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TMI Blog2018 (5) TMI 1557X X X X Extracts X X X X X X X X Extracts X X X X ..... ting Mr. Atanu Mukherjee as Interim Resolution Professional (IRP). However, the Committee of Creditors in its first meeting took a unanimous decision to change Mr. Atanu Mukherjee and proposed appointment of Shri Sanjeev Ahuja as Resolution Professional. The name of Shri Sanjeev Ahuja as a Resolution Professional has been confirmed by Insolvency and Bankruptcy Board of India (IBBI) vide order dated 11th September 2017. In the meanwhile, the initial period of the CIR process was expired on 25.09.2017. As per an application moved by the Resolution Professional (C.A. No.388 of 2017) the CIRP duration has been extended by 90 days on the strength of a unanimous decision of the CoC, thereby the extended period of CIR process was expired on 25-12-2017. 2. In the meanwhile, on 04-01-2018 Ld. Resolution Professional filed a report stating that upon conclusion of CoC meeting on 21-12-2017 the resolution plan was put to vote and that the plan has been approved with a vote share of 68.50% by way of e-voting. In the meanwhile two of the financial creditors of CoC moved appeals against an interim order passed by this Adjudicating Authority and got a stay and therefore this Adjudicating Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elay in filing the Resolution Plan approved by the CoC is because of the stay of the proceedings of this Bench by the Hon'ble appellate Tribunal in CA (AT) (Insolvency) No. 330 of 2017 in the appeal filed by PNB. It is contended on behalf of the Resolution Professional that the period of stay obtained by the above said financial creditor before the Hon'ble Appellate Tribunal shall be excluded from the period of CIRP and if it is excluded the filing of the Resolution Plan is within time. The Resolution Professional also contends that the reconsideration of votes of assenting and dissenting creditors was considered by the financial creditors as per an order of the adjudicating authority in CA(IB) No.50 of 2018 and CA (IB) No.50 of 2018 has been filed by the Resolution Applicant seeking directions against the dissenting and absenting creditors to reconsider their decision regarding the approval of the plan. Upon the said contentions resolution professional prays for approving the plan. 5. Considering the objections of two financial creditors as against approval of the resolution plan submitted by the resolution professional on 06-04-2018, two questions arise for consideration. Firstl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gued by the Ld. Sr. Counsel for the resolution applicant. 8. Before answering the above said questions, let us see the background in filing the CP and the events took place during the CIRP in the case in hand. CIRP initiated as per the order of this Bench dated 30-03-2017. The CP NO.170/KB/2017 has been filed by RBL Bank Limited under Section 7 for initiating CIR process as against the Corporate Debtor/MBL Infrastructure Limited. MBL Infrastructure Limited seems to have set up in 1995 is engaged in infrastructure projects (mainly roads and buildings) which are under development / construction across the state. From a perusal of the records it is understood that due to various factors including recurrent downturn, mismanagement of cash flows, excess of short term funds being used for long term purposes, termination of few projects, the dues from the clients getting into litigation, non-renewal of working capital limits from the Consortium of Banks and resultant loss of important personnel from various sites and offices led to delay in completion of most of the projects and got the company into the current situation of financial distress. 9. Due to failure on the side of the corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meantime the Ministry of Law and Justice, Government Of India, notified the IBC (Amendment) Ordinance 2017 on 23-11-2017 which provides for, inter alia, additional provision laying down certain disqualification in respect of persons interested in submitting the resolution plan. After the amended ordinance came in force the financial creditors raised concerns questioning the eligibility of the resolution applicant who is none other than a promoter director of the corporate debtor who has given personal guarantee to the corporate debtor. According to them he is in eligible under amended section. Section 29A(c) and (h). The CoC therefore took a decision on the basis of the objections of certain financial creditors on 11-12-2017 to seek clarification regarding the resolution applicant's eligibility from the Adjudicating Authority. 12. While so the Resolution Applicant Mr. A.K. Lakhotia himself filed CA (IB) No.543/KB/2017 before this Bench on 12-12-2017 for clarification regarding his eligibility under section 29A (c) (h) of the Code. That application was disposed of by this Adjudicating Authority vide order dated 18-12-2017. It is good to read two paragraphs in page No.14 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of time. There were 100% attendance of the members of the CoC meeting held on 21-12-2017. However, certain members of the CoC expressed their intention to discuss internally among themselves before voting. 