Allowed

In the matter of Bsr Diagnostic Limited [Ma No.32-CTB-2020 in Tp No. 01-CTB-2020 in Cp (Ib) No. 1283-MB-2017]

NCLT9 Mar 2022MA No.32-CTB-2020 in TP No. 01-CTB-2020 in CP (IB) No. 1283-MB-2017

Case brief

AI extract

What is this about?

The Tribunal allowed an application for liquidation of BSR Diagnostic Limited. The successful resolution applicant failed to honor payment terms under the approved plan. The Tribunal held that the resolution applicant stepped into the shoes of the debtor and can be liquidated. Performance security was forfeited.

What did the court decide?

BSR Diagnostic Limited ordered to be liquidated; first Respondent forfeited Rs.20 crores; erstwhile Resolution Professional discharged; Mukesh Kumar Jain appointed as Liquidator.

In the matter of Bsr Diagnostic Limited [Ma… — Insolvency and Bankruptcy | NCLT (2022)

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IN TIM NATIONAL COMPANY^{LAW TRIBTINAL} CUTTACK BENCH CUTTACK

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MA No.32 / CTB/2020 IN TP No. 0l/C-B/2020 CP (IB) No. 1283/TvB/2017

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In the matter of IBC Code,2076

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And

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Miscellaneous Application under Section^{60(5) read with Section74 (3) of the} Insolvency and Bankruptcy Code, 2016;

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And

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In the matter of:

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State Bank of India, a body corporate constituted^{by and under the State Bank of} India Act, 1955 rnith its head office at madame^{Cama Road, Nariman Point,} Mumbai, Maharashtra 400 021 and having its branch office^{at Stressed Assets} Management Branch State Bank Building, First Floor,^{Plot No. 01, Area hills,} Bhopal - 462 011, Madhya Pradesh;

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Versus-

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1, Tricounty Premier Hearing Services LLC, having^{its registeredoffice at707Oaks} Shores Road, Leebusrg, Florida 34748 USA and 1004North^{14'h Street, STE109} Leesburg, Florida 347 48;

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... Respondent No. I

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2.Mr, Parvesh Khirbat, Director of Respondent No.^{1, having his place of} Residence at 707 Oaks Shores RD Leesburg,^Florida;

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...BcssqdestNqJ r.3d-

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IN THE NATIONAL COMPAI{Y LAW TRJBUNAL CUTTACK BENCH

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MA No.32lCTB/2020 IN TP No. 0l/CTB/2020 CP^(IB) No. 1283 /MB / 2017

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In the matter of:

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Axis Bank , abody corporate constitutedby and under the Banking Companies with its head office atWadia International Centre, PB Marg, Worli, Mumbai.

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... Financial Creditor

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And

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BSR Diagnostic Limited, a public company incorporated under the laws of India with its registered office at l5-Commercial Complex, Nehru Nagar (East) Bhilai490 020;

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...Corporate Debtor

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Appearances (via videoconference):
FortheApplicant	Mr.JoySaha,Sr"Adv" Mr.J.Mukherjee,Adv" Mr.AbhishekSharma,Adv.
FortheRespondent	Mr.S.K.Acharya,Adv.
	OrderReserved on:28.02.2022,
	Order Pronounced on:09.03.2022.
Coram: ShriP.MohanRaj	Member (Judicial)
ShriSatyaRanjanPrasad	Member (Technical)

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ORDER

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Per P. Mohan Raj, Member, (Iudicial)

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This Application is filed by Applicant State Bank of India one of the members of COC praytng to pass an order of liquidation of the corporate debtor under section 33(1) of IBC and pass penal order under section 7aQ) of IBC against the successful resolution applicant & its director.

