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2019 (5) TMI 1046

CoC and we do not find any legal infirmity in rejecting the resolution plan by the CoC as it is seen that the CoC has repeatedly considered the case of the promoters of the CD, this Tribunal is of the view that liquidation process in relation to the CD is required to be initiated as contemplated under Section 33 of IBC, 2016 with all the attendant consequences. In view of no Resolution Plan having been approved by the CoC within the period of CIRP of 180 days as well as the extended period of 90 days, recourse is to only press the liquidation mode as provided under the provisions of Section 33 of IBC, 2016 of which the relevant is sub-section 1 of Section 33 In view of lack of any Resolution Plan meeting the criteria fixed being received, the scope of resolving the insolvency is not in existence and in the circumstances taking into consideration the provisions under Section 33(1) of IBC, 2016, as extracted above, the only recourse available is liquidating the CD in view of the CoC in their meeting having unanimously rejected the only Resolution Plan available before it thereby effectively approved for the liquidation of the Corporate Debtor and there being no Resolution Plan being .....

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ans, Applications in C.A.190(PB) of 2018 and Application No.626 (PB)/2018 have been moved by the Resolution Applicants whose resolution plans stood rejected and aggrieved by the said rejection have approached this Tribunal under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC). (III) For the sake of convenience and for appraisal of facts from the date of initiation of CIRP in relation to the CD, the status reports filed by the RP as well as the application filed by RP based on rejection of the resolution plans and thereby for liquidation of the CD consequent to rejection of Resolution Plans is taken up first, being application in C.A.No. 884 of 2018 filed vide Diary No. 6226 dated 04.09.2018:- (1) That the CIRP was initiated on 03.05.2017 and that at the time of initiation of CIRP, one Mr. Ashwani Kumar was appointed as the IRP of the CD and that during his tenure as IRP, the said Mr. Ashwani Kumar had filed three status report dated 12.05.2017, 01.06.2017 and 20.06.2017. (2) That in the first COC meeting held on 07.06.2017, the applicant RP was appointed by COC, instead of the IRP appointed by this Tribunal, namely, Mr. Ashwani Kumar and the change of RP to the pres .....

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2018 vide Diary No.1763 dated 02.04.2018. (i) That the resolution applicants have filed the Resolution Plan between the period 22.11.2017 and 16.01.2018 when an application was pending before this Tribunal seeking for extension of CIRP by a further period of 90 days. (ii) That after extension of CIRP since there was a time gap of only 10 days for the extended period also to expire on 28.01.2018 and in the mean while the COC in its 4th meeting laid down certain pre-conditions, the Resolution Applicants jointly moved an application seeking for extension of time beyond the mandatory period which was rejected by this Tribunal vide order dated 25.01.2018 against which an appeal was preferred before Hon'ble NCLAT dated 01.02.2018 which had restrained this Tribunal from passing an order of liquidation as well as allowed the RP to continue in relation to CD (iii) That in the mean while, consequent to the qualifications being put by the COC in terms of net worth in its 4th meeting held on 23.01.2018 subsequent to order of extension of CIRP on 16.01.2018 and pursuant to the advertisement inviting Expression of Interest (EOI), on 06.02.2018 it is averred the Resolution Applicants submitt .....

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ts particularly in relation to the proceedings that transpired before this Tribunal which are obviously eschewed being contrary to the proceedings that transpired, and the remaining details of which are as follows:- (2) Application No.626 (PB)/2018 filed vide diary No. 4141 dated 26.06.2018:- (i) That vide order dated 09.04.2018, this Tribunal was pleased to pass an order directing the RP to place the said plan of the Resolution Applicants before the COC and allowed COC to decide the eligibility under Section 29A as well as the plan. (ii) However, the COC without application of mind had rejected mechanically and in violation of decisions of the Hon'ble Principal Bench had declared the Resolution Applicants as ineligible in the first place under Section 29A of IBC, 2016 and also in relation to net worth of the applicants is without any merits and is liable to be overruled. (iii) That this additional application has been filed taking into consideration the RP as well as COC have not given the grounds for rejection and that the rejection per se is not in consonance with the established precedents and also in view of the position that new law in the form of Ordinance having coming .....

