Allowed

In the matter of Capital Electronics and Appliances Limited [IA(IBC)(LIQ.)-3(KB)2024 in C.P. (IB)-724(KB)2020]

NCLT9 Apr 2024IA(IBC)(LIQ.)-3(KB)2024 in C.P. (IB)-724(KB)2020

Case brief

AI extract

What is this about?

Upon the expiration of the CIRP timeline due to a non-functioning Committee of Creditors, the NCLAT ordered the liquidation of the Corporate Debtor Capital Electronics and Appliances Limited and appointed a Liquidator.

What did the court decide?

Corporate Debtor ordered to be liquidated; Mr. Subrata Ghosh appointed as Liquidator under Section 34(1); powers of Board of Directors ceased.

In the matter of Capital Electronics and Appliances… — Insolvency and Bankruptcy | NCLT (2024)

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IN THE NATIONAL COMPANY LAW TRIBUNAL KOLKATA BENCH, (Court – II) KOLKATA

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IA(IBC)(LIQ.)/3(KB)2024 C.P. (IB)/724(KB)2020

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An application under Section 33 read with Section 60(5) of the Insolvency and

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Bankruptcy Code, 2016.

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In the matter of:

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(1) ISERVE SOLUTIONS & SERVICES PRIVATE LIMITED

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... Operational Creditor

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-Versus-

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(2) CAPITAL ELECTRONICS AND APPLIANCES LIMITED [CIN: U31901WB2006PLC110699] & [PAN: AAGCA1876P]

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... Corporate Debtor

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-And-

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(3) Mr. Rasik Singhania, Resolution Professional of Capital Electronics and Appliances Limited (In CIRP) having his office at Chitrakoot Building, Room No. 98, 9^th Floor, 230A, Acharya Jagadish Chandra Bose Road, Kolkata – 700 020 .

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... Applicant/Resolution Professional Date of pronouncing of the order: 09/04/2024

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Coram:

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Smt. Bidisha Banerjee : Member (Judicial) Shri D. Arvind : Member (Technical)

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Appearances (via video conferencing/physically): Ms. Tanvi Luhariwala, Adv. : For the Resolution Professional Mr. Rasik Singhania, RP : O R D E R

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Per: Bidisha Banerjee, Member (Judicial)

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1. The court convened through hybrid mode .

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2. Ld. Counsels appearing for the parties were heard in extenso .

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3. This application IA(IBC)(LIQ.)/3(KB)2024 has been preferred to seek the following reliefs, inter alia : -

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IN THE NATIONAL COMPANY LAW TRIBUNAL KOLKATA BENCH (Court –II) KOLKATA

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(a) Direct the initiation of Liquidation Proceedings as envisaged under Section 33 of the Insolvency and Bankruptcy Code, 2016 .

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(b) Direct issuance of Public Announcement stating that the corporate debtor is in liquidation .

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(c) Direct liquidation order be sent to the Registrar of Companies, Kolkata for its intimation and necessary compliance .

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(d) Direct the members of the Committee of Creditors to deposit the remaining CIRP costs to the CIRP Account of the Corporate Debtor to make necessary payments .

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4. Factual matrix of the case are as under: -

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(a) This application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) being C.P. (IB)/724(KB)2020 to initiate a Corporate Insolvency Resolution Process (“CIRP”) was filed against the Corporate Debtor, namely, Capital Electronics and Appliances Ltd. The application was admitted by the Order dated 16^th January, 2023 of this Tribunal by appointing the applicant as its Interim Resolution Professional (“IRP”).

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(b) On 18^th January, 2023 the applicant published the Public Announcement in Form A in Business Standard (in English) and in Ekdin (in Bengalivernacular), inter alia , inviting claims from the Creditors of the Corporate Debtor .

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(c) The applicant received claims from three Operational Creditors and based on the said claims, the applicant constituted the Committee of Creditors (“CoC”) of the Corporate Debtor .

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(d) On 14^th February, 2023 the first meeting of the CoC was conducted, wherein the applicant was confirmed as the Resolution Professional . Thereafter, the applicant received further claims from two Operational Creditors and as a consequence thereof, the Constitution of CoC was

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IN THE NATIONAL COMPANY LAW TRIBUNAL KOLKATA BENCH (Court –II) KOLKATA

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changed. The applicant had duly filed a report for the re-Constitution of CoC to this Tribunal, i.e., on 6^th April, 2023 .

