tribunal may deem fit and proper in the facts and circumstances of the case.

# 3. The facts in brief stated in the application is as under: –

a) This Adjudicating Authority vide its order dated 02.12.2019 had initiated the Corporate Insolvency Resolution Process against M/s M K S Oil Private Limited (‘Corporate Debtor’) in C.P.(IB) 1587/ND/2019 and appointed Mr. Atul Mittal having IBBI Registration No. IBBI/IPA-001/IP-P00439/2017-18/10762 as the Interim Resolution Professional of the Corporate Debtor.

b) The IRP under Section 15, 17 & 18 of the Code and made public announcement in Form A in the newspapers i.e. Business Standard- English & Hindi on 11.12.2019 and last date for filing the claims was 23.12.2019. In the first meeting of the Committee of Creditors on 07.01.2020, the agenda of ratification of the appointment of the Interim Resolution Professional as the Resolution Professional, was disapproved by the Committee of Creditor by 100%. The Interim Resolution Professional informed all the members that in the absence of any recommendation for appointment as “Resolution Professional”, he shall continue to function as deemed Resolution Professional.

c) In the second meeting of the Committee of Creditors, the CoC approved the Eligibility Criteria for the Prospective Resolution Applicants in light of Section 25(2)(h) of the Code. The IRP invited the expression of interest from all the Prospective Resolution Applicants by publishing the prescribed Form G on 20.02.2020 in the newspapers i.e. Financial Express in English and Jansatta in Hindi.

d) In the 3rd meeting of Committee of Creditors dated 27.02.2020, the Evaluation Matrix, Request for Resolution Plan were also put forth for the consideration of the Committee of Creditors and were approved accordingly. Further, the members of the Committee proposed the name of Mr. Abhimanyu Mittal having IBBI Regn. No. IBBI/IPA-001/IP-P-01870/2019-2020/12893 to act as the Resolution Professional. The said resolution was passed by the Committee of Creditors and the appointment of Mr. Abhimanyu Mittal as Resolution Professional was later approved by this Adjudicating Authority vide its order dated 03.07.2020.

e) In the 4th meeting of Committee of Creditors held on 18.03.2020, the IRP informed the members that only 2 expressions of interests have been received from the Prospective Resolution Applicants in response to the Form G dated 23.02.2020, out of which 1 was found to be ineligible due to his failure to furnish complete records. The Committee of Creditors, to ensure maximization of the value of the assets of the Corporate Debtor decided to republish the Form G. It was further resolved that the prospective Resolution Applicants must provide non-interest-bearing Refundable Deposit along with their expression of interest amounting to Rs. 10,00,000/-. Accordingly, Form G was republished on 23.03.2020 in Financial Express English and in Jansatta Hindi along with the terms and conditions as prescribed by COC.

f) In the 5th meeting of the Committee of Creditors, no voting was done by any of the Financial Creditors and the final result was circulated by the Applicant on 15.08.2020. Thereafter emails were sent to all the members of the Committee of Creditors seeking way forward for the smooth conduct of the CIRP and in response to the same one of the Financial Creditors, i.e. Punjab National Bank requested the Applicant RP to reopen the voting window so as to enable all the creditors to vote upon the agendas discussed in the 5th meeting of Committee of Creditors. Accordingly, the E-voting window was again opened on 21.08.2020, 12 P.M to 25.08.2020, 6 P.M and was further extended to 27.08.2020, 6 P.M. During this round, only one of the members of the Committee of Creditors, namely, IndusInd Bank having a share of 8.70 % voted upon the agendas. However, any of the agendas could not be passed during this round due to lack of votes.

g) In order to assure the maximization of the value of the assets of the Corporate Debtor, the Resolution Professional again approached the prominent Financial Creditor, Punjab National Bank requesting them to provide a way forward. They were informed that in case, the agenda for the extension of the period of Corporate Insolvency Resolution Process was not approved by the Committee of Creditors; the Corporate Debtor would head for automatic liquidation. Upon the request of Punjab National Bank, the E Voting window was re-opened for the Final time from 12 P.M. to 6 P.M. on 11.09.2020. During this time, votes were casted only by Punjab National Bank having a voting share of 91.30% and the PNB voted against the agenda to file an extension application before the Adjudicating Authority

h) The period of Corporate Insolvency Resolution Process was completed on 06.06.2020. As per Regulation 40C of the IBBI (Insolvency Resolution Process for Corporate Person Regulations), 2016, the period of lockdown shall not be included for the purposes of calculating the time period of the Corporate Insolvency Resolution Process. In accordance with the same, a period of 98 days i.e. from 25.03.2020 till 30.06.2020 has been excluded for the calculation of the period of CIRP. The period of 180 days of CIRP have expired on 12.09.2020.

i) Accordingly, the Corporate Debtor should be liquidated under the provisions of Section 33 of the Code. The Resolution Professional stated that there is no option left except that the Corporate Debtor be liquidated because the timeline for the completion of the Corporate Insolvency Resolution Process has already expired and no directions have been received from the Committee of Creditors for the extension/liquidation in respect of the same. Hence, the present Application.