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is a case in point in relation to amendments carried out in view of judicial interpretation, exigencies arising out of necessity not to allow the defaulting promoters, in substantial of the cases they primarily being the reason for insolvency of a CD, to gain a back door entry into the process had compelled the Legislature to insert Section 29A in relation to persons not eligible to be resolution applicant by virtue of Insolvency and Bankruptcy Code (Amendment) Act, 2018 w.r.e.f. 23.11.2017 and further amended by Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 w.r.e.f. 06.06.2018. Similarly clause(h) of sub-section 2 of Section 25 of IBC, 2016 has also undergone changes by virtue of Insolvency and Bankruptcy Code (Amendment) Act, 2018 w.r.e.f. 23.11.2017 as compared to the position as it stood at the time of enactment of IBC, 2016. Since both Section 29A as well as Section 25(2)(h) has been invoked by the COC to bar the resolution applicants the same has been specifically mentioned. A similar mention of sub section 4 of Section 30 as amended by virtue of Insolvency and Bankruptcy Code (Amendment) Act, 2018 w.r.e.f. 23.11.2017 and the inclusion of Section 240A by virtue .....

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is of immense significance and hence is considered first before going into the list of dates. In this connection paragraphs 75 to 81 of Arcelor Mittal's case is reproduced as below: Powers by RP and CoC in relation to Resolution Plans: 75. What has now to be determined is whether any challenge can be made at various stages of the corporate insolvency resolution process. Suppose a resolution plan is turned down at the threshold by a Resolution Professional under Section 30(2). At this stage is it open to the concerned resolution applicant to challenge the Resolution Professional's rejection? It is settled law that a statute is designed to be workable, and the interpretation thereof should be designed to make it so workable. xxxxxxxxxxxxxx 76. Given the timeline referred to above, and given the fact that a resolution applicant has no vested right that his resolution plan be considered, it is clear that no challenge can be preferred to the Adjudicating Authority at this stage. A writ petition under Article 226 filed before a High Court would also be turned down on the ground that no right, much less a fundamental right, is affected at this stage. This is also made clear by th .....

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ions of section 29A, and (c) other requirements, as specified in the invitation for expression of interest. (9) The resolution professional may seek any clarification or additional information or document from the prospective resolution applicant for conducting due diligence under sub-regulation (8). (10) The resolution professional shall issue a provisional list of eligible prospective resolution applicants within ten days of the last date for submission of expression of interest to the committee and to all prospective resolution applicants who submitted the expression of interest. (11) Any objection to inclusion or exclusion of a prospective resolution applicant in the provisional list referred to in sub-regulation (10) may be made with supporting documents within five days from the date of issue of the provisional list. (12) On considering the objections received under sub-regulation (11), the resolution professional shall issue the final list of prospective resolution applicants within ten days of the last date for receipt of objections, to the committee. 78. Thus, the importance of the Resolution Professional is to ensure that a resolution plan is complete in all respects, and .....

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esolution applicant as well as the Committee of Creditors, after which an appeal can be preferred from the decision of the Adjudicating Authority to the Appellate Authority under Section 61. 81. If, on the other hand, a resolution plan has been approved by the Committee of Creditors, and has passed muster before the Adjudicating Authority, this determination can be challenged before the Appellate Authority under Section 61, and may further be challenged before the Supreme Court under Section 62, if there is a question of law arising out of such order, within the time specified in Section 62. Section 64 also makes it clear that the timelines that are to be adhered to by the NCLT and NCLAT are of great importance, and that reasons must be recorded by either the NCLT or NCLAT if the matter is not disposed of within the time limit specified. Section 60(5), when it speaks of the NCLT having jurisdiction to entertain or dispose of any application or proceeding by or against the corporate debtor or corporate person, does not invest the NCLT with the jurisdiction to interfere at an applicant's behest at a stage before the quasi-judicial determination made by the Adjudicating Authority. .....

