One Page #4 – In matter of M/s Thiru Arooran Sugar Ltd
With regards to commercial wisdom of COC, decision to liquidate the company
Court: NCLT-Chennai, NCLAT-Chennai. (AT#59/2021 Dt 19.05.2021)
1. Facts of the Case:
- Appellant is the Chairman & MD of CD & Respondent is the IRP/RP of CD.
- Appellant is aggrieved by the liquidation order passed by NCLT, Chennai and appointment of the Liquidator.
- Only one Rplan was received after 3 rounds of invitation which was rejected COC.
- Appellant challenged the order for liquidation on following grounds:
- The revised compromise settlement offers for Rs.243Cr by promoters is 12% higher than the liquidation value of 217Cr, and it works out to 42.03% of aggregate claims admitted by the RP
- Employees and farmers dues will be paid by 100% and there are about 13341 sugar cane farmers, who will be affected with liquidation. Being classified as operational creditors, they rank in the lowest rung of priority for distribution of proceeds u/s 53 of IB Code.
- NCLT failed to consider the efforts at resolving the debt of the CD in the teeth of IB Code which provides for liquidation in the event of failure of CIRP or non-receipt of Rplan within the specified period.
- NCLT passed the order for liquidation even when certain interlocutory and miscellaneous application were pending before the Adjudicating Authority.
2. Case Laws: Kalpraj Dharamsi & Anr V Kotak Investment Advisors Ltd & Anr (by Supreme Court): Though there has been material irregularity in exercise of the powers by RP, however all those actions had approval of COC. NCLAT was not correct in law in interfering with the commercial decision taken by COC by a thumping majority.
3. Judgement: Decision of COC takes pivotal seat based on commercial wisdom and taking notice that 76.02% voted against Rplan, the liquidation order passed by NCLT is free from legal infirmities, hence the appeal gets dismissed.