# 4. We have heard the learned counsels and have perused the documents on record. It is noted that this Adjudicating Authority vide its order dated 02.12.2019 had admitted the application under Section 9 of the Code and initiated CIRP against the Corporate Debtor i.e. M/s M.K.S Oil Private Limited. The CIRP of the Corporate Debtor commenced on 02.12.2019 and was completed on 06.06.2020. In accordance with Regulation 40C of the IBBI (Insolvency Resolution Process for Corporate Person Regulations), 2016, the lockdown period i.e. a period of 98 days (25.03.2020 till 30.06.2020) has been excluded for the calculation of the period of the CIRP. The period of 180 days of CIRP expired on 12.09.2020.

# 5. The Resolution Professional stated that there is no option left except that the Corporate Debtor be liquidated because the timeline for the completion of the Corporate Insolvency Resolution Process has expired and PNB having a voting share of 91.30% has rejected the agenda to file an extension application before the Adjudicating Authority

# 6. We take note of the fact that CIRP period expired on 12.09.2020 and an extension application has not been filed as there was no requisite resolution of CoC member as per section 12 of the code. It is noted that the 5th CoC meeting had the agenda for an extension application to be filed before the Adjudicating Authority and the 5th CoC meeting was held on three separate occasions due to lack of participation of the CoC members. The following are the details of the same:

a) The minutes of the First Round was circulated on 08.08.2020. The e-voting window was open from 10.08.2020 to 13.08.2020. Since, none of the Financial Creditors participated in the said meeting, the voting window was extended till 14.08.2020. E-voting results of the said meeting circulated on 15.08.2020 is placed on record as Annexure-12.

b) For the second round of the meeting, the Resolution Professional sent mails to the members of the CoC for active participation for smooth conduct of the CIRP and upon request from one of the Financial Creditors i.e. PNB to reopen the voting window so as to enable all the creditors to vote upon the agendas discussed in the 5th meeting, the e-voting was again opened on 21.08.2020. It was extended till 27.08.2020. During this round, only one of the members of the Committee of Creditors, namely, Indusind Bank having a share of 8.70% voted upon the agendas, but the agendas in this round could not be passed due to lack of votes. E-voting results of the said meeting circulated on 28.08.2020 is placed on record as Annexure-12.

c) For the third round of the meeting, the Resolution Professional again approached the Financial Creditors stating that that in case, the agenda for the extension of the period of Corporate Insolvency Resolution Process was not approved by the Committee of Creditors; the CorporateDebtor would head for automatic liquidation. E-Voting was reponed for the final time on 11.09.2020. During this time, votes were casted only by Punjab National Bank having a voting share of 91.30% and upon perusal of the e-voting results it is noted that the PNB voted against the agenda to file an extension application before the Adjudicating Authority. E-voting results of the said meeting circulated on 12.09.2020 is placed on record as Annexure-12.

# 7. In light of the above, it is evident that the CoC members did not participate in the 5th CoC meeting on several occasions. The lead CoC member i.e. PNB has not approved the agenda for an extension application to be filed before the Adjudicating Authority, despite being informed by the Resolution Professional that if the agenda for the extension of the period of Corporate Insolvency Resolution Process were not approved by the Committee of Creditors; the Corporate Debtor would head for automatic liquidation. Moreover, the Ld. Counsel on behalf of PNB appeared before the Adjudicating Authority on 28.08.2025 and they have not objected to the instant application.

# 8. Section 33 of the Insolvency & Bankruptcy Code, 2016 provides for order of liquidation by the Adjudicating Authority. Section 33 of the Insolvency & Bankruptcy Code, 2016 reads as under:

“(1) Where the Adjudicating Authority, —

(a) before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast-track corporate insolvency resolution process under section 56, as the case may be, does not receive a resolution plan under sub-section (6) of section 30; or

(b) rejects the resolution plan under section 31 for the non-compliance of the requirements specified therein, it shall—

(i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter;

(ii) issue a public announcement stating that the corporate debtor is in liquidation; and

(iii) require such order to be sent to the authority with which the corporate debtor is registered.

(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 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)”.

