Rajesh Narang Vs Durha Vitrak Pvt Ltd
Company Appeal (AT)(Ins) No.612/2021
Facts:
1.An application filed by the Financial Creditor, on an allegation of default in payment despite the account being declared as NPA, CIRP proceeding was initiated and by order dated 8.11.2019 NCLT appointed Mr. Aishwarya Mohan Gahrana and subsequently as the RP.
2.As per the appellant at that time when IRP took over the Corporate Debtor it was generating a revenue of Rs.87 lakhs in the month of November, 2019. The appellant offered unconditional support to RP to continue the operation of the Hospital to maximise the value of the Corporate Debtor and that during CIRP the RP instead of taking step to continue the hospital as going concern was taking all steps to create a situation for liquidation. Even the RP had not taken any step to get certain dues of the Corporate Debtor recovered from the concerned Govt Departments/Agencies.
3.An applucation for liquidation of corporate debtor under section 33 of the Code was filed by the RP which was admitted by the NCLT vide order dated 31.05.2021. Appelant is challenging the order of NCLT.
Issue: whether order passed by NCLT is bad in law?
Arguments:
For appellants:
1.It was submitted by counsel for the appellant that total loan amount was Rs.33 crores for which EMI was fixed as Rs.50 lakhs approximately. However, due to reasons it was beyond the control of the appellant, the loan account was termed as NPA. He submitted that in the Hospital upto month of October, 2019, there were 17doctors. He further by way of referring to Page 61 of the Memo of Appeal tried to persuade the Court that till 15th November, 2019 there were 15 doctors. However, immediately after the RP took over the charge of the hospital, number of doctors started drastically decreasing.
2.The number of employees also started decreasing from the month of the October to December 2019 from 82 to 45. he further submitted that approach of the RP from the very inception was not to see the CD as going concern and this was the reason that the Resolution Plan which was offered by one Lala Munni Lal Manghe Ram Charitable Trust which offered for Rs.25 crores was turned down and the said Resolution Plan was rejected.
For respondents:
1.Counsel submitted that At the time of initiation of CIRP, the CD was having only Rs.12858/- in its account and its CD unit i.e. Febris Multispeciality Hospital was having Rs.15300/- only in its account. The aforesaid accounts were lying in the Axis Bank. On 6.11.2019 total amount of Rs.4138/- of CD/Hospital was lying in ICICI Bank. He further submits that since September, 2019 the employees of the Corporate Debtor were on strike.
2 .Counsel submitted thatthe appellant has never rendered any cooperation nor he took steps for supplying information and relevant documents to the RP. He further submits that the registration certificate of the Hospital was valid upto March, 2020. However, due to failure on the part of suspended directors the licence was not got renewed and he placed the proceeding of the 4th CoC to highlight his submissions.
3.It was further submitted that liquidation was commercial wisdom and as such the order impugned may not be interfered with.
Decision: NCLAT Set aside the order of the liquidation of the corporate debtor.
Rationale:
1.NCLAT noted that the basic object of the IBC is to see that even if there is financial crunch or a company is in default, the approach should be to get the said company/entity as going concern. In any event liquidation of a CD under the IBC Code is considered as last nail in a coffin. The object to keep a CD as going concern is a rule whereas carrying the CD for liquidation is exception.
2.The RP who was expected to proceed independently, in the present proceeding has proceeded as if he was one of the partner of the main financial creditor i.e. LIC Housing Finance Ltd. It noted that RP has appeared through a common Advocate who has appeared on behalf of the RP as well as financial creditor LIC Housing Finance Ltd. Reply which has been filed in the present appeal has also been filed jointly by RP and Financial Creditor. This act of the RP is itself a glaring example of biasness
3.It noted that COC meetings were held at the place of respondent financial creditor and without the two financial creditors namely Siemens Financial Services Pvt Ltd and HDFC Bank Ltd whose voting share was 4.66% and 1.97% respectively. It held that being RP it was duty on his part to show his independence and fairness, but visiting the premises of LIC Housing Finance Ltd who was the major financial creditor i.e. having above 93% of voting right in the CoC reflects that it was neither independent nor fair.
4.It also noted that from the fact disclosed in the Memo of Appeal that the strength of Doctors and staff/employees were also sufficient till the initiation of CIRP. However, immediately after IRP took charge it started reducing and within one or two months it was reduced to a negligible number. These facts are itself enough to draw an inference that the RP had given incorrect picture to the CoC in the Meeting. Even there were some proposals to restart functioning of the hospital, but, on flimsy ground it was turned down.
5.The ill intention of the RP is further evident on perusal of the proceeding of the 4th CoC Meeting held on 29th July, 2020 whereby unreasonable eligibility criteria under Section 25(2)(h) to invite prospective resolution applicants was included. It is common knowledge that during Covid period number of hospitals besides rendering service to society generated huge funds, however, even in such situation in the present case, to the reasons best known to him, the RP did not allow anyone to run the hospital as going concern.
6.RP had not taken any reasonable step to get the CD as going concern which is mandated as per Section 25(2)(h) or he acted in accordance with Section 24 of the Code and as such there is no reason to allow the impugned order to further continue.
Order :
