Allowed

In the matter of Klisma E-Services Pvt. Ltd. [Ia 2083 of 2020 in Cp 3834 of 2019]

NCLT10 Aug 2021IA 2083 of 2020 in CP 3834 of 2019

Case brief

AI extract

What is this about?

The NCLT Mumbai Bench allowed an application for the direct dissolution of Klisma E- services Pvt. Ltd., the Corporate Debtor. The court held that since no realizable assets existed to cover liquidation costs and the only claimant was a related party Financial Creditor unable to join the CoC, the Tribunal exercised its powers under Section 33 read with Section 54 and IBBI Rules to dissolve the com

What did the court decide?

The Corporate Debtor Klisma E- services Pvt. Ltd. is dissolved from the date of this Order, and the case file is consigned to records.

In the matter of Klisma E-Services Pvt. Ltd. [Ia 2083 of… — Insolvency and Bankruptcy | NCLT (2021)

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT NO. V

IA 2083 of 2020

CP 3834 of 2019

Under Section 54 of the I&B Code, 2016 And Under Rule 11 of NCLT Rules, 2016 r/w Section 60(5) of the I&B Code, 2016 And Regulation 14 of IBBI (Liquidation Process Regulations, 2017)

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Mr. Dinesh Gopal Mundada …. Applicant/ Resolution Professional In the matter of: - Persistent Systems Ltd. …. Petitioner/ Operational Creditor V/s

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Klisma E- services Pvt. Ltd.

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… Respondent/ Corporate Debtor

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Order delivered on: - 10.08.2021

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Coram:

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Hon’ble Suchitra Kanuparthi, Member (Judicial) Hon’ble Chandra Bhan Singh, Member (Technical)

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For the Applicant :

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Ms. Pallavi Salunke, Ms. M Swati and Ms. Tanvi Soman i/b LegaLogic Consulting for Financial Creditor a/w Mr. Amit Atre, representative of Financial Creditor

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Per: Suchitra Kanuparthi, Member (Judicial)

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT NO. V IA 2083 of 2020 IN CP 3834of 2019

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ORDER

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This is an application filed by the Resolution Professional under section 33 of the Code and thereafter filed amendment seeking direct dissolution of Corporate Debtor. The CIRP of the Corporate Debtor commenced vide an admission order dated 20.01.2020. However, the copy of the order was received by the Resolution Professional on 07.02.2020. The applicant thereafter made public announcement calling for the claims, the IRP received claims from Persistent Systems Limited who is the original petitioner in the Company Petition. The IRP was unable to constitute a Committee of Creditors with respect to the Corporate Debtor, as the Financial Creditor is a related party as defined under section 5(24)(j) of the code. The IRP filed the report in this regard to the Tribunal on 25.02.2020. Section 5(24)(j) of the Code is reproduced below;

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“Any person who controls more than twenty per cent of voting rights in the Corporate Debtor on account of ownership or a voting agreement.”

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The applicant further stated the Financial Creditor i.e. Persistent Systems Limited held 50% of shares in the Corporate Debtor and therefore is a related party of the Corporate Debtor and hence cannot have any right or representation or participation or voting in the meeting of CoC. Section 21 of the code states as follows;

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“ 21 . Committee of creditors. -

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(1) The interim resolution professional shall after collation of all claims received against the corporate debtor and determination of the financial position of the corporate debtor, constitute a committee of creditors.

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT NO. V

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IA 2083 of 2020 IN CP 3834of 2019

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(2) The committee of creditors shall comprise all financial creditors of the corporate debtor:

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Provided that a¹ [ financial creditor or the authorised representative of the financial creditor referred to in sub-section (6) or sub-section (6A) or subsection (5) of section 24, if it is a related party of the corporate debtor, ] shall not have any right of representation, participation or voting in a meeting of the committee of creditors:

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2[ Provided further that the first proviso shall not apply to a financial creditor, regulated by a financial sector regulator, if it is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares 1[ or completion of such transactions as may be prescribed ] , prior to the insolvency commencement date.]