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on applicant does not have a vested right to demand that his resolution plan is required to be considered by the Resolution Professional where after examination the Resolution Professional is of the prima facie opinion that Resolution Plan does not conform to Section 30(2) of IBC, 2016 and the recourse is for the Resolution Professional to fall back upon 30(4) of IBC, 2016 to invite fresh resolution plans if no other resolution plan has passed muster of course within the time lines prescribed which cannot be lost sight off. (VIII) The Hon'ble Supreme Court taking into consideration the scheme of things of IBC, 2016 has considered Section 30 of IBC, 2016 as an important provision and has expressed in as many words in paragraph 73(viii) of the Arcelor Mittal's case as follows:- 73. XXXX XXXX XXXX (viii) Section 30 is an important provision in that a resolution applicant may submit a resolution plan to the Resolution Professional, who is then to examine the said plan to see that it conforms to the requirements of Section 30(2). Once this plan conforms to such requirements, the plan is then to be presented to the Committee of Creditors for its approval under Section 30(3). This .....

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ion of time permitting extension of time (Extension Order), after 75 days. 23.01.2018 In CoC meeting convened after Extension Order records that Promoters submitted another Resolution Plan in the meantime which could not be presented before CoC as the matter was reserved by the Hon'ble NCLT for orders. EoI was decided to be invited in view of amended Code and the requite qualification criteria for three categories of proposed resolution applicants was also decided. For individual resolution applicants, a minimum net worth of ₹ 10.00 crores was stipulated. Further RP was authorised to file application for exclusion of 75 days taken in pronouncement of Extension order. 25.01.2018 Application filed for exclusion of time taken in pronouncement of Extension Order, from extended 90 days as above, dismissed. 19.02.2018 CoC meeting records that two EoI were received, one from Promoters and another from one Mr. Satish. The Promoters were found to be ineligible as they have failed to provide suitable documents to prove their net worth of ₹ 10.00 crores, as fixed by the CoC. No concrete proposal was submitted by Mr. Satish and thus CoC again recommended for liquidation of Corp .....

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extended period of 90 days as well after eschewing the period of legal proceeding in between before this Tribunal as well as Hon'ble NCLAT on 16.04.2018. Any resolution plan, if at all as approved by COC should have been filed before this Tribunal at least on or before the last date of expiry of the extended period of CIRP on 16.04.2018 in view of the time lines required to be adhered to as prescribed under IBC. 2016 as well as the CIRP Regulations and as extracted by the Hon'ble Supreme Court in the judgment of Arcelor Mittal's case. However, no resolution plan as approved by the COC has come before this Tribunal for its approval but on the other hand the COC has rejected the resolution plan and has thereby recommended for liquidation of the Corporate Debtor when apprised by the RP of the consequence of rejection. The Resolution Plans of the resolution applicants it must be noted having been rejected on 13.04.2018 and in the circumstances the only course available is to press the liquidation mode in relation to the Corporate Debtor in view of the provisions of Section 33 of IBC, 2016. (X) However, learned counsel for the resolution applicants vehemently opposes the li .....

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levant portion of which alone is reproduced hereunder: However, we cannot forget that the consequence of the chopper falling is corporate death. The only reasonable construction of the Code is the balance to be maintained between timely completion of the corporate insolvency resolution process, and the corporate debtor otherwise being put into liquidation. We must not forget that the corporate debtor consists of several employees and workmen whose daily bread is dependent on the outcome of the corporate insolvency resolution process. If there is a resolution applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see that this is made possible. A reasonable and balanced construction of the statute would therefore lead to the result that, where a resolution plan is upheld by the appellate authority, either by way of allowing or dismissing an appeal before it, the period of time taken in litigation ought to be excluded. 2. From the above observations of the Hon'ble Supreme Court it is evident that more than a fair chance is required to be given for the resolution of insolvency by this Tribunal prior to ordering liquidation, .....

