Allowed

In the matter of Digicontrols Nortern Private Limited Ia No. 53-JPR-2021 in Cp No. (IB)-164-9-JPR-2019

NCLT11 Mar 2022

Case brief

AI extract

What is this about?

The NCLAT directed the liquidation of the corporate debtor after the Committee of Creditors resolved to liquidate following the failure to receive a resolution plan. The court upheld the timeliness of the application in light of regulatory exclusions for the COVID-19 lockdown period.

What did the court decide?

Directed the corporate debtor to be liquidated in the manner laid down in Chapter III of the Code; appointed the Resolution Professional as Liquidator.

In the matter of Digicontrols Nortern Private Limited Ia… — Insolvency and Bankruptcy | NCLT (2022)

¶1

N THE NATIONAL COMPAI{Y LAW TRIBUNAL AT JAIPUR

¶2

CORAM: SHTU DEEP CHANDRA JOSHI, HON'BLE JUDICIAL MEMBER

¶3

SHRI RAGHU NAYYAR, HON'BLE TECHNICAL MEMBER

¶4

IA No. 53/JPR/2021 In CP No. (IB)-164/9/JPR/2019

¶5

(under section 9 of the Insolvency and Bankruptcy code,20I6)

¶6

IN THE MATTER OF:

¶7

I[/s. Eltech Electro- Controls Pvt. Ltd.

¶8

.. . Operational CreditoriApplicant

¶9

VERSUS

¶10

M/s. Digicontrols Northern Private Limited

¶11

. . . Corporate Debtor/Respondent

¶12

MEMO OF PARTIBS

¶13

M/s. Eltech Electro-Controls Private Limited Shop No. 27, Plot No. 5, H Pocket Market Sarita Vihar, New Delhi-110076

¶14

. ..Operational Creditor/Applicant

¶15

VERSUS

¶16

1[/s. Disicontrols Northern Private Limited Shop No. 46, Arcade Market Omaxe Panaroma City, Alwar Road Opposite Sizewark INK Company, Bhiwadi- 30 1 0 1 8, Rajasthan

¶17

. . . Corporate Debtor/Respondent

¶18

s.h_

¶19

IA No. 53/JPR/2021 In CP No. (IB)-164/9/JPM2019

¶20

A\D Di THE MAMER OF IA No. 53/JPR/2021

¶21

Ranjeet Kumar Verma, Resolution Professional G-129. First Floor, Sector-63, Noida - 201303

¶22

... Applicant

¶23

For the Applicant : Joginder Kumar Chowdhary, Adv. Ranjeet Verma, RP For the Respondent : Yogesh Kumar Tyagi , Adv.

¶24

Order Pronounced On: 11.03.2022

¶25

ORDER

¶26

Per: Shri Raghu Nawar. Technical Member

¶27

This Application bearing IA No. 53llPFV2O2l is filed by the Resolution Professional of Digicontrols Northern Private Ltd ('Applicant'/'Rp') under Section 33 and Section 34 of the Insolvency and Bankruptcy Code,2016 ('Code') for passing an order of Liquidation against Digicontrois Northern Private Ltd ('Corporate Debtor').

¶28

) The Adjudicating Authority vide order dated 1 I .10.2019 had admitted the Application filed by IWs Eltech Electro-Controls Privare Limited ('Operational Creditor') under Section 9 of the Code for initiation of Corporate Insolvency Resolution Process ('CIRP') of Corporate Debtor and as a consequence thereof appointed Mr. Ranjeet Kumar Verma as Interim

¶29

Resolution Professional ('IRp' ).

¶30

s4_ |5r-".l*-

¶31

IA No. 53/JPM202L In CP No. (IB)-164/9/JPM20t9

¶32

¶33

In compliance with provisions ofthe Code, the IRP constituted the Committee of Creditors ('CoC'). The 1 't meeting of CoC was held on25 .l I .201 9, wherein the CoC unanimously appointed the IRP as the Resolution Professional ('RP') and the same was confirmed by this Adjudicating Authority vide order dated 09.01 .2020.11 is also seen that the RP had appointed two registered valuers to determine the fair and liquidation values under Regulation 35 of the CIRP Regulations, 2016.

