AA Rightly Rejected CoC’s Decision to Liquidate CD After Preparation of IM, as it is Beyond the CoC’s Power | NCLAT

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  • Last Updated on 1 August, 2023

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Information Memorandum

Case Details: Hero Fincorp Ltd. v. Hema Automotive (P.) Ltd. - [2023] 152 taxmann.com 311 (NCLAT-New Delhi)

Judiciary and Counsel Details

    • Justice Ashok Bhushan, Chairperson & Ms Shreesha Merla, Technical Member
    • Sanjeev Singh, Ms Taniya Bansal, Ms Ridhi Pahuja & Ms Pallavi Aggarwal, Advs. for the Appellant.

Facts of the Case

In the instant case, the appellant initiated proceedings under section 13(4) of the SARFAESI Act, 2002 against the corporate debtor. Subsequently, the CIRP proceedings were commenced against the corporate debtor. The appellant filed its claim and CoC was constituted with the appellant as sole member of CoC.

On 7-10-2022, RP published Form-G, wherein the last date for receipt of an Expression of Interest (EOI) was 24-10-2022. On 19-10-2022, CoC passed the resolution for the liquidation of the corporate debtor. However, the Adjudicating Authority (NCLT) rejected the said resolution directing the CoC to reconsider said liquidation order.

Thereafter, an appeal was filed to the National Company Law Appellate Tribunal (NCLAT) against the order passed by the NCLT.

The appellant challenged the said order submitting that it was mandatory for the Adjudicating Authority to pass an order of liquidation in view of section 33(2) of the IBC.

It was noted that as per section 33(2), CoC could take the decision to liquidate the corporate debtor at any time before the preparation of the Information Memorandum and as per regulation 36 of the CIRP Regulation, Information Memorandum must be prepared and circulated to members of CoC prior to issuance of Form-G.

NCLAT Held

The NCLAT held that since in the instant case, the decision of liquidation by CoC was taken after Form-G had been issued i.e. after the preparation of the Information Memorandum, the Adjudicating Authority didn’t commit any error in rejecting for liquidation and asking the CoC to reconsider its decision. Accordingly, the appeal was to be dismissed.

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