14. The Resolution Professional as well as the Corporate Debtor team were asked to move out from the hall of the meeting and after having an internal discussion among the Committee of members themselves, they informed the professional to put the Resolution Plan of Mr. Lakhotia to votes instead of ballot voting directed the Resolution Professional to conduct e-voting. It is significant to note here that when the voting requisition of the plan has been finally considered by the CoC, the CIR process duration is to be expired within four days of the meeting held on 21-12-2017. The e-voting have been completed on 22-12-2017 by the Resolution Professional. As per the said voting the plan was approved with 68.50% voting share. Out of 20 members of the Committee of Creditors /financial creditors, the majority financial creditors' voted in favour of the Resolution Plan. Three financial creditors supported the plan. Six financial creditors voted against the plan and one financial credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .50/KB/2018 in part vide order dated 15-01-2018 and issued directions to the resolution professional to issue notice of the application to the descending and abstaining creditors. The effect of the said notice is that the above said financial creditors were given one more opportunity to reconsider their option either to reconfirm the disapproval or to approve the only one resolution plan which was not acquired required voting share as per section 30(4) of the Code in the 12th meeting of the CoC held on 21-12-2017. 18. On the basis of the directions, the Resolution Professional has issued notice by serving copy of the CA. No.50 of 2018 to the dissenting creditors namely Allahabad Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, IDBI Bank, and the Oriental Bank of Commerce and to Indian Overseas Bank (IOB) who abstained from voting. Upon receipt of the notice, out of the 7 creditors, the above referred Indian Overseas Bank and Bank of Maharashtra gave its assents. The relevant extract of the said two creditor's reply is shown as below. (i) The Indian Overseas Bank issued an email on January 31, 2018 under which Indian Overseas Bank has stated; "we hereby advise that our t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Ld. Counsel appearing for the Resolution Applicant, in computation of the period of CIR process the period of inter party litigation initiated at the instance of the financial creditors is to be excluded and if it is excluded, the Resolution Plan submitted for the approval of the adjudicating authority is within time. The said submission was challenged by the Ld. Counsel appearing for the IDBI. IDBI also filed CA(IB) 238/KB/2018 challenging extension of the CIRP beyond 270 days as it is prohibited under section 12 of the Code and also challenged the reconsideration of voting after the expiry of 270 days. The objection raised by the IDBI in the application is therefore is the objection against the approval of the resolution plan. Therefore the said CA was heard along with the CP. 23. Similarly Bank of Baroda also filed CA. (IB) No. 270/KB/2018 challenging the approval of the Resolution Plan contending the very same contention of the IDBI. It contended that any modification of the resolution plan after completion of 270 days as provided under section 12 of the Code is bad in Law and that any reconsideration by dissenting creditors on resolution plan after the time limit for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above cited decision. It reads as follows: Regard being had to be modern trend of authorities referred to in the concurring judgment in Ms. Eera through Dr. Manjula Krippendorf (supra), we need not be afraid of each Judge having a free play to put forth his own interpretation as he likes. Any arbitrary interpretation, as opposed to fair interpretation, of a statute, keeping the object of the legislature in mind, would be outside the judicial ken. The task of a Judge, when he looks at the literal language of the statute as well as the object and purpose of the statute, is not to interpret the provision as he likes but is to interpret the provision keeping in mind Parliament's language and the object that Parliament had in mind. With this caveat, it is clear that judges are not knight-errants free to roam around in the interpretative world doing as each judge likes. They are bound by the text of the statute, together with the context in which the statute is enacted; and both text and context are Parliaments', and not what the Judge thinks the statute has been enacted for. Also, it is clear that for the reasons stated by us above, a fair construction of Section 9(3)(c), in consonanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmittee of creditors by a vote of 75% of the voting shares. The provision does not stipulate that such application is to be filed before the Adjudicating Authority within 180 days. If within 180 days including the last day i.e. 180th day, a resolution is passed by the committee of creditors by a majority vote of 75% of the voting shares, instructing the resolution professional to file an application for extension of period in such case, in the interest of justice and to ensure that the resolution process is completed following all the procedures time should be allowed by the Adjudicating Authority who is empowered to extend such period up to 90 days beyond 180th day." 29. While allowing the appeal preferred by Quantum Limited, the Hon'ble Appellate Tribunal set aside the interim order and extended the period of resolution process for another 90 days counted from the date of order of the appellate tribunal. The Hon'ble Appellate Tribunal has held that "The period between 181 days and passing of this order shall not be counted for any purpose and is to be excluded for all purposes and is to be excluded for all purpose". According to Ld Counsel for the IDBI the proposition in the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Part, the period during which such moratorium is in place shall be excluded." 