# 9. In that view of the above, having considered the submissions and on perusal of averments made in the present Interlocutory Application, this Bench is satisfied and is of the considered opinion that the present Interlocutory Application is in consonance with Section 33 of the Code. In the present case, CIRP was initiated on 02.12.2019 and 180 days as provided under Section 12 of the Code including exclusion on account of lockdown ended on 12.09.2020. Thereafter, Section 12 of the Code also mandates that the corporate insolvency resolution process shall be completed within a period of three hundred and thirty days from the insolvency commencement date, which has also expired in the instant case.

# 10. Accordingly, this Authority is left with no option except to pass an order for Liquidation of the Corporate Debtor Company in the manner laid down in Chapter III of the Code considering the fact that the timeline for the completion of the Corporate Insolvency Resolution Process has already expired and no extension application has been approved by the CoC.

# 11. In light of the above, the application is allowed by ordering liquidation of the corporate debtor, namely M/s M K S Oil Private Limited with following directions:

a) That Mr. Abhimanyu Mittal, the Resolution Professional of the Corporate Debtor, is relieved from the present assignment as Resolution Professional;

b) It is to be noted that, as per IBBI vide its circular no. LIQ12011/214/2023- IBBI/840 dated 18.07.2023 in the exercise of its powers conferred u/s 34(4) (b) of the Code had recommended that an IP other than RP/ IRP may be appointed as a liquidator in all the cases where the Liquidator (read liquidation) order is passed henceforth;

c) In view of the above circular of IBBI, from the panel of Insolvency Professional(s) (IPs) valid for the period- July 1, 2025- December 31, 2025 issued by IBBI, we hereby appoint Mr. Pawan Kumar Garg, holding Registration No. IBBI/IPA- 001/IP-P00608/2017-2018/110069, having email id- ca.pawangarg@gmail.com as the Liquidator in terms of Section 32(1) of the Code. The Liquidator is directed to give his written consent in the specified form along with a copy of registration certificate as well as a valid AFA within 5 days of receipt of this order;

d) That the Liquidator for conduct of the Liquidation proceedings would be entitled to the fees as provided in Regulation 4(2)(b) of the IBBI (Liquidation Process Regulations), 2016;

e) Liquidator shall issue public announcement stating that Corporate Debtor is in liquidation;

f) Registry is directed to communicate this Order to the Registrar of Companies, NCT of Delhi & Haryana and to the Insolvency and Bankruptcy Board of India;

g) The Order of Moratorium passed under Section 14 of the Insolvency and Bankruptcy Code, 2016 shall cease to have its effect and a fresh Moratorium under Section 33(5) of the Insolvency and Bankruptcy Code shall commence;

h) This order shall be deemed to be notice of discharge to the officers, employees and the workmen of the corporate debtor as per Section 33(7) of the Insolvency and Bankruptcy Code, 2016;

i) The Liquidator is directed to proceed with the process of liquidation in the manner laid down in Chapter III of Part II of the Insolvency and Bankruptcy Code, 2016 and in accordance with the relevant rules and regulations.

j) The Liquidator shall follow up and continue to investigate the financial affairs of the Corporate Debtor in accordance with provisions of Section 35(1) of the Code.

k) The liquidator shall also follow up the pending applications for their disposal during the process of liquidation including initiation of steps for recovery of dues of the Corporate Debtor as per law.

l) The Liquidator shall submit Preliminary Report to the Adjudicating Authority within seventy-five days from the liquidation commencement date as per Regulation 13 of the Insolvency and Bankruptcy (Liquidation Process) Regulations, 2016;

m) Copy of this order be sent to the financial creditors, corporate debtor, CoC members and the Liquidator for taking necessary steps;

n) The CoC is directed to pay the remuneration and expenses of the Applicant including that of professional advisors subject to the provisions of IBC Code, 2016 and CIRP Regulations, 2016.

I.A 5077/ND/2020 in CP(IB) 1587/ND/2019 stands allowed and is disposed of in accordance with the aforesaid terms. Let a copy of the order be served to the parties.

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ACRE – 81 Trust and Ors. Vs. Pawan Kumar Goyal IRP and Ors.- CoC has the power to liquidate the CD before confirmation of the resolution plan. The said decision in the case of Sunil S. Kakkad (Supra) has further been affirmed by the Hon’ble Supreme Court when the appeal was filed by Sunil S. Kakkad was dismissed on 07.01.2021.

