TMI Blog2017 (12) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... ith this law. It has to be borne in mind, it is an overriding provisions in respect to other laws but not to the provision of this Code, therefore, if any law is laid down in this Code to do a particular thing in particular manner, this Authority cannot exercise this jurisdiction given under this sub-section to override a specification already given in this Code by giving an interpretation contrary to the mandate in that particular section. It has to be understood that this sub-section is not meant for exercising jurisdiction over the mandates already given in the Code. Therefore, asserting jurisdiction u/s 60(5) of the Code to tweak super majority is a misconceived idea, therefore, we have not found any merit to consider the plea of this applicant to direct the committee of creditors to take up something which has already been decided by them in compliance of the provision of this Code. The applicant counsel has raised various contentions saying that workmen will suffer; the resolution plan value is double to the net liquidation value given by the valuers, likewise many other contentions. By seeing all these contentions, can all these assume jurisdiction to this Authority to go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in terms of the provisions of Chapter III of Insolvency & Bankruptcy Code, to issue a public announcement stating that the Corporate Debtor is in liquidation - Held that:- The Insolvency Resolution Process of 270 days is already over by 14.10.2017, since no resolution plan has been received by this Bench, as contemplated u/s 30(6) of the Code, this Bench hereby orders the Corporate Debtor to be liquidated in the manner as laid down in this Chapter, to issue a public announcement stating that corporate debtor is in liquidation and also to send this order to the RoC with which the corporate debtor is registered by appointing the Resolution Professional herein as the Liquidator u/s 34 of the Code for the purposes of this liquidation by holding that all powers of the Board of Directors, key managerial personnel and the partners of the Corporate Debtor will cease to have effect and shall be vested in the liquidator with direction to the personnel of the corporate debtor and to extend cooperation to the liquidator as may be required by him in managing the affairs of the corporate debtor. RP appointed as liquidator is entitled to charge fees for the conduct of the liquidation process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the financial creditors comprised in the Committee of Creditors to cast votes on such modified Resolution Plan; 2. The applicant says that this application has been filed by it and on behalf of other resolution applicants namely Kitara International Ltd. and Lighthouse Partners. It says that the Corporate Debtor (R7) is a multi-product company catering to applications in diverse sectors such as automobile, boiler and heat exchangers, energy, oil and general engineering. It specializes in processing various types of steels, faster development cycles, flexible production systems, effective supply chain management for efficient delivery and capability to make tubular transformations and it always comes out with continuous innovations. 3. The resolution applicant on September 3, 2017 submitted a term sheet along with proposed Resolution Plan for ₹ 284.3crores (in present value terms) @13% discounting rate with a compulsory change in management of the company to make a cash payment of around ₹ 180crores within a period of one year subject to all approvals and for conversion of residual debt ₹ 1191.9crores) into Cumulative Convertible Optionally Redeemable Prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) Conversion of loan into CCORPS, redemption of which would be guaranteed by the promoters of the Corporate Debtor. (d) The proposed Resolution Plan contemplated funds through Rights Issue/Preferential allotment of shares, which requires shareholders approval under the provisions of Companies Act, 2013. (v) For the value of the Resolution Plan being more than double to the net liquidation value of ₹ 135.40crores, it is the only viable alternative for liquidation. (vi) The requirement of 75% vote in favour of a resolution plan is directory and not mandatory, for saying this, the applicant relied upon judgments in between Dalchand v.. Municipal Corporation,, Bhopal and Anr. [1984] 2SCC p486, State of Haryana v. Raghubir Dayal [1995] 1SCC p133, to say that the word shall in section 33(1) of the Code does not leave any discretion with this Bench Is flawed. To support the contention of the applicant, it has also relied upon a decision given by NCLT (Bench-II) Mumbai in the case of Raj Oil Mills Ltd. v.. Edelweiss Asset Reconstruction Co. Ltd. on 15.09.2017 giving approval for replacement of Interim Resolution Professional with Resolution Professional though 61.8% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of process because the ultimate object of the Court is not liquidation of asset but to save the business of the company. If at ail this proposed Resolution Plan is rejected, the object of the Code will get defeated. 9. On hearing the submissions of this applicant, the moot point to be adjudicated is as to whether this Adjudicating Authority has jurisdiction to exercise over a decision taken by CoC as contemplated in the Code . 