TMI Blog2022 (2) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial Discussion of CoC - justifiable or not - HELD THAT:- The Hon ble Supreme Court in Jaypee Kingston Boulevard Apartments Welfare Association Ors. [ 2021 (3) TMI 1143 - SUPREME COURT] has observed that there is an intrinsic assumption that Financial Creditors are fully informed about the viability of the Corporate Debtor and feasibility of the proposed Resolution Plan. They act on the basis of thorough examination of the proposed Resolution Plan and assessment made by their team of experts. The opinion on the said matter expressed by them after due deliberations in the CoC Meeting through e-voting, as per voting shares, is a collective business decision. The Legislature, consciously, has not provided any ground to challenge the commercial wisdom of the individual Financial Creditors or their collective decisions before the Adjudicating Authority that has made it non-justiciable - In the instant case, the Appellants have failed to establish by means of any documentary evidence that there was any material irregularity under Section 30(2) of the Code in the Order of the Liquidation passed by the Adjudicating Authority. Eligibility under the amended MSME Act 2006, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors. has noted that the matter be taken up for hearing on the date fixed, but as the Appellant Counsel has sought for adjournments to place some Judgements in support of his case, and the matter was taken up finally on 13.01.2022 and heard at length. 3. Submissions of the Learned Counsel appearing on behalf of the Appellant: It is submitted that the Insolvency Application under Section 7 of the Code was filed on 03.07.2018, which is more than three years after the Corporate Debtor was declared as NPA on 30.03.2015 and hence is barred by Limitation . The Learned Counsel relied on the Judgements of the Hon ble Supreme Court in Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminium Industries Private Limited Anr. (2020) 15 SCC 1, Laxmi Pat Surana Vs. Union Bank of India and Anr. (2021) 8 SCC 481, and in B.K. Educational Services (P) Ltd. Vs. Parag Gupta Associates , (2019) 11 SCC 633. As the Corporate Debtor falls into the new classification criteria of MSME, the benefit of exemption under Section 240A of the Code should have been availed by the Resolution Professional ( RP ) for the benefit of the Corporate Debtor ; more so because the Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Signatory Vs. Satish Gupta Ors. , (2020) 8 SCC 531. o Joseph Joseph Ors. Vs. Churakulam Tea Estate Pvt. Ltd. NCLT Kochi, IA/(IBC)/74/KOB/2021 in IBA/21/KOB/2019. o Enviiro Bulkk Handling Systems Pvt. Ltd. , I.A. No. 741 of 2021 in C.P. (IB) No. 1319/MB/2017. 4. Submissions of the Learned Counsel appearing on behalf of the Respondent: Learned Counsel submitted that CIRP against the Corporate Debtor commenced on 26.04.2019 and as no Resolution Plan was received even after issuance of three publications for Expression of Interest on 16.07.2019, 31.07.2019 and on 23.08.2019 respectively, the members of the CoC resolved to go for Liquidation by Resolution dated 09.10.2019. I.A. 715 of 2019 was filed seeking a direction from the Adjudicating Authority for liquidating the Corporate Debtor and the same was allowed. It is submitted that the Appellant/ Corporate Debtor was present in the sixth CoC Meeting held on 04.10.2019 and also in the eighth CoC Meeting held on 20.04.2020 which discussed the status of the Liquidation Application. The Liquidator kept the Appellant informed about filing of the Liquidation Application in the seventh CoC Meeting v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, whereas the Respondent issued a Public Announcement of the Liquidation Process on 18.07.2020 itself. Assessment: Issue of Limitation 5. The contention of the Learned Counsel for the Appellant that the date of NPA is 30.03.2015 and Section 7 Application was filed on 03.07.2018 and hence is barred by Limitation , is unsustainable as the material on record evidences the revival letters, written by the Corporate Debtor , the last one being 28.11.2015. It is seen that the Bank has enclosed these revival letters duly acknowledged and signed by the Corporate Debtor from time to time and the Section 7 Petition filed on 06.07.2018, cannot be said to be barred by Limitation . The ratio of the Hon ble Supreme Court in Dena Bank (Now Bank of Baroda) Vs. C. Shivkumar Reddy Anr. (2021) 10 SCC 330, is squarely applicable to the issue of limitation raised in this case as we hold that there is a jural relationship between the Bank and the Appellant herein and the revival letters addressed to the Bank substantiate debt as acknowledgement by the Appellant. 6. Additionally, it is seen from the record that the Order of Admission dated 26.04.2019 has not been challenged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed jurisdiction and authority either with NCLT or NCLAT, to review the commercial decision exercised by CoC of approving the resolution plan or rejecting the same. 151. The position is clarified by the following observations in paragraph 59 of the judgment in the case of K. Sashidhar (supra), which reads thus: 59. In our view, neither the adjudicating authority (NCLT) nor the appellate authority (NCLAT) has been endowed with the jurisdiction to reverse the commercial wisdom of the dissenting financial creditors and that too on the specious ground that it is only an opinion of the minority financial creditors .. 152. This Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra) after reproducing certain paragraphs in K. Sashidhar (supra) observed thus: Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h circumstances, we do not think the appellate authority ought to have interfered with the order of the adjudicating authority in directing the successful resolution applicant to enhance their fund inflow upfront. 155. This Court observed, that the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. This Court clearly held, that the appellate authority ought not to have interfered with the order of the adjudicating authority by directing the successful resolution applicant to enhance their fund inflow upfront. 