 NCLAT (2024.01.17) in ACRE – 81 Trust and Ors. Vs. Pawan Kumar Goyal IRP and Ors. [(2024) ibclaw.in 40 NCLAT, Comp. App. (AT) (Ins) No. 447 of 2023 & I.A. No. 1475, 1476 of 2023] held that;

• There is an error in the approach of the Adjudicating Authority that for the purpose of taking a decision regarding the liquidation of the CD, the CoC has to complete all the steps regarding resolution of the CD because it would be against the spirit of Section 33(2) and explanation appended to it wherein the legislature has used the word any time twice i.e., firstly, in Section 33(2) and secondly, in the explanation of Section 33(2) of the Code that the CoC has the jurisdiction to pass the order of liquidation of the CD,

• CoC has the power to liquidate the CD before confirmation of the resolution plan. The said decision in the case of Sunil S. Kakkad (Supra) has further been affirmed by the Hon’ble Supreme Court when the appeal was filed by Sunil S. Kakkad was dismissed on 07.01.2021.

• Finally the provision of Section 65 has no application because it would apply if the application is filed for the purpose other than liquidation.

Excerpts of the order;

This appeal has been filed by ACRE-81 Trust (Appellant No. 1), India Real Estate 2021 Trust (Appellant No. 2), ACRE -100 Trust (Appellant No. 3) and Catalyst Trusteeship Limited (Appellant No. 4), all assenting members of the Committee of Creditors (in short ‘CoC’) of SARE Realty Projects Pvt. Ltd. (Corporate Debtor) having voted to liquidate the Corporate Debtor, against the order dated 16.03.2023 passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi Bench, Court II) in I.A. No. 3818/ND/2021 in CP (IB) No. 684/ND/2020, by which show cause notice has been issued seeking an explanation of the Appellants as to why the penalty stipulated under Section 65 of the Insolvency and Bankruptcy Code, 2016 (in short ‘Code’) be not imposed upon them.

# 2. In brief, one Dharam Vir Gupta, filed an application under Section 9 of the Code, as an operational creditor before the Adjudicating Authority bearing C.P. (IB) No. 684 of 2020 against the Corporate Debtor. The Corporate Debtor did not file any reply nor appeared during the proceedings and was proceeded against ex-parte on 01.03.2021. The Adjudicating Authority admitted the application filed under Section 9 of the Code, vide its order dated 05.03.2021 and appointed the IRP besides imposing the moratorium. The IRP made a public announcement on 09.03.2021 to invite claims from the creditors of the Corporate Debtor. The IRP conducted first meeting of the CoC on 06.04.2021 and informed the members of the CoC that the office of the Corporate Debtor was closed for more than one year, all the directors of the Corporate Debtor had resigned before the commencement of the CIRP, last audited financial statements of the Corporate Debtor filed with the ROC were for the year ending March 31, 2017 and the secured financial creditors of the Corporate Debtor had initiated enforcement action under SARFAESI Act, 2002 and taken over possession of the project assets. One of the authorized representatives of CoC members, India Real Estate 2021 Trust and ACRE-81 Trust, proposed the liquidation of the Corporate Debtor.

# 3. Second meeting of the CoC was held on 27.05.2021 in which liquidation of the Corporate Debtor was proposed and publication of Form G was deferred till the CoC take the decision on the issue of early liquidation. The 3rd meeting of the CoC held on 23.06.2021 in which the members of the CoC again discussed the early liquidation of the Corporate Debtor. The IRP also highlighted the high cost involved in the continuation of CIRP. The 4th CoC meeting was held on 27.07.2021 in which members of the CoC proposed to take the issue of liquidation of the CD before other agenda items. The CoC had a detailed deliberation on the issue of liquidation including powers of the CoC to recommend liquidation at any time before the approval of the resolution plan and the members of the CoC decided to liquidate the CD in terms of Section 33 of the Code but at the request of the majority members of the CoC, e-voting on the said agenda was deferred. The IRP sent a notice for conducting the 5th CoC meeting to be held on 13.08.2021. On 12.08.2021, the representative of India Real Estate Trust 2021 and ACRE -81 Trust sent an email to IRP and other members of the CoC proposing early liquidation of the CD. In the 5th meeting of the CoC was held on 13.08.2021 in which the CoC continued their deliberations on the issue of liquidation of the CD which was not voted upon in the 4th CoC meeting. E-voting on the said issue was conducted during the period from 16.08.2021 till 18.08.2021 in which 88.48% of the CoC members including the financial creditors in class, i.e. allottees/homebuyers voted in favour of the liquidation of CD. The IRP filed an application for liquidation of the Corporate Debtor bearing I.A. No. 3818 of 2021 with the following prayers:-

“a. allow the present application.

b. Pass an order for liquidation of the CD under Section 33(2) r/w Explanation and in terms of sub-clauses (i), (ii) and (iii) of clause (b) of sub-clause (1) of Section 33 of the Code.