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2[ Subject to sub-sections (6) and (6A), where ] the corporate debtor owes financial debts to two or more financial creditors as part of a consortium or agreement, each such financial creditor shall be part of the committee of creditors and their voting share shall be determined on the basis of the financial debts owed to them.

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(4) Where any person is a financial creditor as well as an operational creditor, -

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(a) such person shall be a financial creditor to the extent of the financial debt owed by the corporate debtor, and shall be included in the committee of creditors, with voting share proportionate to the extent of financial debts owed to such creditor;

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(b) such person shall be considered to be an operational creditor to the extent of the operational debt owed by the corporate debtor to such creditor.

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(5) Where an operational creditor has assigned or legally transferred any operational debt to a financial creditor, the assignee or transferee shall be considered as an operational creditor to the extent

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IA 2083 of 2020 IN CP 3834of 2019

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of such assignment or legal transfer.

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(6) Where the terms of the financial debt extended as part of a consortium arrangement or syndicated facility³ _[]_* provide for a single trustee or agent to act for all financial creditors, each financial creditor may-

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a. authorise the trustee or agent to act on his behalf in the committee of creditors to the extent of his voting share;

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b. represent himself in the committee of creditors to the extent of his voting share;

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c. appoint an insolvency professional (other than the resolution professional) at his own cost to represent himself in the committee of creditors to the extent of his voting share; or

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d. exercise his right to vote to the extent of his voting share with one or more financial creditors jointly or severally.

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4[ (6-A) Where a financial debt—

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(a) is in the form of securities or deposits and the terms of the financial debt provide for appointment of a trustee or agent to act as authorised representative for all the financial creditors, such trustee or agent shall act on behalf of such financial creditors;

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(b) is owed to a class of creditors exceeding the number as may be specified, other than the creditors covered under clause (a) or sub-section (6), the interim resolution professional shall make an application to the Adjudicating Authority along with the list of all financial creditors, containing the name of an insolvency professional, other than the interim resolution professional, to act as their authorised representative who shall be appointed by the Adjudicating Authority prior to the first meeting of the committee of creditors;

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(c) is represented by a guardian, executor or administrator, such person shall act as authorised representative on behalf of such financial creditors,

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and such authorised representative under clause (a) or clause (b) or clause (c)

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT NO. V

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IA 2083 of 2020 IN CP 3834of 2019

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shall attend the meetings of the committee of creditors, and vote on behalf of each financial creditor to the extent of his voting share.

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(6-B) T h e re m u n e ra tio n p a y a b le to th e a u t h o rise d representative-

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(i) under clauses (a) and (c) of sub-section (6A), if any, shall be as per the terms of the financial debt or the relevant documentation; and

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(ii) under clause (b) of sub-section (6A) shall be as specified which shall be form part of the insolvency resolution process costs.]

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1[(7) The Board may specify the manner of voting and the determining of the voting share in respect of financial debts covered under sub-sections (6) and (6A).

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(8) Save as otherwise provided in this Code, all decisions of the committee of creditors shall be taken by a vote of not less than fifty-one per cent. of voting share of the financial creditors:

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Provided that where a corporate debtor does not have any financial creditors, the committee of creditors shall be constituted and shall comprise of such persons to exercise such functions in such manner as may be specified. ]

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(9) The committee of creditors shall have the right to require the resolution professional to furnish any financial information in relation to the corporate debtor at any time during the corporate insolvency resolution process.

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(10) The resolution professional shall make available any financial information so required by the committee of creditors under subsection (9) within a period of seven days of such requisition.”

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Therefore, in terms of section 21, the Financial Creditor being the related party cannot be part of the CoC, and as such the Resolution Professional could not form CoC.