156. It would thus be clear, that the legislative scheme, as interpreted by various decisions of this Court, is unambiguous. The commercial wisdom of CoC is not to be interfered with, excepting the limited scope as provided under Sections 30 and 31 of the I B Code. 8. The Hon ble Supreme Court in Jaypee Kingston Boulevard Apartments Welfare Association Ors. (Supra) has observed that there is an intrinsic assumption that Financial Creditors are fully informed about the viability of the Corporate Debtor and feasibility of the proposed Resolution Plan. They act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming a micro, small or medium enterprise. (1) Any person who intends to establish a micro, small or medium enterprise may file Udyam Registration online in the Udyam Registration portal, based on self-declaration with no requirement to upload documents, papers, certificates or proof. (2) On registration, an enterprise (referred to as Udyam in the Udyam Registration portal) will be assigned a permanent identity number to be known as Udyam Registration Number . (3) An e-certificate, namely, Udyam Registration Certificate shall be issued on completion of the registration process. 12. It is the cardinal principle of construction that every statue is prima facie prospective, unless it is expressly or by necessary implication made to have retrospective operation. The Hon ble Supreme Court in Keshoram Vs. The State of Bombay , AIR 1951 SC 128, has observed that a new law ought to regulate what is to follow, not the past and this presumption operates unless shown to the contrary by express provision in the statute or is otherwise discernible by necessary implication. The legal magazine nova constitutio futuris fornam imponery debet, right known praetpritis sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it relevant to refer to paragraphs 110.2 to 110.5 in Director General of Trade Anr. Vs. Kanak Exports Anr. (2016) 2 SCC 226, in which it is observed as hereunder: State of Rajasthan Ors. v. Basant Agrotech (India) Ltd. 21. There is no dispute over the fact that the legislature can make a law retrospectively or prospectively subject to justifiability and acceptability within the constitutional parameters. A subordinate legislation can be given retrospective effect if a power in this behalf is contained in the principal Act. In this regard we may refer with profit to the decision in Mahabir Vegetable Oils (P) Ltd. v. State of Haryana (2006) 3 SCC 620, wherein it has been held that: 41. We may at this stage consider the effect of omission of the said note. It is beyond any cavil that a subordinate legislation can be given a retrospective effect and retroactive operation, if any power in this behalf is contained in the main Act. The rule-making 10 (2006) 13 SCC 542 11 (2013) 15 SCC 1 Page 96 96 power is a species of delegated legislation. A delegate therefore can make rules only within the four corners thereof. 42. It is a fundamental rule of law that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Section 3 of the Conveyancing and Law of Property Act, 1892 (55 56 Vict. c. 13). In substance Section 3 provided that in all leases containing a covenant, condition or agreement against assigning, underletting, or parting with the possession, or disposing of the land or property leased without licence or consent, such covenant, condition or agreement shall, unless the lease contains an expressed provision to the contrary, be deemed to be subject to a proviso to the effect that no fine or sum of money in the nature of a fine shall be payable for or in respect of such licence or consent. It was held that the provisions of the said section applied to all leases whether executed before or after the commencement of the Act; and, according to Buckley, L.J., this construction did not make the Act retrospective in operation; it merely affected in future existing rights under all leases whether executed before or after the date of the Act. The position in regard to the operation of Section 5(1) of the amending Act with which we are concerned appears to us to be substantially similar. 10. A similar question had been raised for the decision of this Court in Jivabhai Purshottam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are detailed as follows: 43. According to us, it is clear that the opening words of Section 29A furnish a clue as to the time at which sub-clause (c) is to operate. The opening words of Section 29A state: a person shall not be eligible to submit a resolution plan . It is clear therefore that the stage of ineligibility attaches when the resolution plan is submitted by a resolution applicant. The contrary view expressed by Shri Rohatgi is obviously incorrect, as the date of commencement of the corporate insolvency resolution process is only relevant for the purpose of calculating whether one year has lapsed from the date of classification of a person as a non-performing asset. Further, the expression used is has , which as Dr. Singhvi has correctly argued, is in praesenti. This is to be contrasted with the expression has been , which is used in sub-clauses (d) and (g), which refers to an anterior point of time. Consequently, the amendment of 2018 introducing the words at the time of submission of the resolution plan is clarificatory, as this was always the correct interpretation as to the point of time at which the disqualification in sub-clause (c) of Section 29A will att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the NCLAT, or this Court taking time to decide an application beyond the period of 270 days, the time taken in legal proceedings to decide the matter cannot possibly be excluded, as otherwise a good resolution plan may have to be shelved, resulting in corporate death, and the consequent displacement of employees and workers. 19. The contentions of the Learned Counsel that amendments enforced during CIRP shall be applicable to decide the eligibility to submit the Resolution Plan that the promoters of the Corporate Debtor become eligible as the law was amended during the CIRP the threshold for MSME has been increased, is untenable in this case for the following reasons: It is an admitted position that the CIRP commenced on 26.04.2019, the MSME Notification amending the threshold was notified on 26.06.2020, wherein it is clearly specified that the MSME Act, 2006, would be effective from 01.07.2021. This itself makes it clear that the provisions therein are effective prospectively from 01.07.2021. Keeping in view the ratio laid down by the Hon ble Supreme Court in S.L. Srnivas Jute Twine Mills P. Ltd. (Supra) and in Director General of Trade Anr. (Supra), we hold ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