c. Pass an order to appoint the Interim Resolution Professional Pawan Kumar Goyal, IBBI Registration No. IBBI/IPA-001/IP-P00875/2017-18/11473 as Liquidator of the Corporate Debtor.

d. Pass any other or further order(s) as this Hon’ble Tribunal deem fit and proper in the facts and circumstances of the matter”

# 4. In the impugned order, the Adjudicating Authority has observed that until EOI in From G is published, there is no mechanism under the regime of IBC to discover prospective resolution applicants for a corporate debtor and without publishing Form-G, CoC could not have been in a position to formulate an opinion that there were no prospective buyers available for the CD. It further observed that the scheme of IBC gives every Corporate Debtor a fair chance to stand on their own feet and to come out of financial distress and that is why every Corporate Debtor must go through the IBC mandated CIR process before facing the liquidation proceedings. It was concluded that without taking any steps for seeking resolution of the Corporate Debtor, the CoC has acted contrary to the scheme of IBC. With these observations, the Adjudicating Authority has further observed that it was prima facie of the opinion that the application for liquidation of CD has been filed with malicious intent and therefore, it was found as a fit case for issuance of show cause notice to the assenting CoC members jointly who voted in favour of the liquidation of the CD without even exploring the possibility of resolution of the Corporate Debtor. The Appellants herein have thus been asked to show as to why penalty stipulated under Section 65 of the Code should not be imposed on them.

# 5. Although, the Adjudicating Authority has asked the present Appellants to file a joint reply to the show cause notice and had also observed that it has not finally adjudicated upon the liquidation application, the fate of which would depend upon the outcome of Section 65 proceedings initiated against the assenting CoC members but aggrieved against the aforesaid impugned order dated 16.03.2023, the present appeal has been filed in which on the date of preliminary hearing held on 13.04.2023, this Court passed the order of stay ‘in the meantime, issuance of notice under Section 65 in the impugned order shall remain stayed’. Thus as a matter of fact, no notice was there before the Appellants for the purpose of giving reply to the same.

# 6. Counsel for the Appellant has vehemently argued that not only the Adjudicating Authority has committed an error in invoking Section 65 of the Code for the purpose of issuance of show cause notice but also it misread the provisions of Section 33(2) of the Code and the explanation of the Code. It is submitted that as per Section 33(2), the Resolution Professional, at any time during the CIRP but before confirmation of resolution plan, intimate the Adjudicating Authority of the decision of the CoC (approved by not less than sixty six per cent. of the voting share) to liquidate the CD. It is further submitted that explanation to Section 33(2) further provides that the CoC may take the decision to liquidate the CD any time after its constitution and before the confirmation of the resolution plan including at any time before the preparation of the information memorandum. In support of his submissions, he has relied upon a decision of this Appellate Tribunal rendered in the case of Sunil S. Kakkad Vs. Atrium Infocom Pvt. Ltd. & Ors., 2020 SCC Online NCLAT 1160 in which the question involved was as to whether the Resolution Professional with the approval of CoC with 66 per cent vote share can directly proceed for the liquidation of CD without taking any steps for resolution of the CD? He has submitted that in the said case only three meetings of CoC took place and without making any endeavour for inviting EOI, the CoC unanimously resolved to liquidate the CD. He has further referred to Para 19, 20 and 21 of the said decision in which the power of the CoC has been discussed in respect of Section 33(2) of the Code as per which it can order for liquidation at any stage but before confirmation of resolution plan. It is further submitted that the decision in the case of Sunil S. Kakkad (Supra) has further been upheld by the Hon’ble Supreme Court reported as 2021 SCC Online SC 723. It is further submitted that in the present case the decision has been taken by the CoC in its fifth meeting for the liquidation of the CD by 88.48% voting share. It is also submitted that the decision relied upon by the Adjudicating Authority in the case of Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Ors. is not applicable because it is prior in time to the amended Section 33(2) of the Code which clearly empowers the CoC to liquidate the CD at any time after the constitution of the CoC and prior to the approval of the resolution plan.