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Averments made in the petition in brief:

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MA No.32lCTB/2020

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TP No. 0|/CTB/2020 CP flB) No.l283/MB/2017

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The Axis Bank filed the petition under section 7 of Insolvency and Bankruptcy Code 2016 before NCLT-Mumbai Bench in CP" No. (IB) 1283 MB)/2017^{against the corporatedebtorBSR Diagnostic Limitedthe same was} admitted on 29.07.2017and Mr. Sundaresh Bhat was appointed as the interim Resolution professional. The resolution professional filed an application MA.No.649 of 2018 on 27.05,2018 for liquidation of corporate debtor when the resolution plan submitted by the respondent failed to get requisite number of votes in COC meeting held on 26.05.2018. On 19.07.2018 the 1" respondent filed an application MA.No.73 6 of 2018 and suspended promoters/ directors of corporate debtors filed application MA.No.737 of 2018 opposing the liquidation application filed by the Resolution professional. The respondent filed revised plan on 23,08.2018 increasing the quantum payable to the secured creditors from Rs.38 crore to Rs.45 crore, the said enhanced offer amount was acceptable to the petitioner. Then as per the order of Tribunal dated 12.10.2018 the Resolution professional placed the revised resolution plan before COC for consideration the same was accepted by COC by 99,4758% votes. f'he resolution professional filed an application on 14.11.2018 in MA.No.1352 of 2018 for approval of revised resolution plan and another MA No.1351 of 2018 to with draw the liquidation application MA.No.649 of 2018. The'Iribunal on22.0.1.2019 approved the revised resolution plan, appointed monitoring committee and allowed MA.No.1352 of 2018 and dismissed the MA.No.649 of 2018. In pursuant to the approved plan the respondent taken over the control of corporate debtor llom the resolution professional on06.02.2019. As per the approved plan the respondent agreed to pay

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3d.

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MA No.32lCTB/2020 IN TP No. 0l/CTB/2020 CP flB) No. L283/MB/2017

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upfront cash amount of Rs,12 corers within sixty days from the date of approval of plan but he failed to comply this condition. That despite taking conffol of corporate debtor the 1't respondent failed to fulfil its commitments and deliberately^neglected to honour the timelines of approved plan. The monitoring agency also^filed periodical reports about the default of the respondent in complying the payment condition set out in the approvedresolution^plan. The respondent failed to fulfil^its obligation therefore the applicant files this application for ordering the initiation of liquidation proceeding against the corporate debtor, and praying to^punish the respondents under section 7aG) of IBC 2016 for the wilful contravention of approved resolution Plan.

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Averments made in the reply in brief:

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The 1" respondent successful resolution applicant is incorporated in Leesburg, Florida, USA and is one of leading hearing aids distributors in Florida, M/S Tri Country Private limited is an Indian subsidiary/associate concern of the respondent having its registered office at Mumbai. The respondent has not been able to render payments to various creditors as per the^provisions of the approved resolution plan due to reasons beyond its control. The respondent has paid the entire CIRP Costs in full andpard the entire dues of employees and workmen of the corporate debtor. The respondent could not^get financial^parrner to support and could not affaruge funds due to inevitable incident causing the delay in^payments to the creditors. Many payments were made to the financial and operational creditors of the corporate debtor. The respondent has filed LA.No.SS/CTB /2020 for revision of the timelines for payment to various creditors. The respondent had

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MA No.32lCTB/2020 IN TP No. 0L/CTB/2020 CP flB) No,l283/MB/2017

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been trying to overcome unanticipated^{flaws in the processso far which includes} (I) 3 months delay in getting the approval of plan by Hon'ble^{Tribunal, (ii) arising} obligation of almost entire^{payments of Rs.50.00crore within 60'70days of the} time(iii) unavailability of funds through the^{financial partner (iv)unexpected} expenses of overhauling of the^{equipment'sto ensure the operationof corporate} debtor on going. The respondent has shown^{their bono fide intention by} approprtating Rs.12 crores to the^{creditors afterthis applicationfor liquidationis} filed" The penal proceeding under section 7aQ) is not^{maintainable before this} Tribunal and prayed for the dismissal of the^{petition. On the respondentsside} several additional aflidavits are filed but the^{contentsof them are not germane to} dispose of this application.