10. The Code in clear terms has stated that any decision that has been taken by CoC in the Corporate Insolvency Resolution period shall be a resolution with 75% voting shares of CoC. Since this being the conspectus of law, to conceive why any approval of CoC shall be an approval with 75% of the voting shares of the creditors, it is imperative to go through various provisions of this Code, which has dealt with the approval of CoC and the resolution plan. The provisions are as follows: Section 12: Time limit for completion of Insolvency Resolution process 1 2. The resolution professional shall file an application to the Adjudicating Authority to extend the period of the Corporate Insolvency Resolution Process beyond 180 days, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 75% voting share of CoC is non est in law. 12. In section 21 (8) of the Code, it has been mandated that all decisions of the CoC shall be taken by a vote of not less than 75% of voting shares of the Financial Creditors. Neither a proviso, nor is any exception carved out to this section saying this mandate is exempted in so and so situations. Can there be any thing clearer than this? 13. It goes without saying, if anybody wants to venture into interpretation of a statute, first it has to be ascertained that reading of a section is not giving any meaning or the meaning that comes out of such section is absurd and inconsistent with the remaining part of the legislation. After having come to such conclusion that section is unable to reflect any meaning, then heading of the meaning is to be seen, if the heading of the section is also of no meaning, then to see the heading of the respective chapter, after doing all these exercises, even then also, if one is unable to construct the meaning of the section, then to go to the statement and objects of the statute and then to see Committee reports to find out as to what the intention of the enactment in respect to the section that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l framework for timely resolution of insolvency and bankruptcy to support development of credit markets and encourage entrepreneurship. The reason for consolidation is to make insolvency and bankruptcy resolution in a time bound manner for maximization of value of assets of various persons mentioned above to promote entrepreneurship, availability of credit and balance of interests of all stakeholders. The basic idea to bring all at one place is, to avoid answering every time legal issues such as overlapping issues, repugnancy issues, jurisdictional issues, obtaining stays on the ground some other Act is in play, multiplicity of proceedings to achieve the object, like wise plethora of issues. And it was not working also. One answer for all this is single window approach. Had it been the intendment that reorganisation or restructuring is the primacy of this Code, there were many for it, SICA, JLF etc. All failed. The only object in leaving everything to the domain of creditors is, because their stake is stuck in the company, so far in our experience, we have seldom come across a company that has assets more than liabilities, means what, what is left in the company is less than the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignoring the mandate given in law, it is absurd thought. Moreover that wisdom is not in the realm of this Authority, that Wisdom was already applied by the Parliament - apex policy making body in respect to governance of this Country. Supplementation or tweaking the law is not possible. Here also, no timeline is given to what extent resolution period will continue, the only difference is a calm period is set out to enter into a resolution plan with 75% of voting share of CoC. Resolution or no resolution, it is a business decision by CoC with complete authority, this Bench cannot go into the decision of CoC. 18. In report of the bankruptcy law reforms committee, it has been said as follows in respect to primacy of the Code: The Joint Committee is of the opinion that freedom should be permitted to the overall market to propose solutions for keeping the entity as a going concern. Since the manner and the type of possible solutions are specific to the time and environment in which the insolvency becomes visible, it is expected to evolve over time, and with the development of the market. The Code will be open to all forms of solutions for keeping the entity going without prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... majority as set out in the Code, because under section 31 of the Code, the Adjudicating Authority is given power to examine as to whether the plan approved by the Committee has complied with section 30(2) of the Code or not, if complied with, it has to be approved by this Authority, if not complied with, to reject the resolution plan approved by the committee with not less than 75% voting share of the company. By reading this, to invoke the jurisdiction of this Authority, there must be a resolution plan approved by the Committee with 75%. So, there is total prohibition upon this Bench to go into as to whether approval of 75% is required or not and as to whether resolution plan approved by the committee is otherwise correct or not, except as mentioned in section 31 of the Code. 23. Though it has not been mentioned in the application that this application falls under section 60(5) of the Code, it has been asserted in the written submission filed by the Counsel that this application falls within the realm of section 60(5) of the Code. Before we have light upon sub-section 60(5) of the Code, it has to be kept in mind when a special procedure has been carved out giving dos and do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to sub-section 2 for transfer of pending insolvency and bankruptcy proceedings against personal guarantor shall be transferred to the Adjudicating Authority dealing with insolvency resolution process or liquidation proceedings of such corporate debtor. 