2021 (3) TMI 496 - SC - Insolvency and Bankruptcy

Power of NCLT - Corporate insolence resolution proceedings - Direction to the Government for extension of mining lease - time limitation - whether the provisions of Section 14 of the Limitation Act or the principles laid down therein would be available to KIAL for exclusion of the period during which it was prosecuting the writ petition before the Division Bench of the Bombay High Court? - HELD THAT - When a certain period is excluded by applying the principles contained in Section 14 there is no delay to be attributed to the appellant and the limitation period provided by the statute concerned continues to be the stated period and not more than the stated period. It was therefore held that the principle of section 14 which is a principle based on advancing the cause of justice would certainly apply to exclude time taken in prosecuting proceedings which are bona fide and pursued with due diligence but which end without a decision on the merits of the case - Coming to the facts of the present case immediately after NCLT pronounced its judgment on 28.11.2019 and even before the certified copy was made available on 18.12.2019 KIAL had filed writ petition before the Division Bench of the Bombay High Court on 11.12.2019 on the principal ground that the procedure followed by NCLT was in breach of principles of natural justice. Such a ground could be legitimately pursued before a writ court. In that sense it was not a proceeding before a wrong court as such. Perusal of the judgment and order dated 28.1.2020 passed by the Division Bench of the Bombay High Court which dismissed the writ petition on the ground of availability of alternate and equally efficacious remedy would reveal that the said writ petition was hotly contested between the parties and by an order running into 32 pages the Division Bench of the Bombay High Court dismissed the petition relegating the petitioner therein (i.e. KIAL) to avail of an alternate remedy available in law. This Court found that the petitioner therein had adopted tactics of taking chances by approaching High Court of Delhi which had no territorial jurisdiction. As such it was found that neither the writ petition nor the appeal before the Delhi High Court could be construed to be a bona fide. It was further noticed that there was an inordinate delay of 697 days. It is thus apparent that the petitioner therein had not satisfied the necessary conditions for applicability of Section 14 - the petitioner was bona fide prosecuting his remedy before the High Court and that too with due diligence. NCLT did not have jurisdiction to entertain an application against the Government of Karnataka for a direction to execute Supplemental Lease Deeds for the extension of the mining lease. Since NCLT chose to exercise a jurisdiction not vested in it in law the High Court of Karnataka was justified in entertaining the writ petition on the basis that NCLT was coram non judice - thus KIAL was entitled to extension of the period during which it was bona fide prosecuting a remedy before the High Court with due diligence. Whether there was waiver and acquiescence by KIAL so as to estop it from challenging the participation of Kalpraj? - HELD THAT - For constituting acquiescence or waiver it must be established that though a party knows the material facts and is conscious of his legal rights in a given matter but fails to assert its rights at the earliest possible opportunity it creates an effective bar of waiver against him. Whereas acquiescence would be a conduct where a party is sitting by when another is invading his rights. The acquiescence must be such as to lead to the inference of a licence sufficient to create a new right in the defendant. Waiver is an intentional relinquishment of a right. It involves conscious abandonment of an existing legal right advantage benefit claim or privilege. It is an agreement not to assert a right. There can be no waiver unless the person who is said to have waived is fully informed as to his rights and with full knowledge about the same he intentionally abandons them. It is in dispute as to whether RP had again directed KIAL and Kalpraj vide email dated 11.2.2019 to submit revised plan. It is asserted on behalf of the KIAL that such email was received by it whereas it is denied by RP. In any event it is not in dispute that both KIAL and Kalpraj submitted their revised plans on 12.2.2019 - On 13/14.2.2019 the resolution plan of Kalpraj was accepted by CoC. On 18.2.2019 RP filed M.A. No.691 of 2019 before NCLT for approval of the resolution plan of Kalpraj. KIAL filed its M.A. No. 1039 of 2019 on 14.3.2019 before the Adjudicating Authority objecting to the approval of resolution plan of Kalpraj. KIAL had objected to participation of any other applicant submitting plan after the due date as per the last Form G and also reiterated its objection we are of the considered view that it cannot be held that having participated by submitting the revised plans KIAL is estopped from challenging the process on the ground of acquiescence and waiver. Merely because the revised plans are not submitted with the words without prejudice in our view would not make any difference - KIAL had no other option than to submit its revised plans in view of clause 11.2 of the Process Memorandum. Inasmuch as had it not responded it had to run the risk of being out of fray - thus the conduct of the party is relevant for considering whether it can be held that a case is made out of waiver or acquiescence. Whether NCLAT was right in law in interfering with the decision of CoC of accepting the resolution plan of Kalpraj? - HELD THAT - The Committee was of the view that for deciding key economic question in the bankruptcy process the only one correct forum for evaluating such possibilities and making a decision was a creditors committee wherein all financial creditors have votes in proportion to the magnitude of debt that they hold. The BLRC has observed that laws in India in the past have brought arms of the Government (legislature executive or judiciary) into the question of bankruptcy process. This has been strictly avoided by the Committee and it has been provided that the decision with regard to appropriate disposition of a defaulting firm which is a business decision should only be made by the creditors - The Committee also expressed the opinion that there should be freedom permitted to the overall market to propose solutions on keeping the entity as a going concern. The Committee opined that the details as to how the insolvency is to be resolved or as to how the entity is to be revived or the debt is to be restructured will not be provided in the I B Code but such a decision will come from the deliberations of CoC in response to the solutions proposed by the market. This Court has held that it is not open to the Adjudicating Authority or Appellate Authority to reckon any other factor other than specified in Sections 30(2) or 61(3) of the I B Code. It has further been held that the commercial wisdom of CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescribed by the I B Code. This Court thus in unequivocal terms held 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 - It has been held that the legislature has consciously not provided any ground to challenge the commercial wisdom of the individual financial creditors or their collective decision before the Adjudicating Authority and that the decision of CoC s commercial wisdom is made nonjusticiable. 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. Appeal disposed off.

