Fact that liquidation value is more than enterprise value couldn’t be a ground to liquidate a corporate debtor: NCLT

Case Details: Ramsarup Industries Ltd., In re - [2022] 138 taxmann.com 432 (NCLT-Kolkata)

Judiciary and Counsel Details

• • Rajasekhar V.K., Judicial Member & Balraj Joshi, Technical Member
  • S.N. Mookherjee, Ld. Adv. General, Ratnanko Banerji, Sr. Adv., Deepanjan Dutta Roy, Siddharth Dutta, Ms. Suhaani Dwivedi, Deep Roy, Ms. Srishti Agnihotri, Advs., Kshitiz Chhawchcharia, RP, Sudipto Sarkar, Sr. Adv., Sumant Batra, Shounak Mitra, Saptarshi Mandal, Debasish Chakrabarti, Ms. Trisha Mukherjee, Ms. Manju Bhuteria, Varun Kedia & Ms. Amrita Pandey, Advs. for the Appearing Parties.

Facts of the Case

In the instant case, a Corporate Debtor was admitted into CIRP under section 10. Subsequently, the resolution plan submitted by ‘SS’ was approved by the Committee of Creditors (CoC) with a 74.41% voting share.

NCLT Held

The NCLT also approved the same. Upon approval of the resolution plan, the appeal was preferred by the ‘SS’ because the NCLT had materially changed and altered the plan by imposing additional financial obligations on the ‘SS’.

The NCLAT dismissed the appeal. The NCLAT also directed the Monitoring Agency to start taking action to implement the resolution plan. In case of the failure by the ‘SS’ to implement the resolution plan, an application for the liquidation of the Corporate Applicant should be moved before the Adjudicating Authority, without any further delay

The ‘SS’ preferred Appeal before the Supreme Court. However, this was dismissed by the Supreme Court on grounds of lack of substantial question of law. There was another appeal of interest, the one filed by Vanguard Credit & Holdings Private Limited (Vanguard), before the Supreme Court, which relates to the inclusion of the factory as part of the assets of the corporate debtor on the ground that Vanguard was the owner of the land in which factory of the corporate debtor was situated.

After the dismissal of the Vanguard’s Appeal by the Supreme Court the erstwhile RP, who is the present chairman of the Monitoring Agency, proposed a schedule of implementation of the Resolution Plan and the steps to be taken by the ‘SS’ the Monitoring Agency and the financial creditors. As per the schedule of payment, the ‘SS’ was supposed to make payment of the balance amount within thirty days from the date of the meeting.

Meanwhile, one of the financial creditor of the corporate debtor filed an application seeking for liquidation of the corporate debtor and requested to direct the Monitoring Agency to forfeit the Performance Security amount deposited by the ‘SS’ and to utilise the same towards CIRP costs and other outstanding expenses.

The NCLAT dismissed the liquidation plea of the financial creditor and held that Liquidation should be the last resort, when everything else has been attempted and failed. The financial creditor filed the liquidation application because the liquidation value was more than the enterprise value. But that cannot be a ground for sustaining this application, as in the present case, a successful resolution applicant was ready and willing to implement the approved resolution plan. Although there were some delays in the insolvency resolution process of the corporate debtor, attributable to the fact that many appeals came to be filed right up to the Supreme Court. The whole idea of the Code is to put the corporate debtor back on its feet for the larger benefit of all the stakeholders, not just the creditors.

List of Cases Referred to

• • Kridhan Infrastructure (P.) Ltd. v. Venkatesan Sankaranarayan [2021] 125 taxmann.com 138/165 SCL 355 (SC) (para 3.14)
  • Ebix Singapore (P.) Ltd. v. Committee of Creditors of Educomp Solutions Ltd. [2021] 130 taxmann.com 208 (SC) (para 3.14)
  • Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC) (para 4.4)
  • Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P.) Ltd. [2020] 118 taxmann.com 323 (SC) (para 4.5)
  • Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh [2020] 113 taxmann.com 421/158 SCL 567 (SC) (para 4.7)
  • Gojer Bros (P.) Ltd. v. Ratan Lal Singh [1974] 2 SCC 453 (para 4.10)
  • Kunhayammed v. State of Kerala [2000] 113 Taxman 470/247 ITR 360 (SC) (para 4.10)
  • SS Rathore v. State of M.P. [1989] 4 SCC 582 (para 4.10)
  • Canara Bank v. NG Subbaraya Setty [2018] 16 SCC 228 (para 4.12).