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On the Ersfwhile Resolution^professional side filed the written^submission supporting the claim of the applicant and^{declinedto give consent to appoint him} as Liquidator in the event of^petitionis allowed.

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The Point for consideration is:

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Whether the liquidation order to be^{passedagarnstthe corporate debtor} PointNo.l

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The respondent submitted his resolution^{plan and got the approvalof} Tribunal on 23 .03 .20 1 9. The^prime allegation^{levelledagainst the respondent is that} it failed to honour the time schedule^{payment made in the approved resolution} plan, it is also alleged because of delay caused by the respondent the liquidation value of the corporate debtor also considerably^{reduced.As per the approvedplan} the respondent has to make the^payment of^{Rs.45 crores towards the secured}

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MA No.32./CTB/2020 IN TP No. 0L/CTB/2020 CP 0B) No, 1283 /lvIJ. /²⁰¹⁷

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financial debt in the following manner viz: A sum^{of Rs.12 crores within sixfy days} from the date of approval of resolution^plan. A sum of^{Rs.26 crores on before} 31.03.2019.4 sum of Rs.3 crores by^{31.03.2020 with 8% interest and Rs.4crores} by 31 .03.2021 with 8% interest. Admittedly the^{respondentnot compliedthe} payment condition as set out in the approved plan. The erstwhile^Resolution profession also given details of default committed by the^respondent in^his periodical report as a member of monitoring committee.^{'Ihis petitionis filed on} 17.09.2019, after that thrice this Tribunal^{grantedtimeextensionto makethe} payments as agreed in the resolution plan.

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The respondent fited CA No.5B /CTB/2020^{seekingtime extension of six} months i.e., up to 31.10.2021to completc implementation^{of the Resolution plan.} This Tribunal af\er hearing all the^parties concern on^{12.04.2021 grantedtime} exrension il|07.06.2021. While^granting time extension^{this Tribunal orderedout} of Rs.30 crore the respondent shall^pay Rs.20 crore on^{or before 07 .06.2021to show} their bono fide, but respondent failed to comply^{the said specificcondition"Again} on 20.09.2021 while disposing CA No.58/CTB/2020 of^{2027 this Tribunal} observed that the conduct of the respondent/successful^{resolution applicant is} completely lacking bono fides and successful resolution^{applicanthas grossly failed} in meeting its commitment in respect of implementation of the^{ResolutionPlan} however as a last opportunify grantedtime extension till 3t.lO.2O2l.

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The respondent agarn filed an application I.A.No.1L5/CB/2021 seeking time extension for compliance till^{30. 1l.2021, but this Tribunal declined to} Page 6 of 13^'sdr

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MA No.32lCTB/2020 IN TP No. 0l/CTB/2020 CP^(IB) No. 1283/MB/20U

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$ant^{time extension in consequencethe said application was dismissedon} 24.rt.2021.

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The respondent^{preferredan appeal against the order of this Tribunal} Passed in LA.No.ILS/CB/2027 dated24.1"L.202lbefore^{the NCLAT in Company} Appeal (ATXlnsolvency) No.1038 of^{2021. The Hon'ble NCLAT by order dated} 20"01 .2021allowed the said^{appeal and granted30 days'time to pay Rs.30 crores} to financial Creditors ttll20.02.2022.^{Fvrther the Hon'ble NCLATalso observed} in the order that if the respondent^{herein fails to pay the said amountit is open to} proceecl with the liquidation of corporate debtor.^{The respondentfailed to comply} the order of the NCLAT,^{has not pard any amount till this date'}

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The respondent ought to^{have beenpaid Rs.45 croreson or before} 31"03.2027 and a sum of^{Rs.3 croreswith 8% interest on or before 31.03.2020.} However, the same has not been done.^{Till the date only around Rs.15 crorewas} paid by the resolution Applicant. Even though^{the respondent attributedcertain} reasons for non-compliance of^{Resolution Plan such as sharp writing down of the} trade receivables on the balance sheet^{of corporate debtor,Non-cooperationof the} creditors, Issues pertaining to^{the variouscentres of the Corporate debtor, Non-} cooperation of financial^{partners,Non-cooperation of Resolutionprofessional,} Delay in opening separate Bank account^{etc; but all these aspects were considered} by this Tribunal and^passed a^{detarTed order in I.A.No. 58 of 2021 on 20.09 .2021 so} it is unnecessary agatfi to discuss^{the very same points.The default is patent, in} earlier disposed applications CA^{No.58/CTB/2020and in LA.No.1I5/CB/2021'} it was clearly held that the act of the^{respondentis not bono fide. On the petitioner}