# 7. As regards the issuance of show cause notice under Section 65 of the Code is concerned, it is argued that the said provision has been invoked without application of mind because it provides that it can be invoked if the proceedings have been initiated with malicious intent for any purpose other than for the liquidation. Whereas in the present case, the proceedings have been initiated for the liquidation, therefore, the said provision would not apply and has been wrongly invoked for the purpose of issuance of show cause notice and in this regard, reliance has been placed upon the orders passed in Unigreen Global Pvt. Ltd. Vs. Punjab National Bank CA (AT) (Ins) No. 81 of 2017 in which it has been held that no such penalty under sub-Section (1) or (2) of Section 65 can be imposed by the Adjudicating Authority without recording opinion for coming to the conclusion that a prima facie case is made out to suggest that the person fraudulently or with malicious intent for the purpose other than the resolution of the insolvency or liquidation or with the intent to defraud any person has filed the application. It is submitted that the Adjudicating Authority has though observed that it has found prima facie that a case has been made out against the Appellant but the reason to frame the opinion much less prima facie is conspicuous by its absence in the impugned order.

# 8. Counsel on behalf of the RP has also appeared in this case.

# 9. We have heard Counsel for the parties and perused the record with their able assistance.

# 10. There is no dispute that the CoC took a decision for liquidation of the CD after holding five meetings and by voting share of 88.48 per cent which meets the criteria laid down in Section 33(2) of the Code. There is an error in the approach of the Adjudicating Authority that for the purpose of taking a decision regarding the liquidation of the CD, the CoC has to complete all the steps regarding resolution of the CD because it would be against the spirit of Section 33(2) and explanation appended to it wherein the legislature has used the word any time twice i.e., firstly, in Section 33(2) and secondly, in the explanation of Section 33(2) of the Code that the CoC has the jurisdiction to pass the order of liquidation of the CD, approving it by not less than sixty six per cent of the voting share, but it should be before the confirmation of the resolution plan. In the case of Sunil S. Kakkad (Supra), this Court has categorically framed a question as to whether the RP, with the approval of the CoC with sixty six per cent vote share, directly proceed for the liquidation of CD without taking any steps for resolution of the CD. In the said case, there were three meetings of CoC in which without making endeavour for inviting EOI, the CoC unanimously resolved to liquidate the CD and that issue came for adjudication before this Court in which while referring to Section 33(2) and the explanation appended thereto it has been ordered that the CoC has the power to liquidate the CD before confirmation of the resolution plan. The said decision in the case of Sunil S. Kakkad (Supra) has further been affirmed by the Hon’ble Supreme Court when the appeal was filed by Sunil S. Kakkad was dismissed on 07.01.2021 and in so far as the issuance of notice under Section 65 is concerned, firstly, the issuance of notice was stayed by this Court vide its order dated 13.04.2023 and secondly, the Adjudicating Authority has not given any reason for forming an opinion much less prima facie that it was a case of malicious intent on the part of the Applicant/RP with the connivance of assenting members of CoC to whom the show cause notice was given and finally the provision of Section 65 has no application because it would apply if the application is filed for the purpose other than liquidation.

# 11. Thus, from the aforesaid discussion and looking from any angle, the impugned order does not deserve to survive and hence, the present appeal is allowed and the impugned order is set aside though without any order as to costs.

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Hero Fincorp Ltd. Vs. M/s Hema Automotive Pvt. Ltd. - Judicial review of the decision of the CoC (to Liquidate the CD) in a particular case is not precluded. In Sreedhar Tripathy, it has been clearly held that judicial review of the decision of the CoC (to Liquidate the CD) is not precluded and it depends on facts of each case.

NCLAT (06.01.2023) in Hero Fincorp Ltd. Vs. M/s Hema Automotive Pvt. Ltd. [Company Appeal (AT) (Insolvency) No.1540 of 2022]  held that;

• 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 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.

• That decision taken by the CoC is subject to judicial review in the facts of the particular case and the Tribunal can very well look into as to whether the decision is in accordance with the Code or not.

• There is no doubt that in Section 33, sub-sections (1) and (2) legislature has used the expression “shall”. However, the obligation of the Adjudicating Authority to direct for liquidation shall rise only when decision of the CoC is in accordance with the Code.

• Judicial review of the decision of the CoC in a particular case is not precluded. In Sreedhar Tripathy, it has been clearly held that judicial review of the decision of the CoC is not precluded and it depends on facts of each case.

 

Excerpts of the order;

This Appeal has been filed challenging the order dated 23.11.2022 passed by the National Company Law Tribunal, New Delhi Court-VI dismissing the IA No.5586 of 2022 filed under Section 33, sub-section (2) read with Section 34 of Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “Code”) seeking initiation of the liquidation of the Corporate Debtor.

 

# 2. Brief facts of the case giving rise to this Appeal are:

(i) The Appellant extended financial facilities to the Corporate Debtor in the year 2018-2019. The Corporate Debtor committed default in repayment of the loan facilities. The Financial Creditor initiated proceedings under Section 13, sub-section 4 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “SARFAESI Act”) by taking possession of the secured assets.