Summary

Issues Involved:
1. Limitation period for filing appeals before NCLAT.
2. Waiver and acquiescence by KIAL.
3. Interference by NCLAT with CoC's decision on the resolution plan.

Detailed Analysis:

1. Limitation Period for Filing Appeals Before NCLAT:

The primary issue was whether the appeals filed by KIAL before NCLAT were within the limitation period. The judgment emphasized that the I&B Code is a complete code in itself, and the limitation for appeals is governed by Section 61(2) of the I&B Code, which prescribes a 30-day period for filing appeals with a possible extension of 15 days if sufficient cause is shown. KIAL filed a writ petition before the Bombay High Court on 11.12.2019, which was dismissed on 28.1.2020, and then filed the appeal before NCLAT on 18.2.2020. The court held that the period during which KIAL was bona fide prosecuting the writ petition before the High Court should be excluded when computing the limitation period, applying the principles underlying Section 14 of the Limitation Act. This made the appeal filed by KIAL within the limitation period.

2. Waiver and Acquiescence by KIAL:

The court examined whether KIAL had waived its right to challenge the acceptance of Kalpraj's resolution plan by submitting revised plans after Kalpraj was allowed to participate. The court noted that KIAL had objected to the acceptance of Kalpraj's plan immediately upon learning of it and reiterated its objections subsequently. The court found that KIAL had no meaningful choice but to submit its revised plans due to clause 11.2 of the Process Memorandum, which required submission of additional information if requested by RP or CoC. The court concluded that KIAL's actions did not amount to waiver or acquiescence, as it consistently objected to Kalpraj's participation and submitted revised plans under compulsion.

3. Interference by NCLAT with CoC's Decision on the Resolution Plan:

The court emphasized the paramount status given to the commercial wisdom of the Committee of Creditors (CoC) under the I&B Code, which is not subject to judicial intervention except on limited grounds specified in Sections 30(2) and 61(3) of the I&B Code. The court held that NCLAT exceeded its jurisdiction by interfering with the CoC's decision, which was taken by a thumping majority of 84.36%. The court reiterated that the Adjudicating Authority (NCLT) and the Appellate Authority (NCLAT) are not endowed with the jurisdiction to reverse the commercial decisions of CoC. The court restored the NCLT's order approving Kalpraj's resolution plan and quashed NCLAT's order directing CoC to reconsider the resolution plans.

Conclusion:

The Supreme Court allowed the appeals filed by Kalpraj, RP, and Deutsche Bank, setting aside NCLAT's order and restoring NCLT's order approving Kalpraj's resolution plan. The court held that KIAL's appeals before NCLAT were within the limitation period, KIAL had not waived its rights, and NCLAT erred in interfering with the CoC's commercial decision. The court directed NCLAT to decide the appeal of Fourth Dimension Solutions Limited expeditiously.