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side srated that the Respondent/Resolution^{Applicant is enriching from equipment} of the corporate debtor without implementation^{of the ResolutionPlan, This} petition is pending from 17.09.2019 for more than two^{years, pendingthis} application thrice time extension was^{grantedand even after the said extended} period the Resolution Applicant could not comply the conditions^{hence without} any other option this Tribunal is constrained to^{acceptthe pleaof the petitionerand} inclined to pass an order the liquidation of corporate^debtor.

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This petition has been filed^quoting under^{section 60(5) of IBC 2016} Read with 74(3). On the respondent side^{questioned the correctness of the provision} of law under which this petition is filed, Further it^{is stated that afler the approval} of resolution plan the application can be filed for liquidation^{onlyundersection} 33(3) & (4) of IBC for contravention any^{provisionsof the resolution plan by the} corporate debtor. It is stated that the liquidation^{applicationcan be preferredonly} if the contravention of resolution plan is committed by^{the corporate debtor and} not by the Successful Resolution Applicant.

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1 1. It is settled law that quoting of incorrect^provision of^{law is not fatal} to the proceeding, in such a case the court cantreat the^{applicationin appropriate} section and pass suitable orders. Even though the application is filed^underthe caption under Section 60(5) 2016 R/W 74(3) but in^{the ptayil column (a) prayed} to pass an order of liquidation under section^{33(1) of IBC.}

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72" As stated on the respondent side the^{provisions available to pass an} order of liquidation by the adjudicatlng authority^{after the approval of Resolution} plan is under section 33(3) & (4), for contravention of^provisions of approved

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resolution plan by the concerned corporate^{debtor. The word corporate debtor is}

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defined in section 3(8) of IBC2016^{as follows:}

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"Corporate debtor" means a^{corporatepersonwho owesa debt}

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to any person;

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The definition covers both the^{corporatedebtor and Successful} resolution applicant of course in different^{stages. At the beginning of the insolvency} proceedings, original promoters and the key^{managerial personnel of the corporate} debtor are the ones who owe debt^{to the creditors. Once Resolution planis} approved, it is the successful resolution^{appltcantwho now owes a debt to other} creditors and undertakes to^{pay them. Thtts, the successfulResolutionApplicant} becomes the new corporate debtor to the^{creditorsand the Resolution plan becomes} binding on the new colporate debtor^{as per section 31(1) of IBC. Whenthe} Resolution plan is approved by the^{AdjudicatingAuthority, the successful} resolution applicant who stepped^{into shoesof the corporate debtor having control} and supervision ovei the finance^{of the company,so any contravention or violation} of resolution plan by the Successful^{Resolution Applicantamounts} contravention/violation by corporate debtor^{as mentioned in section 33(3) of IBC} as such order of liquidation can be ordered^{for contravention of resolutionplan by} the Successful Resolution applicant^{under section 33(3)of IBC. The defencetaken} on the respondent side is unsustainable.^{Therefore,it is fit case to pass an order of} liquidation thus the point is answered.