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(e) Again, the applicant received further claims from two unsecured financial creditors, namely, Bajaj Finance Limited and Capfloat Financial Services Private Limited. The entire CoC was again reconstituted with Bajaj Finance Limited with 90.91 % voting share and Capfloat Financial Services Private Limited with 9.09 % voting share in the CoC. The applicant had duly filed a report for re-Constitution of CoC before this Tribunal on 6^th April, 2023 .

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(f) Meanwhile, on 17^th March 2023, the applicant had published Form G under Regulation 36A (1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons), Regulations, 2016 for inviting expression of interest from prospective resolution applicants for the Corporate Debtor. In terms of the said Form G , the last date for submission of the EoI was on 1^st April, 2023. On 1^st April, 2023 the applicant received 3 EoIs from prospective Resolution Applicants .

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(g) On 8^th April, 2023 Bajaj Finance Limited issue an email to the RP for withdrawal of its claim in the CIRP. Thereafter, on 18^th April, 2023 Bajaj Finance Limited filed an application being IA(I.B.C.)/836(KB)2023 before this Tribunal, inter alia , praying for an Order allowing Bajaj Finance Limited to withdraw its claim from the CIRP of the Corporate Debtor and on this date, i.e., on 8^th April, 2023 during the pendency of IA(I.B.C.)/836(KB)2023, Bajaj Finance Limited had refrained from participating in the CoC meetings .

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(h) Bajaj Finance Limited held 90.91 % voting share in the CoC and was not participating in the CoC meetings, therefore, no decisions or resolutions were being passed by the CoC with respect to the CIRP of the Corporate Debtor. As a result, the CIRP of the Corporate Debtor had practically

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come to a standstill. Even the Request for Resolution Plan (“RFRP”) could not be approved from the CoC .

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(i) The period of 180 days as prescribed under Section 12 of the Insolvency and Bankruptcy Code, 2016 was expired on 14^th July, 2023 due to Corporate Insolvency Resolution Process could not be completed within the prescribed time .

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(j) Capfloat Financial Services Private Limited, filed an application being IA(I.B.C.)/1431(KB)2023 for withdrawal of its claim from the CIRP of the Corporate Debtor .

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(k) On 20^th September, 2023 this Tribunal allowed the application of both Capfloat Financial Services Private Limited as well as Bajaj Finance Limited to withdraw their respective claims from the CIRP of the Corporate Debtor and also allowed the application being IA(I.B.C.)/1199(KB)2023 and excluded the period from 8^th April, 2023 till the date of the Order, i.e., 20^th September, 2023 from the timeline for completing any activity relating to the CIRP of the Corporate Debtor .

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(l) On 20^th September, 2023 the Constitution of CoC was again changed which then comprised of the Operational Creditors. In the interim period, the applicant received claims from one Mudit Commercial Corporation and the Income Tax Department, Government of India .

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(m) Due to non-functioning of the CoC, the Request for Resolution Plan could not be issued by the applicant. As such, the same was issued on 14^th October, 2023 to the prospective resolution applicants. The last date for submission of the resolution plan was on 13^th November, 2023 and also the applicant did not receive resolution plan from either of the 4 Prospective Resolution Applicant. In fact, the Prospective Resolution Applicants requested for the refund of their EMD amount .

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(n) On 24^th November, 2023 the 6^th meeting of the CoC was held and conducted, wherein the applicant had informed the members of the CoC that the CIRP period after exclusion would expire on 27^th December, 2023. It was discussed that as no resolution plan has been received, then should the CIRP period be extended by 90 days and fresh Form G be issued or should the Corporate Debtor go into liquidation. All the members of the CoC who were present in the meeting was of the opinion that extending the CIRP process by 90 days was not going to yield any result and it would unnecessarily increase the cost. Accordingly, the members suggested that it would be better to head for liquidation .

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(o) On 23^rd December, 2023 the 7^th CoC meeting of the Corporate Debtor was conducted. In the said meeting one of the agenda for voting was regarding initiation of liquidation process with respect to the Corporate Debtor .

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(p) It is stated that the aforesaid agenda was voted upon by three members of the Operational Creditor being Vedik Dealcom Private Limited having 33.55% voting right, Vishal Video Appliances Private Limited having 1.5045% voting right and Mudit Commercial Corporation having 3.10% voting right. The other members of the CoC which includes two government entities have not voted on the said agenda. As such, the said Resolution for initiation of liquidations with respect to the Corporate Debtor, was not approved by 66% percent votes of the CoC .