(ii) An order dated 08.07.2022 was passed by Adjudicating Authority commencing the Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor.

(iii) The Appellant filed its claim in Form-C on 09.09.2022, which was provisionally accepted. The Committee of Creditors (“CoC”) was constituted with Appellant as the sole Member of the CoC. On 07.10.2022, in accordance with the approval of the CoC, the Resolution Professional (“RP”) published Form-G, wherein the last date for receipt of Expression of Interest (“EOI”) was 24.10.2022. The RP convened the CoC Meeting on 19.10.2022 with sole agenda pertaining to eligibility criteria vis-à-vis extension of time seeking EOI by issuing/ revising amended Form-G.

(iv) On 19.10.2022 in 3rd CoC Meeting, CoC passed Resolution for liquidation of the Corporate Debtor. In pursuance of Resolution dated 19.10.2022, the RP filed an Application IA No.5586 of 2022 praying for an order of the liquidation.

(v) The Adjudicating Authority heard the Application on 23.11.2022 and directed the CoC to reconsider the Application. Order of Adjudicating Authority being in 2 paragraphs, is as follows:

• “This is an application under Section 33(2) read with section 34 of IB Code 2016 seeking initiation of the liquidation of the Corporate Debtor and appointment of Liquidator. The present application has been filed by the RP. Para 3 of the present application says that as per the public announcement dated 28.07.2022 the last date for submission of claims by Creditors was 09.08.2022. It also transpires that M/s. Hero Fincorp Ltd. (in NBFC) is the sole Member of the CoC. It transpires that on 07.10.2022 in accordance with the approval of the CoC, RP has published “Form G” wherein the last date of receipt of Expression of Interest (“EOI”) was 24.10.2022. However, prior to the said date the sole Member of the CoC resolved and directed the RP to move an application for liquidation of the Corporate Debtor.

• Such approach is not in the spirit of IB Code as Insolvency Resolution is the focus of the act. Only in the event of failure of insolvency resolution the steps for liquidation have to be taken. The sole Member of CoC has not adopted a judicious approach of exploring the possibility of resolution. Since he has recommended the liquidation even before the time period for seeking EOI had elapsed which is 24.10.2022. Therefore, CoC is directed to reconsider the present application. CoC is also directed to release RP fee and expenses incurred by RP till date on priority basis. The prayer at “(i)”, “(iii)” & “(iv)” are denied.”

(vi) Challenging the order of the Adjudicating Authority, this Appeal has been filed by the sole Financial Creditor.

 

# 3. The learned Counsel for the Appellant challenging the order contends that it was mandatory for Adjudicating Authority to pass an order of liquidation in view of the provision of Section 33, sub-section (2) and Adjudicating Authority committed error in not allowing Application filed by the RP. The learned Counsel for the Appellant relied on the judgment of this Tribunal in Company Appeal (AT) (Insolvency) No.1062 of 2022 – Sreedhar Tripathy vs. Gujarat State Financial Corporation and Ors. The learned Counsel for the Appellant submits that the decision taken by the CoC for liquidation was in the commercial wisdom of the CoC, which ought not to have been interfered by the Adjudicating Authority. The learned Counsel for the Appellant has also relied on the judgment of the Hon’ble Supreme Court in Vidarbha Industries Power Limited vs. Axis Bank Ltd. – (2022) 8 SCC 352.

 

# 4. We have considered the submission of learned Counsel for the Appellant and perused the records.

 

# 5. Before we proceed to consider the submission of learned Counsel for the Appellant, it is necessary to notice the relevant statutory provisions regulating the liquidation. Section 33, sub-sections (1) and (2), which are relevant in the present case are as follows:

“33. Initiation of liquidation. – (1) Where the Adjudicating Authority, –

(a) before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast track corporate insolvency resolution process under section 56, as the case may be, does not receive a resolution plan under sub-section (6) of section 30; or

(b) rejects the resolution plan under section 31 for the non-compliance of the requirements specified therein, it shall-

(i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter;

(ii) issue a public announcement stating that the corporate debtor is in liquidation; and

(iii) require such order to be sent to the authority with which the corporate debtor is registered.

(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 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).

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.”

