Amit Ahirrao vs. Anagha Anasingharaju - (National Company Law Appellate Tribunal) Company Appeal (AT) (Insolvency) No. 842 of 2022 decided on 16th May 2023

Upholding Liquidation Order and Spirit of IBC

Summary

There was an order from Adjudicating Authority for the initiation of CIRP process against M/s Virtue Infra and Entertainment Private Limited. The Committee of Creditors passed a resolution, and the Form G was issued by the Resolution Professional. Although no resolution plan could be submitted in the entire process. Liquidation was decided upon and was allowed by NCLT Mumbai. This appeal was against the liquidation order.

Timeline

1. The order of this present appellate tribunal on 05.12.2022 observed that Learned Counsel for the Appellant submitted the amount of Rs. 1,09,00,000/-, and it had already been deposited on Wednesday in the Registry. The appellant asked for another 100 days for depositing interest amount which was allowed by the order.
2. On 20.03.2023; Learned Counsel for the Appellant stated that the appellant had made the deposit as was directed by the Tribunal. Although Respondent No. 2, who was the only financial creditor of the corporate debtor was not interested, the only interest being liquidation. It was informed that the genesis of the dispute was a matrimonial one as the daughter of Respondent No. 2 was the wife of the appellant.

Issues Raised 

1. Whether assets must be sold as a going concern by the liquidator?
2. What value must be considered of the assets?
3. Whether order of liquidation must be upheld despite the appellant having deposited the required amount to Financial Creditors.

Arguments

Learned Counsel appearing on behalf of Financial Creditor had submitted before this appellate tribunal that the order initiating CIRP had already been upheld by this tribunal earlier, and no resolution plan was received, leaving liquidation the only option.

Learned Counsel for Appellant argued that the liquidator must sell the assets as a going concern.

Further, the question arose regarding the value of the assets. It was also brought to light by the tribunal that Corporate Debtor has only one valuable asset i.e., an immovable property situated in Aurangabad, Maharashtra. The resolution professional stated that he had obtained two valuation reports and that one of them have already been shared with the appellant.

Judgment

The court heard the learned counsels for both parties and perused the record. When the resolution professional had not obtained any resolution plan till the meeting of CoC, the following was recorded in paragraph 4 of Agenda Item No. 4., that date of completion of CIRP is 27^th March 2022 and the corporate debtor is not a going concern and carries no business. The Adjudicating Authority allowed the petition filed by Resolution Professional for accepting the liquidation proceeding. The court observed that by I.A. No. 2459 of 2022; appellant has brought on record both the valuation reports. Regulation 35 (1) of the Liquidation Regulation 2016; states that where the valuation has been conducted under Regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process of Corporate Persons) Regulations, 2016; and has been conducted under Regulation 34 of the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for corporate persons) Regulations 2017, as the case may have been, the liquidator shall consider the average of the estimates of the values arrived under those provisions for the purpose of valuation under these regulations.

In the present case, the valuation has been conducted under CIRP Regulation 2016. As per Sub-regulation (2) of the Regulation 35, liquidator is empowered to appoint two registered valuers when the liquidator is of the opinion that fresh valuation is required.

The court held the following:

1. Regarding the submission of the learned counsel for the appellant that the liquidator shall take steps to sell the asset as a going concern, the court found it suffice to say that the Committee of Creditors in its resolution dated 10.03.2022 has noted categorically that Corporate Debtor is not a going concern.
2. The court held that the reserve price has to be the value of assets arrived at as per Regulation 35 (1).
3. Order of Liquidation was upheld, and it was ordered that the amount deposited by the appellant in pursuance of orders passed in this appeal must be refunded to the Appellant.

Analysis

The Insolvency and Bankruptcy Regime in India, especially with the implementation of IBC 2016 and ongoing support from the Insolvency and Bankruptcy Board of India, has undergone significant development. In this case analysis, we observe that the corporate debtor attempted to appeal the liquidation order and even fulfilled the outstanding amount as per the Appellate Court's directives when no resolution plan was received. This emphasizes the aim of the insolvency process in India, which is to either revive non-functional businesses or, if no viable plan is reached, to liquidate them, allowing resources to be redirected towards productive ventures instead of prolonging unproductive businesses.