¶34

It is submitted that the RP had initially made the publication of Form G on 10.02.2020 and invited Expression of Interest ('EOI') for submitting a resolutionplan fortheCorporate Debtor. The RP neither received the EOIs nor any resolution plan(s) under the Code's prescribed time. In the 4th CoC meeting held on 06.03.2020, the RP proposed the liquidation ofthe Corporate Debtor. By a majority vote ofnot less than66o/ovoting, the CoC has resolved to liquidate the Corporate Debtor. Copy of the minutes of the 4ft meeting of CoC is annexed as Annexure 7 (Colly) of the Application.

¶35

We have carefully heard and considered the arguments ofthe learned counsel for the RP and perused the records. Taking into consideration the above facts concerning the affairs ofthe Corporate Debtor, the provision of Section 33 of IBC, 2016 is as follows: -

¶36

"33. Initiation of liquidation. -

¶37

(1) Where the Adjudicating Authority, -

¶38

(a) before the expiry ofthe insolvency resolution process period or the maximum period permitted for completion of the corporate

¶39

54 Ja-

¶40

IA No. 53/JPM2021 In CP No. (IB)-164/9/JPR/2019

¶41

¶42

insolvency resolution process under section I2 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

¶43

(b) rejects the resolution plan under section 3l for the no,n-compliance of the requirements specified therein, if shall -

¶44

(i) pass anorder requiring the corporate debtor to be liquidated in ibmanner as laid down in this Chapter,

¶45

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

¶46

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

¶47

(2) where the resolution professional at any time during the corporate insolvency resolution process but before confirmation of resolution

¶48

plan, intimates the adjudicating authority of the decision of the committee of creditor approved by not less than sixty-six per cent of thevoting share to liquidate the corporate de ltor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clause (i), (ii) and (iii) of clause (b) of sub-Section (l)".

¶49

The Hon'ble National Company Law Appellate Tribunal ('NCLAT'), in

¶50

Praveen Kumar l{anda Kumar Vs. VSL Securities Pvt Ltd., Company

¶51

Appeal (AT) (Insolvency) No. 308 of 2020 observed as under:

¶52

"Likewise, the decision of the COC recommending liquidation of the corporate debtor after proper evaluation of the assets and liabilities of the corporate debtor with no Resolution Planforthcoming would be a business decision fqlling within the domain of commercial wisdom of the COC which is not amenable to judicial review^".

¶53

However, whether the relevant Application is filed within stipulated timelines

¶54

as per the applicable procedure is to be seen.

¶55

The prescribed period for filing Application - In the present case, the

¶56

Application under Section 9 of the Code was admitted on 11.10.2019, and the RP filed the present Application on 11.02.2021. Accordi.gly, the date

¶57

U No. 53/JPR/2021 In CP No. (IB)-164/9/JPR/2019

¶58

for completion of CIRP was 07.04.2020.

¶59

In view of the situation of COVID-l9 pandemic, the Hon'ble Supreme Court of India in Suo Motu Writ Petition (Civil) No(s). 3/2020 in Re; cognizancefor extension of Limitotion, vide order dated 23.03.2020, passed the following order: -

¶60

"This Court has taken Suo Motu cognizance o{the situation arising out of the challenge faced by the country on account of Covid- t 9 Virus and resultant dfficulties that may be faced by litigants across the country in filing^{their petitions/applications/suits/} appeals/all other proceedings within the period ,f limitation prescribed under the general lqw of limitation or under Special Laws (both Central and/or State).

¶61

To obviate such dfficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. ISth March 2020 till further order/s to be passed by this Court in present proceedings.

¶62

We are exercising this power under Article I 42 read with Article l4 I of the Constitution of India and declare that this order is a binding order within the meaning of Article t4l on all Courts/Tribunals and authorities. This order may be brought to the notice of all High Courts for being communicated to all subordinate Courts/Tribunals within their respective jurisdiction.