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resolution plan by the concerned corporate debtor. The word corporate debtor is defined in section 3(8) of IBC 2016 as follows:

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"Corporate debtor" means a corporate person who owes a debt

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to any person;

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The definition covers both the corporate debtor and Successful resolution applicant of course in different stages. At the beginning of the insolvency proceedings, original promoters and the key managerial personnel of the corporate debtor are the ones who owe debt to the creditors. Once Resolution plan is approved, it is the successful resolution applicant who now owes a debt to other creditors and undertakes to pay them. Thus, the successful Resolution Applicant becomes the new corporate debtor to the creditors and the Resolution plan becomes binding on the new corporate debtor as per section 31(1) of IBC. When the Resolution plan is approved by the Adjudicating Authority, the successful resolution apphcant who stepped into shoes of the corporate debtor having control and supervision over the finance of the company, so any contravention or violation of resolution plan by the Successful Resolution Applicant amounts contravention/violation by corporate debtor as mentioned in section 33(3) of IBC as such order of liquidation can be ordered for contravention of resolution plan by the Successful Resolution applicant under section 33(3) of IBC. The defence taken on the respondent side is unsustainable. Therefore, it is fit case to pass an order of liquidation thus the point is answered.

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MA No.32lCTB/2020 IN TP No. 0L/CTB/2020 CP^(IB) No, 1283 / lvIB / 2017

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On the petitioner side made a ptayer to forfeit the amount of Rs.15 crores pardby the respondent, since for the past more than fwo years the respondent dodging to pay the balance amount of Rs.30/- corers in spite of conditional orders passed by this Authority, it is also stated that the respondents taken possession of the corporate debtor and running the business by using the premises and apparatus of the corporate debtor and substantially earned without fulfilling its obligation. Further it is alleged that the respondents have alienated or sold offthe sophisticated machineries/assets of the Corporate Debtor. In contra on the respondent side submitted that the order of forfeiture cannot be passed in the absence any pleadings and very much relies upon the order of this Bench dated 09.07 ,2019 passed in Adhunik Metaliks Ltd. in T.P. No. 44/CTB/2019. In the said order this Authority after rcferring Regulation 368(4,4.) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for corporate persons) Regulation 2076 held that since the said regulation enabling the Adjudicating Authority to forfeit the performance security amount was introduced by amendment w. e" f 24.01.2019 it has no retrospective effect in the case where resolution plan was approved year ago before the amendment.

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In this case the question of forfeiting performance security amount does not arise but the respondent taken undue advantage of the of the procedure and from the beginning he committed default, the ersfwhile resolution professional also filed periodical reports pointing out the default of the respondents but the respondent ignoring all these things without making payment started to earn by using the assets of the corporate debtor in such circumstances the depreciation and

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loss of value caused to the value of the corporate debtor should be suitably compensated. Hence in the interest ofjustice and to do complete^justice we inclined to invoke inherent power of this Authoriry provided under Rule 11 of NCLT Rules 2016. Further the order of this Authority referred supra is no better after the pronouncement Judgment of Apex court in Kridhan Infrastructure Pvt. Ltd. vs Venkatesan Sankaranarayan on L March, 20212 LL 2021 SC 139 Paragraph I 1.

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"The orders of the NCLT' and NCLAT make it

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abundantly clear that despite the grant of sfficient time, the appellant has not been able to comply with the terms of the Resolution Plan. Since 9 October 2020, despite the passage of almost five months, the appellant has not been able to deposit an amount of Rs 50 crores. Time is a crucial facet of the scheme under the IBC. To allow such proceeCings to lapse into an indefinite delay will plainly defeat the object ofthe statute, A goodfaith ffirt to resolye a corporate insolvenry is a preferred course. However, a resolution applicant must be fair in its dealings as well. The appellant has failed to abide by its obligations. In that uiew of the matter, we see no reason or justification to entertain the Civil Appeal any funher. The consequence enyisaged under the order of this Coun shall accordingly ensue in terms of

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the Jbrfeiture of the amount of Rs 20 crores. As a

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consequence of this order, the maltagement shall reyert to the liquidatorfor taking steps in accordance

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with law. The Civil Appeal is accordingly

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dismissed. "

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The above citation is applicable to the facts of this case also. In the circumstances we inclined to accept the plea made on the petitioner side to forfeit the amount deposited by the respondents.

