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2022 (5) TMI 460 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHIValidity of approved Resolution Plan - mismatch in the liquidation value and fair value arrived at by two registered valuers - value arrived by the third valuers nearly half the value arrived by the two registered valuers previously - it is alleged that the resolution plan approved by the Impugned Order has resulted in transfer of the business of the company at a value which is much below its actual worth causing loss to all the stakeholders including the creditors - HELD THAT:- In the instant case, the first valuation by two registered valuers were made on 28.5.2018 and the two valuations of liquidation value were Rs.126.30 crores and Rs.121.01 crores, leading to average value of Rs.123.66 crores. Even if the CoC thought it fit to get another valuation of a more recent date, it was desirable that the procedure outlined in regulations 27 and 35 should have been followed. The source of payment for valuation is not a material factor insofar as valuation figures are concerned nor will they have any impact on them. They are really disjointed activities. Moreover, in the present case the third valuation estimates the liquidation value as Rs. 52.69 crores, which is even less than half of the liquidation value estimated earlier and hence significantly different from the two earlier valuations. Thus, the procedure of obtaining a third valuation and then considering it as basis for deciding the payment particularly of the operational creditors under Section 30(20(b) defective and not in accordance with the stipulated norms and procedure under the CIRP Regulations. The CoC did consider the variance between the two earlier liquidation valuation estimates and the third one and desired explanation regarding the same. The explanation could have been obtained from the three valuers since they had carried out the valuation exercise and would be in a position to explain the methodology and reason for divergence in values. It, therefore, appears surprising that rather than obtain explanation from the earlier valuers, the CEO of the erstwhile corporate debtor, who would have been an interested party and could have had a clouded opinion, was approached to provide this explanation. We do not think such an explanation would be fair and free from being coloured with possible conflict of interest. Therefore, taking it as the basis for calculating payments under the resolution plan cannot be considered as an error-free exercise - it is quite clear that the members of the CoC had concerns about the appointment of the third valuer and later about the low liquidation value in the third report. The Resolution Profession also expressed an opinion about the low liquidation value obtained in the third report. The detailed discussion regarding the third valuation report on fair and liquidation value and the approval of resolution plan of Rs. 54.02 crores make it clear that the quantum of liquidation value was relevant and material in allocating payments to be given to the workmen, employees and the operational creditors. The third valuation report of fair and liquidation should be discarded as it is not in accordance with the stipulated provision and procedure in the CIRP Regulations, and moreover the wide variance of the liquidation value of the third valuation report from the first two valuation reports also necessitates discarding of the third valuation report. Therefore, the average liquidation value of first two valuations viz. Rs. 123.66 crores should be the liquidation value on which various payments in the resolution plan should be based upon. The impugned order and the resolution plan set aside only to the extent it relates to allocation of payments to the stakeholders and creditors and direct that the revision of payments and subsequent approval of the revised resolution plan should be completed within a period of two months from the date of this judgment - appeal disposed off.
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