¶63

Issue notice to all the Registrars General of the High Courts, returnable in fou,^{weelts. "}

¶64

g . The Hon'ble NCLA T in suo Moto-company Appeal (AT) (Insolvency) No. 0 I

¶65

of 2020 vide order dated 30.03.2020, observed as under: -

¶66

telephonically "Upon requeststo^for Registrar^urgent of this listing Appellate of cases Tribunal having fro* been variousmade

¶67

4a-G&,-

¶68

L4 No. 53/IPM2021 In CP No. (IB)-164/9/lPR/2019

¶69

¶70

persons, who were unable to^physically file^{the same on} account of complete^{lockdown declared byGovernment} with effect fro* 25th March^{2020, we take suo moto cognizance} of the unprecedented^{situation arising out ofthe spread} of COVID|g virus declared a^{pandemic. Having regard to the} hardships being faced by^{various stakeholdersas also the} legal fraternity, which^gobeyond fi.ling^{ofAppeals/c%Ses,} which has already been^{taken cqre of by the Hon'ble Apex} Court by extending the^period of^{limitation with} ffict .fro* I\th March, 2020 till further^order/s in^{terms of order dated} 23rd March, 2020 in Suo Motu^{Writ Petition (Civil) IVo(s).0372020'} inasmuch^qs certain steps^{required tobe taken by various} Authorities under Insolvency^{and Banlcruptcy Code, 2016 or to comply} with various provisions and to^{adhere to the prescribed timelines} for taking the^'Resolution Process to^{its logical conclusion in orderto} obviate and mitigate such^{hardships,this Appellate Tribunalin} exercise of powers conferred by^{Rule 1l oflllational} Company Law Appellate^{Tribunal Rules, 2016 rawthe} decision of this Appellate Tribunal^{renderedin"Quinn} Logistics India Pvt. Ltd. vs. Mack Soft-Tech^{Pvt. Ltd. in} company Appeal^{(AT) (Insolvency)No.l85 of 2018" decided} on 8th May, 2018 do hereby order^as follows:^- (l) That the period of lockdown ordered by the Central^Government and the State Governments including^{the period qs mqybe} extended either in whole or^part of^{the country, where} the registered ffice of the^{Corporate Debtor may be located,} shall be excluded fo, the^{purposeof countingof the period} for 'Resolution Process under Section 12 of the Insolvency^and Banlcruptcy Code, 2016, in all cqses^{where 'CorporateInsolvency} Resolution Process has been initiated^{and pendingbefore any Bench} of the National Company Law^{Tribunal or in Appeal before this} Appellate Tribunal."

¶71

Thereafter, the Insolvency^{and BankruptcyBoard of India ('IBBI'),inserted}

¶72

Regulation 40C to the Insolvency^{andB ankruptcy Boardof Indi a ( Insolvency'}

¶73

s d $.i-^--

¶74

A No. 53/JPR/2021 In CP No. (IB)-164/9/1PN2019

¶75

¶76

Resolution Process for Corporate^{Persons) Regulations, 20t6, vide notification}

¶77

dated 29.03.2020 and the same^{is as} under:^-

¶78

"40C.^{Specialprovision relating to time-line} Notwithstanding the time-lines contained^{in these regulations, but} subject to the provisions in the Code, the^{period of lockdown} imposed by the Central Government in the^{wake of the COVID-} 19 outbreqk shall not be counted for the^purposes of^{the time-line}

¶79

for^{any activity that could not be completed due to such lockdown,} in relation to a corporate insolvency resolution^process""

¶80

Similarly, the IBBI vide notification dated^{20.04.2020, inserted Regulation}

¶81

47 Ato the Insolvency and Bankruptcy Board of India^{(LiquidationProcess)} Regulations, 2016 and the said regulation reads as under:^-

¶82

"Exclusion^{of period of lockdown} 47A. Subject to the provisions of the Code, the^period of^lockdown imposed by the Central Government inthe wake of Covid-l9outbreak shall not be countedfor the purpose ofcomputation ofthe timelinefor any task that could not be completed due to such lockdown, in relation to^any liquidation process.^"

¶83

As per Notification No. IBBU2020-21IGN/REG059 dated^{20.04.2020, the} period oflockdown is excluded to calculate the timelines in the CIR^Process. Hence, the present application is filed within the^{prescribed period.In view} of the same, the Application under consideration is taken up under Section 33(2) of the Code.