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On the applicant side prayed to pass an order under section 7aQ) of IBC for taking penal action against the respondents. As pointed out on the respondent side as far as penal provision is concern under Section 236 (l) of IBC the special court alone has exclusive jurisdiction. Under section 236(2) IBC cognizance of an offence can be taken only on the complaint made by the Board or central Government. In the circumstances liberry is granted to the applicant to make appropriate complaint with the Insolvency and Bankruptcy Board of India or the Central Government on the allegation of wilful or intentional default and to pursue the appropriate remedy for the offences, if any committed by the respondents.

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In the result the Application is allowed in respect of prayer (a) M/s BSR Diagnostic Limited, corporate debtor is ordered to be liquidated.

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The ersrwhile Resolution professional Mr. Sundresh Bhat, expressed his inabiliry to give consent to appoint as liquidator and made a request to discharge

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him. In view of section 34(4) of IBC 2016 the Erstwhile Resolution Professional Mr. Sundresh Bhatt is discharged.

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From the list of panels of Liquidator sent by IBBI for the NCLT, Odisha Mr. Mukesh Kumar Jain (Registration No. IBBI/IPA-001/IP-PO1236/20182019/17944 and E-mail ID mkj2822@,gmai|esm having office at Chhattisgarh is appointed as Liquidator.

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The Liquidator is directed to forthwith take into his custody all the assets, Properties, sophisticated equipment tools implement, machineries, effects and actionable claims of the corporate debtor and take necessary steps to ensure preservation, protection securify and marntenance of those properties as provided under section 35(1Xb) & (d) of IBC 2016.

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The respondents Nos I & 2 are hereby directed to hand over all book's assets, Properties and sophisticated equipment tools implements and machineries of the corporate debtor to the Liquidator.

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All the amounts deposited/paid by the l't Respondent as successful Resolution Applicant towards the credit of the corporate debtor is hereby forfeited and Liquidator is directed to include the said forfeited amount into the Liquidation estate under section 36 of IBC 2016.

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The Liquidator is directed to adhere to Section 33(1) (ii) & (iii) and discharge his powers and duties as specified under Section 35 to 4l of IBC,2016 and meticulously adhere to the Rules and Regulations issued by IBBI in this regard flom time to time.

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MA No.32,zCTB/2020 IN TP No. 0l/C'fts/2020 CP^(IB) No. 1283/MB/2017 ___

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Public Notice as contemplated under section 33(1) of the Code shall be issued in one morning English datly and in one morning regional language newspapers.

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All the powers of the Board of Directors of the Corporate Debtor and of its key managerial personnel, successfi.rl resolution applicant, shall cease to exist in accordance with section34(2) of the Code. These powers shall henceforth vest in the Liquidator. The personnel of the Corporate Debtor shall extend all assistance and cooperation to the Liquidator as may be required by him in the Liquidation process of the Corporate Debtor.

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27 . On initiation of the Liquidation process but subject to section 52 of the Code, no suit or other legal proceeding shall be instituted by or against the Corporate Debtor, save and except the liberty to the liquidator to institute a suit or other legal proceeding on behalf of the Corporate Debtor with prior approval of this Adjudicating Authority, as provided in section 33(5) of the Code read with its proviso,

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In accordance with section 33(7) of the Code, this liquidation order shall be deemed to be a notice of discharge to the officers, employees and work men of the Corporate Debtor, except to the extent of the business of the Corporate Debtor continued during the liquidation process by the liquidator.

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29 . In terms of Section 33(1) (b) (iii), the Liquidator shall fi1e a copy of this Order with the Registrar of Companies, Chhattisgarh, Bilaspur, within whose jurisdiction the Corporate Debtor is registered. Additionally, the Registry shall also forward a copy of this Order to the Registrar of Companies, Chhattisgarh, Bilaspur.

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As per Regulation 13 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation,2016, the liquidator shall submit a preliminary report to the Adjudicating Authoriry within 75 days from the liquidation commencement date providing various details/information as mentioned in the said regulation.

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31 , The Registry is directed to send e-mail copies of the order forthwith to Liquidator appointed and to all the parties and their Ld. Counsel for information and for taking necessary steps,

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