PIERCE, Circuit Judge:
Gusam Restaurant Corp. ("Gusam") appeals from an order of the United States Bankruptcy Court for the Eastern District of New York, Boris Radoyevich, Bankruptcy Judge, filed August 12, 1983, converting, sua sponte, Gusam's Chapter 11 reorganization proceeding to a Chapter 7 liquidation case under the Bankruptcy Reform Act of 1978, 11 U.S.C. §§ 101-151326 ("Bankruptcy Code" or "Code"). On August 30, 1983, Judge Radoyevich issued a Memorandum Decision, reported at 32 B.R. 832 (Bankr.E.D.N.Y.1983), "in an effort to provide the appellate court with a more complete record of this Court's decisional basis." Id. at 833. On appeal, Gusam contends that the bankruptcy court lacked power to convert Gusam's Chapter 11 petition to a Chapter 7 case pursuant to 11 U.S.C. § 1112(b) absent a request by a party in interest. We agree with Gusam and, consequently, we reverse and remand for further proceedings consistent herewith.
We state the facts succintly for purposes of this decision. Gusam filed its Chapter 11 petition on August 17, 1982. Pursuant to 11 U.S.C. § 1102(a), Judge Radoyevich appointed a creditor's committee on August 25, 1982. On February 1, 1983, upon application by Gusam, the bankruptcy court issued an order authorizing Gusam to retain "Special Counsel for the limited purpose of representing the Debtor-in-Possession with respect to the sale of its assets." After holding a hearing, Judge Radoyevich issued an order, filed April 25, 1983, approving the sale of Gusam's business to Leechir Enterprises, Inc. ("Leechir"), for the amount of $275,000. To provide Leechir sufficient time to obtain a liquor license, the order directed the parties to hold the closing on the sale "within thirty (30) days of [Leechir] receiving final approval from the State Liquor Authority." Shortly after approving Gusam's sale and without request by any of Gusam's creditors,
Gusam contends that section 1112(b) confers power upon the bankruptcy court to convert a Chapter 11 case to a Chapter 7 case only "on request of a party in interest." Since "no party in interest" requested the bankruptcy court to convert, argues Gusam, the court herein was without power to do so sua sponte. See Warner v. Universal Guardian Corp., 30 B.R. 528, 529 (Bankr. 9th Cir.1983); In re Larmar Estates, Inc., 6 B.R. 933, 934-35 (Bankr.E.D.N.Y.1980); Zip Print, Inc. v. Keller, 4 B.R. 676, 677 & n. 1 (Bankr.N.D.Ga.1980); 5 Collier on Bankruptcy ¶ 1112.01, at 1112-3, -4 (15th ed. 1983). We agree with Gusam that a plain reading of section 1112(b) suggests that a court can convert a case only upon request by a party in interest.
Our own review of the legislative history indicates that the congressional intent is not contradicted, and indeed, is served by a plain reading of the statute. It is clear that a principal aim of the drafters of the new Code was to permit bankruptcy judges to concentrate on their judicial functions by relieving them of previously existing administrative burdens. See H.R.Rep. No. 595, 95th Cong., 2d Sess. 89-90, reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5963, 6050-51 (recounting various administrative duties of bankruptcy judges under
Our interpretation of the legislative intent is reinforced by the statements of Congressman Edwards and Senator DeConcini, the sponsors of the Code, made in reference to section 102, which sets forth the Code's rules of construction. The sponsors stated as follows:
124 Cong.Rec. 32,393 (1978) (statement of Congressman Edwards) (emphasis added); 124 Cong.Rec. 33,993 (1978) (statement of Senator DeConcini) (emphasis added). The above-quoted language makes clear that the very purpose of inserting the phrase "on request of a party in interest" in the final version of section 1112(b) was to keep the court from acting sua sponte.
In short, the legislative intent — as evinced by the drafters' concern with excessive judicial entanglement in administrative matters, the eventual selection of the House version over the Senate version of section 1112(b), and the sponsors' statements as to the purpose and meaning of the phrase "on request of a party in interest" — is not contradicted, and indeed, is furthered by permitting the bankruptcy court to act under section 1112(b) only upon request by a party in interest.
Finally, because we conclude that the bankruptcy court was without power to convert sua sponte a Chapter 11 proceeding to a Chapter 7 case pursuant to section 1112(b), we need not address Gusam's further contention that under the facts of this case there was no cause for conversion and, therefore, that the bankruptcy judge abused his discretion.
For the foregoing reasons, we reverse the order of the bankruptcy court and we remand for further proceedings consistent herewith.
11 U.S.C. § 1112(b) (1982).