¶84

Appointment of Liquidator and fee to be paid- Section 34(1) of^{the Code} provides that where the Adjudicating Authority passes an order for liquidation of the Corporate Debtor under Section 33, the resolution^professional

¶85

IA No. 53/JPM2021 In CP No. (IB)-164/9/JPR/2019

¶86

¶87

appointed for^{the corporateinsolvency resolution process shall, subject to} submission ofwritten^{consentact asthe Liquidatorfor liquidation.The relevant} provisions of Section^{34(1) of the Code are as follows: -}

¶88

,,(1) where the Adiudicating Authority pqsses an order fo, liquidation of the^{corporate debtor under Sectionj j,} tie resolution^{professionalappointed} for^thecorporate shall, insolvency resolition^{process under Chapter II} subjecttosubmission^{of wrilten consent by the resolution professional} totheAdjudicatingAuthorityinspecified'F,*,shall act^qs the liquidatir for^{the purpose ofliquidationunless} replaced by the^{,,ldirdiroting Authority undersub-section(4) ".}

¶89

t4. The present^{RP, Mr. Ranjeet Kumar verma, is eligible as a Liquidator.It is} noted that liquidation^{proceedings herein, at the instance of CoC, because} no expression of^{interest(s)has been received according to the invitation in} Form G, are initiated^{due to prescription of statute.We do not find any reason} to replace the existing^{RP. Mr. RanjeetKumar Vermao Resolution} professional with IBBI Registration No. IBBI/IPA-003/IP-N00014812017^- 1g/11610 has filed^{his consent in Form-AA dated 23.02.2022 to act as the} Liquidator vide^{Dairy No. 52112022 dated 24.02.2022. Thus, Mr. Ranjeet} Kumar Verma is^{appointed as the Liquidator'}

¶90

It is also seen^{that Regulation 39B, 39C and 39D in the CIRP} Regulations,2016 have^{beeninsertedby notification No. IBBI/2019-} 20IGNIREG/048^{dated25.07 .2019. Relevant aspectsin this respect are}

¶91

examinedhereunder.

¶92

Ad-G,*

¶93

IA No. 53/JPM2021 In CP No.^{(IB)'164/9/JPR/2019}

¶94

¶95

Liquidation Cost @egulation^{39B of CIRPRegulations, 2016) - The} Liquidator vide Dairy^{No.Sz ll2O22 dated 24.02.2022has submitted its Final} Report whereby the CoC^{in its 4th meeting held on 06.03.2020 has decided} the estimated liquidation^{cost to be Rs. 1,05,000/-.The necessary action} following IBBI^{(Liquidation Process) Regulations,2016 regarding} contributions to liquidation^{costs have beenfollowed.}

¶96

t7. Assessment of sale as a^{going concern (Regulation 39C of CIRP} Regulations, 2016) - The CoC^{in its 4th meetinghas discussedselling the} Corporate Debtor as a^{going concern, as the first option or sellingthe} business(s) of the Corporate^{Debtor as a going concern,as the secondoption,} before exploring other options^{as per Regulations 32 & 32A of IBBI} (Liquidation Process) Regulations,^{2016 and Regulation39C of CIRP} Regulations, ifthe Adjudicating^{Authority passes an order of liquidation.The} RP explained that the Corporate^{Debtorhas no meansto run the businessas} the unit has already^{been closed, so it is not practicallypossible to explore the} possibilities to sell as a going concern.^{With a l00Yo voting share, the CoC} discussed that it is not^{possibleto sell as a going concern,and they passedthe} resolution.