28. Sub-section 4 says, if any such personal guarantor happens to be an individual falling within Part-Ill of this Code, respective Adjudicating Authority is vested with power to deal with that matter by exercising power given to the recovery tribunal under Part-Ill. 29. By looking at all these preceding four sub-sections, it can be understood that they only speak of subject matter jurisdiction and territorial jurisdiction, nothing else. So is the case, with sub-section 5 as well. 30. Sub-section 5 starts with non-obstante clause saying that notwithstanding any other law contrary to this Code, this Authority shall have jurisdiction to decide any application or proceeding by or against the Corporate Debtor or corporate person, any claim made or against by the Corporate debtor or corporate person including clients by or against any of its subsidiaries situated in India and also in respect to the priority of any question of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation before passing order of liquidation. The language is simple and clear saying shareholder approval is not required to the resolution plan or to any of its clauses. MA 530/2017 33. This is an Application filed by the promoter reiterating what all the grounds the Resolution Applicant raised in MA 557/2017. Since this Bench has already decided MA 557/2017 adjudicating all the grounds which have been repeated in this Application, for the sake of avoiding repetition, this application is also dismissed with an observation to read the grounds and reasons given in MA 557/2017 which are equally applicable to this MA as well. Accordingly, this application is hereby dismissed . MA 529/2017 34. This is an Application filed by the Workmen stating that if this company has been liquidated, the workmen will suffer for it has been providing livelihood for more than 2000 families, in view of the same, these workmen also pray this Bench for a direction to CoC to reconsider their decision enabling this Company to continue as before with some kind of resolution so that the workmen depending on this company can survive. 35. Looking at the prayer sought by the Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he workmen. Therefore, this Application is hereby dismissed making an observation that this Bench is devoid of jurisdiction to decide this application. MA 590/2017 39. The same Workmen s Union filed another MA 590/2017 to seek orders that liquidation shall not be initiated because the object of the IBC is to balance interest among all the stakeholders, since these workers being a class of the stakeholders, their interest should be taken care of on the same footing as the interest of the creditors is taken care of. This union has further stated since lot of recoveries pending in various Courts to a tune of ₹ 150crores, this authority may direct for recovery of those and the proceeds from those recoveries be distributed among the CoC so that the CoC may rethink about the Resolution Plan and change their decision for about going for liquidation. The Workmen raised a point that they have stake in the company, therefore, they have right to protect their right to work which has been given to them under Article 41 of the Constitution of India r/w Article 14 of the Constitution. They are ready to contribute their gratuity and provident fund among the dissenting creditors i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an the remuneration paid to him during the CIRP period. 42. In the admission order dated 17.01.2017 passed under section 14 of Insolvency and bankruptcy Code, the Applicant herein was appointed as Interim Resolution Professional for the Corporate Debtor, subsequently he was confirmed as RP by the CoC of the Corporate Debtor. In pursuance of the provisions of the Code, this Applicant prepared an information memorandum u/s 29 of IBC, whereupon, Kitara Capital Pvt. Ltd., Suyash Outsourcing Pvt. Ltd., Light House Partners and their Co-investors (collectively the Resolution Applicants) supported by the promoter namely Chandu Chavan submitted a term sheet dated 03.09.2017 along with a proposed Resolution Plan on 03.09.2017. 43. In the meanwhile, this applicant appointed M/s. Duff and Phelps and M/s. Vidyasagar Jadhav as registered valuers for determination of the liquidation value of the corporate debtor. The estimate provided by the M/s. Duff and Phelps was for ₹ 143 crores and the estimate given by M/s. Vidyasagar Jadhav was for ₹ 256 crores, this applicant, having seen the difference in the estimates given by the above two valuers, appointed M/s. Acumen Financial Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .10.2017. 46. Since the Resolution Plan has not been approved by the CoC, for having already provisions have been set out to continue the company with the funding from the secured creditors, the Applicant filed this Application for ordering the corporate debtor to be liquidated in terms of this Code. 47. As to super majority to be obtained for approving Resolution Plan has already been discussed in the MA 557/2017, it need not be repeated to say that when Resolution Plan has not been approved by not less than 75% of the vote shares of the CoC, when a report has been made by the Resolution Professional seeking prayer for the corporate debtor to be liquidated, it is imperative on the part of this Bench to pass a liquidation order as mentioned under 33(1) of IBC. 48. The Insolvency Resolution Process of 270 days is already over by 14.10.2017, since no resolution plan has been received by this Bench, as contemplated u/s 30(6) of the Code, this Bench hereby orders the Corporate Debtor to be liquidated in the manner as laid down in this Chapter, to issue a public announcement stating that corporate debtor is in liquidation and also to send this order to the RoC with which the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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