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TMI Blog2017 (12) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (R7 - It is the Corporate Debtor against which R6 filed this CP) seeking this Bench to grant reliefs: a. To declare that the position of law clarified by the Ministry of Corporate Affairs by general Circular No. IBC/01/2017 - Notification No. 30/14/2017 - Insolvency dated October 25, 2017 would be applicable to the corporate insolvency resolution process of the Corporate Debtor; b. To declare that the in view of General Circular No. IBC/01/2017 - Notification No. 30/14/2017 - Insolvency dated October 25, 2017, approval of shareholders of the Original Respondent for actions under the resolution plan for its implementation which would have been required under the Companies Act, 2013 or any other law would not be required and would be deemed to have been given upon approval of a resolution plan by this Bench; c. To allow this Applicant to submit revised Resolution Plan after reducing the time earlier envisaged for obtaining shareholders' approval from the period for making cash payments for fresh vote thereon; d. To direct the Resolution Professional to present to the Committee of Creditors, modified Resolution Plan after reducing the time earlier envisaged for obtaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Plan after reducing the time earlier envisaged for obtaining shareholders' approval for change of period for making cash payments, consequently to direct Resolution Professional to present the modified Resolution Plan before CoC, basing on which, CoC be directed to cast votes on such modified Resolution Plan. The justification this applicant has given for seeking such reliefs is - (i) That the Corporate Debtor provides employment to 1200 workmen. (ii) That the turn-over of the Corporate Debtor for the years ended 31-03-2015, 31-03-2016 and 31-03-2017 is Rs. 372crores, Rs. 368crores, and Rs. 337crores respectively, besides this, the Corporate Debtor has contributed approximately Rs. 70crores towards taxes for the years ended 2015-16 and 2016-17. (iii) That the Resolution applicant is aggrieved of the wrongful rejection of the plan by CoC without giving an opportunity to the applicant to give revised Resolution Plan after considering the effect of the circular given by Ministry of Corporate Affairs on 25.10.2017. (iv) That the salient features of the proposed Resolution Plan are as follows: (a) There would be compulsory change in the management of the original Respondent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de contemplates ease of doing business facilitating more investment leading to higher economic growth and development, if this plan is not approved, all the objects behind enactment would get defeated. 6. As to the Notification given on 25.10.2017 by Ministry of Corporate Affairs clarifying that shareholders' approval not required for actions to be taken under the resolution process, the Counsel says, is directly repugnant to section 35 of Companies Act, 2013 mandating the company to pass an ordinary resolution for increase of share capital of the company. 7. The Counsel further submits that the time period of 270 days as contemplated u/s 12 of the Code is to be conceived as directory because the insolvency resolution process is a complex process that required assessment of business viability, preparation of Resolution Plan, discussions and negotiations with various stakeholders, he therefore says, strict adherence to the period would result in value destruction of the business of the corporate Debtor. 8. The Counsel appearing on behalf of the applicant has further tried to justify that the inherent power conferred upon NCLT under Rule 11 of the NCLT Rules is equally applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essional. 3................ Section 28: Approval of Committee of Creditors for certain actions. 1 ................ 2. ................ 3. No action under sub-section (1) shall be approved by the CoC unless approved by a vote of 75% of the voting shares. 4 ................ Section 30: Submission of Resolution Plan. 1 3. ................ 4. The CoC may approve a resolution plan by a vote of not less than 75% of voting share of the financial creditors. 5 ................ 6................ 11. When it has been replete in the provisions of the Code mandating resolution approved by CoC means a resolution with vote not less than 75% of the voting share of CoC, and when for passing a resolution, a cap is set out as an inbuilt measure in a statute without leaving any ambiguity to the judiciary, will it be open to this Bench to question or to alter the cap given by the legislation? I strongly believe that at least this Adjudicating Authority has no such jurisdiction to venture into. It is also to be kept in mind of us as to whether interpretation of a statute is open to this Authority when legislation in clear terms said what the mandate is. By reading the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rship firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and bankruptcy board of India, and for matters connected therewith or incidental thereto". 16. In this statement, what appears to us is, this is an Act come into force for consolidation of various laws such as repeal of Provincial Insolvency Act and Presidency - Towns Insolvency Act in addition to amendments to Sick Industrial Companies (special provisions) Repeal Act, 2003; Indian Partnership Act, Central Excise Act 1944, the Income Tax Act, the Customs Act, Recovery of Debts due to banks and Financial Institutions Act, the Finance Act, SARFAESI Act, Payment and Settlement Systems Act, 2007, the Limited Liability Partnership Act 2008 and Companies Act 2013, because until before this Act came into force, we did not have single law dealing with insolvency and bankruptcy. Why all these repeals and amendments were taken place is to consolidate the law in respect to insolvency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary to note the Code name itself is Insolvency and Bankruptcy Code applying insolvency to the company and bankruptcy to individuals. That being the case, can it be conceived that insolvency in respect to corporate persons is limited to resolution plan alone ignoring the liquidation process i.e. part and parcel of Part-II of this Code? To our sense, the phrase "insolvency resolution of corporate persons" mentioned in the statement is inclusive of liquidation process, therefore, it is inconceivable to understand that the Code has come into existence for restructuring of the companies alone and not for liquidation. If we see the objects closely, it is also clear a word " reorganisation" is included before the phrase "and insolvency resolution of corporate persons", so as to say that the phrase "and insolvency resolution of corporate persons" is not to indicate CIRP alone, strictly speaking the word "reorganisation" denotes some arrangement before proposing for liquidation. Had it been for only reconstruction to provide hair cut to save the