¶97

The fee of the Liquidator^{(Regulation 39D of CIRP Regulations,2016) -} The CoC in its 4th meeting^{has not discussedthe bearingof additionalcost} eeds towards IRP fees^{and liquidationcost beyondthe actual reali}

¶98

IA No. 53/JPM2021 In CP No.^{(IB)-161/9/lPN20l9}

¶99

¶100

from the sale of inventory/assets or recovered on account ofthe Corporate

¶101

Debtor. However, as per the registered valuer, the liquidation value of the

¶102

Corporate Debtor is Rs. 1, I 5,000/-, which can meet the cost of the liquidation. Further, the CoC has agreed that the period of sale will be 30 days from the approval ofthe Adjudicating Authority, with the balance period ofliquidation being60days. Allmembers unanimously passed this resolution and therefore is per IBBI (Liquidation Process) Regulations, 2016.

¶103

In view of the satisfaction of the conditions provided under Section 33(1)of the Code, including the Rules and Regulations thereunder, the Corporate Debtor, Digicontrols Northern Private Limited, is directed to be liquidated in the manner as laid down in Chapter III ofthe Code. The contextual directions inter-alia include: -

¶104

(i) As per Section 33(5) of the Code and subject to Section 52 of the Code, no suit or other legal proceedings shall be instituted by or against the Corporate Debtor;

¶105

Provided that asuit or other legal proceedings may be instituted by Liquidator on behalf of Corporate Debtor, with the prior approval of the Adjudicating Authority;

¶106

(ii) The provisions of sub-section (5) of Section 33 of the Code shall not

¶107

apply to legal proceedings concerning such transactions as may be

¶108

notified by the Central Government in consultation with any financial

¶109

s*-

¶110

$.r-,^-.-

¶111

IA No. 53/JPR/2021 In CP No. (IB)-164/9/JPR/1

¶112

¶113

sector regulator;

¶114

(iii) This order of liquidation under Section 33^{of Code shallbe deemed} as notice of discharge to the officers,^{employeesand workmen of the}

¶115

Corporate Debtor;

¶116

(iv) All the powers of the Board of Directors, key managerial^personnel and the partners of the Corporate^{Debtor, as the case may be, shall} cease to have an effect and shall^{be vested in the Liquidator;}

¶117

(v) The personnel ofthe Corporate Debtor shall extend all^{assistance and} cooperation to the Liquidator as may^{be required by him in managing} the affairs of the Corporate Debtor, and^{provisions of Section 19 of} the Code shall apply concerning liquidation^{process asthey apply with} CIR process with the substitution of^{references to the Resolution} Professional for the Liquidator;

¶118

(vi) The Liquidator shall publish a public announcement^{per Regulation} 12 ofthe IBBI (Liquidation Process) Regulations,^{2016 and in Form} B ofSchedule II ofthese Regulations within^{five daysfrom receipt of} this order calling upon the stakeholders to^{submittheir claimsas on} liquidation commencement date and^{provide the last date for} submission of claim which shall be 30^{days from the liquidation} commencement date;

¶119

(vii) Under ion-13 of the IBBI^(Liquidation ---------^{Process) Regulations,}

¶120

:>i.5a

¶121

IA No. 53/IPR/2021 In CP No. (IB)-164/9/IPM2019

¶122

¶123

2016, the Liquidator shall file his preliminary report within 75 days

¶124

and regular progress reports according to Regulation 15.

¶125

In view of the foregoing, IA No. 531IPPU2021 is disposed of. Copy of this order is supplied to the counsel for the Liquidator and the Registrar of Companies forthwith. The Registry is also directed to send a copy ofthis order

¶126

to the Liquidator at his e-mail address.

¶127

ZA,'

¶128

CHANDRA JOSHI, JUDICIAL MEMBER

¶129

NAYYAR,

¶130

IA No. 53/JPM2021 In CP No. (IB)-164/9/JPM2019