33. From a reading of the above rules what we understood is that a Tribunal in its discretion from time to time in the interest of justice and for reasons to be recorded, enlarge such period, even though the period fixed by or under these rules or granted by the Tribunal may have expired. This is a case in which so many issues came up for consideration before us during the period of CIRP. The CoC has changed the IRP thereby there is change of IRP. During the consideration of the only one plan of the resolution applicant an amended Ordinance was notified laying down certain disqualification to promoter directors of a company like the promoter in the case in hand. A clarification was sought for by the resolution applicant before the Bench. Against the order of clarification two of the financial creditors filed appeal before the Hon'ble NCALT. There was an order of stay restricting this Bench from proceeding further in regards approval of the plan. 34. Bare in mind the object of the Code, the legislative intention behind the enactment of the Code, in the larger interest of the public, the workmen and othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of time may be demanded, depending on the facts and circumstances of a given case." 36. Bare in mind the above said proposition and the Rule 15 and 153 of NCLT Rule, 2016 it appears to us that even in a case if we are satisfied that grave injustice would be occurred if a prayer of extension for a no fault of applicant is occurred this Adjudicating Authority can extend the time limit provided under section 12 of the Code. However we are not asked to extend the time limit as provided under section 12 of the code but to exclude the period due to litigation and upon the above said finding we already held that exclusion of period due to litigation is liable to be allowed in a case of this nature. So we are not holding that we can extend the period of CIRP as prescribed under section 12 of the Code. 37. The next question is whether reconsideration by dissenting creditors and abstain creditor on resolution plan after the time limit of completion of insolvency process can be allowed?. Both Ld. Counsel for IDBI and Bank of Baroda raised the above question. In answering the first question posed by the above said financial creditors we already come to a conclusion that the time period due t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted, is within their own power and choice. No specific bar in the Code or Regulation brought to our notice to have a different view than the view we have taken as above. Two dissenting financial creditors out of 20 financial creditors alone challenging the reconsideration of resolution plan. Form a practical standpoint of a prudent man thinking also, if one person wish to change its mind who is not debarred from changing its mind, why not change stands considering the subsequent change in the circumstances or events. In the said background, we do not find any justifiable reason to hold that reconsideration of resolution plan is bad in law as contended by IDBI and Bank of Baroda. 41. Ld. Counsel for the IDBI at this juncture, stressed an argument that request for reconsideration was not from the side of the financial creditors but from the side of Resolution Applicant by way of filing CA(IB) No.50/KB/2018 and, therefore, on that ground also reconsideration of votes in respect of approval of Resolution Plan cannot be considered by the Adjudicating Authority. Truly, CoC meeting has not been convened subsequent to 22-12-2017 for the reason that CIR process, according to the Resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Counsel pending projects are with the Company and upon completion of the pending projects the company will be in a position to pay off its entire loan. In the event of liquidation, the Company will not be in a position to complete pending projects and obtained new projects which will severely impact the right of all stakeholders and particularly the entire creditors. 44. From the aforesaid discussion we may conclude that the basic premises on which l&B code is built is that on failure of the Company in discharging its dues, its debt is to be restructured, for continuing the Company as a going concern, by giving the Company to any person who is found financially and technically capable to take over the Company. No challenge from any corner raised before us regarding the technical and economical viability of the resolution applicant in taking over the company by him. This is a unique case in which CIRP could not completed with in 270 days. The exceptional circumstances occasioned beyond the control of the resolution applicant in the case in hand upon the reasons already led in prompt us to exclude the period of litigation and thereby we also found the plan came up for approval wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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