company notwithstanding the fact about repayment capacity to pay to the creditors, for that purpose SICA was there, CDR mechanism, JLF mechanis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total financial liabilities. The majority vote will also involve a cram down option on any dissenting creditors once the majority vote is obtained. This is inevitable to arrive to a decision. The Adjudicator enables the RP to clarify matters of business from the creditors committee during the course of the IRP. For example, if the RP needs to raise fresh financing during the IRP, he/she may seek approval from the creditors committee rather than the Adjudicator. The list of these matters, which fall in the responsibility of the creditors committee, are specified in the Code. 21. In view of the statute mandate and the statements and objects of the enactment and the report of the Committee who drafted the legislation have not minced words in saying that the pre-requisite for approval of the resolution by CoC is 75% majority of the vote shares of the CoC, as against this, I wonder how this Bench could interfere into the wisdom of the CoC to say that less than 75% majority is also a possibility to pass a resolution. 22. This issue has already come before this Bench in the past, it was already held that there could not be any occasion to this Bench to look into a resolution plan tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate debtor or corporate person; (b) Any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and (c) Any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings or the corporate debtor or corporate person under this Code. 25. Looking at this section, it is understandable that sub-section 1 of this section speaks that the Adjudicating Authority under this Code shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located, so, the thing visible is, the territorial jurisdiction of the Adjudicating Authority is as is given to NCLT for trying matters. 26. In sub-section 2, if any application relating to insolvency resolution or bankruptcy of a personal guarantor of any corporate debtor is to be filed or initiated, if any corporate insolvency resolution process or liquidation of proceedings of the respective corporate debtor is already pending before NCLT, it has to be filed before the respective NCLT only. 27. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has already been decided by them in compliance of the provision of this Code. 32. 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 as if they were not in the mind of the legislators when this Code has been passed. To bring in this Code, thorough exercise has been done by studying the Indian law and various foreign laws, thereafter committee dedicated its time and then it went before parliament, referred to standing committee, soon after examination by the standing committee; bill has been approved by the Parliament after thorough discussion. Can such legislation be changed by this Authority applying its wisdom or ignorance, ignoring all the exercises that have been made by this country? We believe it is not. As to Notification given by government on 25.10.2017, it has been given to say that requisite of shareholders' resolution or approval is not an impediment to carry out the resolution plan, it need not be read into to say that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted, it cannot be achieved indirectly by truncating the special jurisdiction given under the said statute. 38. As we said in the MA filed by the Resolution Applicant, the jurisdiction lies with this Bench to exercise its power u/s 31 of IBC only when a plan is approved by the CoC as stated in the Code, here, for no plan has been approved by the CoC, there cannot by any occasion to this Bench to make any observation in respect to a decision come from CoC meeting. In section 30 also, no discussion has made in respect to rejection of a Resolution Plan, it only talks about approval of a Plan with 75% super majority of vote share of the CoC. When there is no consensus to take any decision with 75% majority, it cannot be said that this Bench will interfere with the rights of the Committee of Creditors. When no decision has been taken by CoC, no jurisdiction will lie to this Bench to make any observation, that apart, the jurisdiction given u/s 30 is only limited to approve or reject the Resolution Plan approved by the CoC with super majority. When such is the case, how could it be expected that this Bench would be in a position to invoke its jurisdiction to go into the claim made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved plan has come before this Bench for examination under Section 31 of the Code. Since the approved plan has not been received by this Authority u/s 30(6) of the Code, this Bench has not even got the occasion to examine a plan under section 31 of the Code, therefore, the relief sought by this Workmen organization is beyond the reach and power given to this Adjudicating Authority, therefore this Application is hereby dismissed. IA 72/2017 41. This Intervention (Misc.) Application is filed under Section 33 r/w Section 60(5) of the Code by the Applicant/RP with a prayer to pass an order requiring the Corporate Debtor to be liquidated 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, to direct the copy of order to be sent to the RoC Mumbai and to permit the RP to continuing in its role as the RP pending hearing and final disposal of the present application in the interim period, till the pronouncement of the liquidation of the order. The moratorium to continue beyond October 14, 2017 and the RP to continue in its role as an RP and to be paid not less than the remuneration pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n non-executive capacity on contractual basis. Again, this proposed resolution plan was placed during 11th CoC meeting dated 4.10.2017, wherein since all members of the CoC were physically present, it was agreed that the voting on the proposed plan would take place by electronic means in the period between 3.00 p.m. on 6.10.2017 to 3.00 on 7.10.2017 as contemplated under regulation 26(1) of CIR regulations. On conclusion of the electronic voting process on 7.10.2017, 66.6% of the vote shares of the CoC voted in favour of the Resolution Plan whereas, 33.4% of the voted shares of the CoC voted against the Resolution Plan, since this Resolution Plan could not get approval of not less than 75% of the vote share of the CoC, on 10.10.2017 the CoC resolved that the Resolution Professional should continue conducting its role during the interim period until such time this Bench passes the liquidation order by agreeing about the liquidation fee and also for the retaining the key employees of the corporate debtor by providing a cumulative amount of Rs. 10 lakhs per month by the secured creditors for a period of 3 months from 04.10.2017. 46. Since the Resolution Plan has not been approved by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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