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The applicant further mentioned that the Corporate Debtor is not Operational for the last 5 years, have no assets to be realized and the available assets are insufficient to discharge the liabilities of the Corporate

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IA 2083 of 2020 IN CP 3834of 2019

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Debtor. The statement of profit and loss of the Corporate Debtor for the previous 5 years is as follows;

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT NO. V

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IA 2083 of 2020 IN CP 3834of 2019

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The Corporate Debtor was in the business of e-commerce platform and there were no operations for the last 5 years. The Corporate Debtor had only one bank account with the balance of Rs. 38,913.89/-

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The applicant has also filed the following I.A. as tabled below;

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT NO. V

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IA 2083 of 2020 IN CP 3834of 2019

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT NO. V

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IA 2083 of 2020 IN CP 3834of 2019

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The applicant thus sought to amend the application filed for the liquidation and seek for direct dissolution of the Corporate Debtor in pursuance of the judgment passed by the Co-ordinate Bench at Bengaluru in C.P. 96 of 2020 and I.A. no. 435 of 2020 where in the dissolution of the Corporate Debtor was allowed, as there were no assets in the Corporate Debtor and the liquidator therefore could not be able to perform the duty of the liquidator to realize the assets of the Corporate Debtor. The operative portion of the order of Co-ordinate Bench at Bengaluru is as follows;

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IA 2083 of 2020 IN CP 3834of 2019

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It is pertinent to refer to section 54 of the Code wherein the code stipulates that the Adjudicating Authority is empowered to grant dissolution of the Corporate Debtor where the Corporate Debtor has been completely liquidate. Section 54 of the Code is as follows;

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“ 54. Dissolution of corporate debtor. -

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(1) Where the assets of the corporate debtor have been completely

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liquidated, the liquidator shall make an application to the Adjudicating Authority for the dissolution of such corporate debtor.

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(2) The Adjudicating Authority shall on application filed by the liquidator under sub-section (1) order that the corporate debtor shall be dissolved from the date of that order and the corporate debtor shall be dissolved accordingly.

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(3) A copy of an order under sub-section (2) shall within seven days from the date of such order, be forwarded to the authority with which the corporate debtor is registered.

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This Bench notes that in view of the extra ordinary circumstances, the Corporate Debtor wherein the post admission of the Corporate Debtor, the IRP did not receive any claims and has received a claim only from the Financial Creditor who is the related party and therefore, this Bench is of the considered view that under rule 11 of the NCLT rules, 2016 the Adjudicating Authority has inherent powers to order an early dissolution of the Corporate Debtor has contemplated under rule 14 of IBBI (Liquidation Process) 2016 the early dissolution as defined under rule 14 is as follows; “14. Any time after the preparation of the Preliminary Report, if it appears to the liquidator that-

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(a) the realizable properties of the corporate debtor are insufficient to cover the cost of the liquidation process; and

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT NO. V

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IA 2083 of 2020 IN CP 3834of 2019

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(b) the affairs of the corporate debtor do not require any further investigation;

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he may apply to the Adjudicating Authority for early dissolution of the corporate debtor and for necessary directions in respect of such dissolution”.

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In view of the facts and the circumstance of the present case in hand, it is just and proper for the Adjudicating Authority to dissolve the Corporate Debtor even without liquidating the Corporate Debtor under section 33 of the Code, as there are no assets which are realizable as the result of liquidation process and it is just and proper that the Corporate Debtor is dissolved under section 54 of the Code.

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Conclusion

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10.Upon the conjoint reading of section 33 r/w section 54 r/w rule 14 of IBBI r/w rule 11 o NCLT, this Adjudicating Authority orders dissolution of the Corporate Debtor.

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11.The IA No. 2083 of 2020 is “ Allowed ” and the Corporate Debtor Company stands dissolved from the date of this Order.

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Since the Debtor Company stood Dissolved vide this order and no proceedings are now pending, therefore the Registry is directed that the case file be consigned to records.

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IA 2083 of 2020 IN CP 3834of 2019

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT NO. V

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Copy of this Order shall be forwarded within 7 (seven) days to the concerned authorities and the Registrar of Companies having jurisdiction, for further necessary action as prescribed under Law.

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Sd/Sd/Chandra Bhan Singh Suchitra Kanuparthi Member (Technical) Member (Judicial)

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In the matter of Klisma E-Services Pvt. Ltd. [Ia 2083 of 2020 in Cp 3834 of 2019]

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In the matter of Klisma E-Services Pvt. Ltd. [Ia 2083 of 2020 in Cp 3834 of 2019]

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