Case Note & Summary
The case involves an appeal filed by P. Naveen Chakravarthy (the appellant) against an order dated 27.01.2021 passed by the Adjudicating Authority (National Company Law Tribunal, Chennai) in IA/587/IB/2020 in IBA/257/2019. The impugned order was passed under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (IBC), directing the liquidation of the Corporate Debtor, M/s. MK Cables and Conductors Pvt. Ltd., and appointing Ramakrishnan Sadasivam as the liquidator (Respondent No.1). The appellant, who was the promoter/director of the Corporate Debtor, challenged the liquidation order on the ground that the Corporate Debtor had sufficient assets to pay off its creditors. The appellant contended that the Corporate Debtor had borrowed Rs.10.76 crores from Punjab National Bank (Respondent No.2) in 2011 and 2014, and had mortgaged properties worth Rs.39 crores (factory premises at SIPCO Industrial Complex valued at Rs.25 crores and another property at Ponneri valued at Rs.14 crores). The appellant admitted that due to financial constraints in 2015, the Corporate Debtor defaulted on loan repayment, and the account was declared NPA on 20.09.2015. The Financial Creditor issued notices under Section 13(2) of the SARFAESI Act and initiated proceedings under the IBC. The Adjudicating Authority admitted the petition under Section 7 of the IBC and initiated Corporate Insolvency Resolution Process (CIRP). During the CIRP, no resolution plan was received, and the Resolution Professional filed an application under Section 33(2) for liquidation. The Adjudicating Authority allowed the application and passed the liquidation order. The appellant argued that he was willing to pay the creditors and that the properties were worth much more than the debt. However, the Appellate Tribunal (NCLAT) noted that the appellant had not filed any resolution plan before the Adjudicating Authority and that the Corporate Debtor was not a going concern. The Tribunal held that the mere willingness to pay does not constitute a valid resolution plan under the IBC. The Tribunal also observed that the appellant failed to show any error in the impugned order or any new facts that would warrant interference. Consequently, the appeal was dismissed, and the liquidation order was upheld.
Headnote
A) Insolvency and Bankruptcy Code - Liquidation under Section 33(2) - Challenge to Liquidation Order - The appellant challenged the liquidation order passed by the Adjudicating Authority under Section 33(2) of the Insolvency and Bankruptcy Code, 2016, on the ground that the Corporate Debtor had sufficient assets to pay off creditors and that the appellant was willing to pay the creditors. The Appellate Tribunal held that the appellant failed to show any error in the impugned order, as no resolution plan was received, the Corporate Debtor was not a going concern, and the appellant's offer to pay was not a valid resolution plan under the IBC. The appeal was dismissed. (Paras 1-9) B) Insolvency and Bankruptcy Code - Resolution Plan - Offer to Pay Creditors - The appellant's submission that he was willing to pay the creditors was not considered a resolution plan under the IBC, as it was not in the prescribed form and did not comply with the requirements of the Code. The Appellate Tribunal noted that the appellant had not filed any resolution plan before the Adjudicating Authority and that the mere willingness to pay does not constitute a valid resolution plan. (Paras 5-8) C) Insolvency and Bankruptcy Code - Liquidation - Viability of Corporate Debtor - The Appellate Tribunal observed that the Corporate Debtor was not a going concern and that no resolution plan was received, which justified the liquidation order under Section 33(2) of the IBC. The appellant's contention that the Corporate Debtor had assets worth Rs. 39 crores was not sufficient to prevent liquidation, as the purpose of the IBC is to revive the corporate debtor, not merely to recover debts. (Paras 4-9)
Issue of Consideration
Whether the impugned order dated 27.01.2021 passed by the Adjudicating Authority under Section 33(2) of IBC, directing liquidation of the Corporate Debtor and appointing a liquidator, is sustainable in law.
Final Decision
The appeal is dismissed. The impugned order dated 27.01.2021 passed by the Adjudicating Authority in IA/587/IB/2020 in IBA/257/2019 is upheld. No order as to costs.
Law Points
- Liquidation order under Section 33(2) of IBC is justified when no resolution plan is received
- Corporate Debtor is not a going concern
- and no viable revival proposal is presented
- Offer to pay creditors is not a resolution plan under IBC
- Appellate Tribunal cannot interfere with liquidation order in absence of error or new facts