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(q) After considering the exclusion of 133 days pursuant to Order dated 20^th September, 2023 the period of CIRP of 180 days as prescribed under Section 12 of the Insolvency and Bankruptcy Code, 2016 was expired on 27^th September, 2023 .

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(r) In terms of Section 33 of IBC, where the Adjudicating Authority does not receive a resolution plan before the expiry of 180 days of the CIRP period, the Adjudicating Authority shall, inter alia , pass an Order requiring the Corporate Debtor to be liquidated. In Chapter III of the IBC Code, 2016 and direct issuance of Public Announcement stating that the Corporate

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Debtor is in liquidation and direct that the liquidation Order be sent to the Registrar of Companies, Kolkata for its intimation and necessary compliance .

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(s) It is further submitted that during the 6^th CoC meeting, the Applicant had produced the summary of total estimated expenses incurred during the CIRP period and the details of the amount received by the Applicant. As such, the applicant indicated to the members of the CoC the estimated shortfall and requested the members to contribute their respective shares of shortfall of CIRP cost in the CIRP account of the Corporate Debtor. On 25^th December, 2023, a remainder email was also sent to the members of the CoC requesting to make payment of their respective share of the CIRP cost. However, till date the member of CoC have not made any contribution towards the CIRP costs. Therefore, it is most humbly prayed that an Order be passed directing the members of the Committee of Creditors to deposit the remaining CIRP costs to the CIRP account of the Corporate Debtor .

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(t) It is pertinent to mention that Mr. Prashant Agarwal, being the Suspended Directors of the CD had filed an appeal against the Order of admission dated 16^th January, 2023 before the Hon’ble National Company Law Appellate Tribunal being Company Appeal (AT) (INS) No. 355 of 2023. However, the said appeal was finally withdrawn by Mr. Prashant Agarwal. As such, by an Order dated 31^st January, 2024 the Hon’ble NCLAT, dismissed the said application as withdrawn .

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5. The rival contentions were noted and the decisions were considered .

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6. Analysis and Findings: -

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(a) We have considered the submission made by the Ld. Counsel and perused the record .

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(b) Section 33(1) of the Code enjoins the Adjudicating Authority to pass an order for liquidation of the Corporate Debtor when there is a contravention of the approved

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Resolution Plan. However, even before approval of the plan, Resolution failed due to reason mentioned in para (m) of this order .

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(c) Hence, we do find merit in the prayers made in IA(IBC)(LIQ.)/3(KB)2024 , and deem it fit to order liquidation of the Corporate Debtor .

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7. This Bench, therefore, hereby orders as follows: -

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a. Prayers as sought for in IA(IBC)(LIQ.)/3(KB)2024 filed by RP, is allowed and Capital Electronics and Appliances Limited, the Corporate Debtor is ordered to be liquidated in terms of section 33(1) of the Code ;

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b. Mr. Subrata Ghosh having registration no. IBBI/IPA-003/IPA-ICAI373/2021-2022/13872, email: [email protected], is hereby appointed as Liquidator is hereby appointed as Liquidator as provided under section 34(1) of the Code subject to a valid Authorisation for Assignment (AFA) issued by the Insolvency Professional Agency (IPA) of which she is a professional member ;

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c. The Liquidator shall initiate liquidation process as envisaged under ChapterIII of the Code and the Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016 .

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d. Public Notice shall be issued in the newspapers stating that the Corporate Debtor is in liquidation .

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e. All the powers of the Board of Directors, and of key managerial persons, shall cease to exist in accordance with section 34(2) of the Code. All these powers shall henceforth vest in the Liquidator .

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f. The personnel of the Corporate Debtor are directed to extend all assistance and co-operation to the Liquidator as required by him in managing the liquidation process of the Corporate Debtor .

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g. 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 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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h. 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 workmen 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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i. In terms of section 33(1)(b)(iii), the Liquidator shall file a copy of this Order with the Registrar of Companies, West Bengal, within whose jurisdiction the Corporate Applicant is registered .

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8. The application bearing IA(IBC)(LIQ.)/3(KB)2024 shall stand disposed of in accordance with the above directions .

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9. List the main C.P. (IB)/724(KB)2020 for reporting progress on 10.06.2024.

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

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11. Certified copy of this order may be issued, if applied for, upon compliance of all requisite formalities .

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D. Arvind Member (Technical)

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Bidisha Banerjee Member (Judicial)

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Order signed on: 9^th of April, 2024.

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Ar.

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