 

# 6. The Explanation to Section 33, sub-section (2) contains a legislative declaration empowering the CoC to take a decision to liquidate the Corporate Debtor any time after its constitution as per sub-section (1) of Section 31 and before the confirmation of the Resolution Plan, including at any time before the preparation of the Information Memorandum. The Explanation, thus, clarifies that CoC is fully empowered to take a decision to liquidate any time after the constitution under sub-section (1) of Section 21, but before – (i) the confirmation of the Resolution Plan; and (ii) at any time before the preparation of Information Memorandum. The above Explanation also clarifies that CoC at any time before preparation of the Information Memorandum can take decision to liquidate. The above provisions contained in Explanation has to be given meaning and effect. The Information Memorandum is prepared by the RP under Section 29. The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (for short “CIRP Regulation”) contains relevant provisions with regard to publication of Information Memorandum. Regulation 36 provides that the RP shall submit the Information Memorandum in electronic form to each Member of the Committee within two weeks of his appointment, but not later than 54th day from the insolvency commencement date, whichever is earlier. Regulation 36, sub-regulation (1) provides as follows:

“36. Information memorandum. — (1) Subject to sub-regulation (4), the resolution professional shall submit the information memorandum in electronic form to each member of the committee 86[on or before the ninety-fifth day from the insolvency commencement date. 

 

# 7. Regulation 36A provides for ‘Invitation for Expression of Interest’. In the present case invitation for Expression of Interest was issued with the approval of CoC on 07.10.2022. As per the statutory Scheme contained in Regulation, the Information Memorandum must be prepared and circulated to the Members of the Committee of Creditors prior to issuance of Form-G.

 

# 8. There is no material to indicate that CoC has taken into consideration the Explanation to Section 33, sub-section (2) before taking a decision to liquidate the Corporate Debtor. Explanation to Section 33, sub-section (2) has to be given some meaning.

 

# 9. The learned Counsel for the Appellant has relied on judgment of this Tribunal in Sreedhar Tripathy. In that case, the CoC has passed the Resolution for liquidation. In paragraph 3 of the judgment, reasons given by the CoC for liquidation are contained, which are to the following effect:

• “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 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.”

 

# 10. In the Sreedhar Tripathy’s case, the Corporate Debtor was not a going concern since last 19 years. After considering Section 33, sub-section (2), following was laid down by this Tribunal in paragraph 7:

• “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 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.

 

# 11. The judgment of this Tribunal in paragraph 7 in Sreedhar Tripathy’s case, makes it clear that decision of the CoC, which was approved was in the facts of that case and it was clarified that decision taken by the CoC is subject to judicial review in the facts of the particular case and the Tribunal can very well look into as to whether the decision is in accordance with the Code or not.

 

# 12. The learned Counsel for the Appellant further relied on judgment of Hon’ble Supreme Court in Vidarbha Industries Power Limited, wherein in paragraphs 76 and 77 following has been laid down:

• “76. The fact that the legislature used “may” in Section 7(5)(a) IBC but a different word, that is, “shall” in the otherwise almost identical provision of Section 9(5)(a) shows that “may” and “shall” in the two provisions are intended to convey a different meaning. It is apparent that the legislature intended Section 9(5)(a) IBC to be mandatory and Section 7(5)(a) IBC to be discretionary. An application of an operational creditor for initiation of CIRP under Section 9(2) IBC is mandatorily required to be admitted if the application is complete in all respects and in compliance of the requisites of the IBC and the rules and regulations thereunder, there is no payment of the unpaid operational debt, if notices for payment or the invoice have been delivered to the corporate debtor by the operational creditor and no notice of dispute has been received by the operational creditor. The IBC does not countenance dishonesty or deliberate failure to repay the dues of an operational creditor.

• 77. On the other hand, in the case of an application by a financial creditor who might even initiate proceedings in a representative capacity on behalf of all financial creditors, the adjudicating authority might examine the expedience of initiation of CIRP, taking into account all relevant facts and circumstances, including the overall financial health and viability of the corporate debtor. The adjudicating authority may in its discretion not admit the application of a financial creditor.”

 

# 13. There is no doubt that in Section 33, sub-sections (1) and (2) legislature has used the expression “shall”. However, the obligation of the Adjudicating Authority to direct for liquidation shall rise only when decision of the CoC is in accordance with the Code. Judicial review of the decision of the CoC in a particular case is not precluded. In Sreedhar Tripathy, it has been clearly held that judicial review of the decision of the CoC is not precluded and it depends on facts of each case.

 

# 14. Coming to the facts of the present case, Form-G having been issued after preparation of the Information Memorandum and the last date fixed by the CoC being 24.10.2022 for receiving Expression of Interest, we are satisfied that Adjudicating Authority did not commit any error in rejecting for liquidation and asking the CoC to reconsider its decision. The order of Adjudicating Authority clearly empowers the CoC to reconsider its decision and take an appropriate decision taking into consideration further facts and events. We, thus, are satisfied that there is no ground to interfere with the impugned order. The Appeal is dismissed. No costs.

 

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