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ntrol of the company should shift to the creditors. In the absence of swift and decisive mechanisms for achieving this, management treams and shareholders retain control after default. Bankruptcy law should address this. 3. Facts of the instant case clearly points out and as reflected in the order passed by this Tribunal at the time of admission that two of the resolution applicants herein, namely Mr. Amit Basia and Mr. Naresh Basia, being the Managing Director and Whole Time Director respectively of the Corporate Debtor, prior to commencement of insolvency proceedings have candidly admitted to the default by stating that they have no funds to meet the liability of the Operational Creditor, namely Anant Overseas Private Limited and based on the said representations the CIRP of the Corporate Debtor has been initiated and thereafter the control of the company by virtue of provisions of IBC, 2016, has vested with the COC and under the circumstances equity holders cannot have a say according to their own dictates and conditions by way of trying to impose a Resolution Plan as submitted by them should be necessarily considered. 4. The sermonizing on the part of the parties, particularly .....

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by the KMP of the CD on 29.9.2017 and that after due examination of the said resolution plan under the then existing law i.e. prior to 22.11.2017 was placed before the CoC for its due consideration and the CoC in its meeting held on 26.10.2017 and the minutes of the said meeting recorded is to the following effect: Consideration of Resolution Plan The plan submitted by the Resolution Applicants M/s. Global Houseware Ltd. the Corporate Debtor, was presented before the CoC, by Sh. Vikas Surana, consultant of the Resolution Applicant. Numerous queries were raised on the resolution plan by the members of the CoC and were responded to by the KMP, being the Resolution Applicant. The RP also informed the CoC, that in case of rejection of the Resolution Plan in the e-voting, the Corporate Debtor would automatically become eligible for liquidation u/s. 33 of the IBC, 2016. Approved by 0.00%, Opposed by 91.24%, Abstained from voting 8.76%. 7. The fate of the resolution plan as given above shows that by overwhelming majority of 91.24% the resolution plan as submitted by KMP of the CD has been opposed and thereby rejected. However, it is also evident from the said meeting of CoC held on 26.10. .....

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m list of dates, as extracted above, in the 4th CoC meeting held on 23.01.2018 a call has been taken by the members of the CoC, taking into consideration the Amendment Act of 2018 of IBC, 2016 made effective from 22.11.2017 and also in view of rejection of the resolution plan to issue publication inviting for Expression of Interest (EoI) and for calling for the resolution plan thereafter. In this connection, the CoC had also directed the RP to suitably advertise calling for EoI and it is also seen from the minutes of meeting dated 23.01.2018, certain eligibility criteria for a resolution applicant to fulfil has been fixed which is to the following effect: Item No.B-1 Eligibility of Resolution Applicant The agenda was discussed in detail and CoC shortlisted the following criteria of eligibility of Resolution Applicant. Qualification Criteria for Potential Resolution Applicant (RA), Possible parties/bidders A. For Private/Public Ltd. Company/LLP/Body Corporate, whether incorporated in India or outside/any other applicant: B. For Financial Institutions/Investment Companies/Fund Houses /PE Investors/NBFCs/ARC or any other applicant: C. Individuals/Partnership Firms/Group of Investors. .....

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ective resolution applicants in accordance with the criteria as fixed and extracted as above and the last date in this regard was fixed as 9.2.2018 for receipt of EOIs. Pursuant to the same an EoI has been received from the promoters of the CD, namely, Mr. R.N. Basia, Mr. Naresh Basia s/o Mr. R.N. Basia, Mr. Amit Basia again s/o Mr. R.N. Basia to become joint resolution applicants which was conveyed on 6.2.2018 by the said persons to the RP and that a sum of ₹ 25,000/- was deposited on 7.2.2017 to the account of the company. It is also brought to the notice of this Tribunal vide the said report by the RP that based on CIBIL report Mr. Naresh Basia was shown as willful defaulter by 5 banks/FIs and taking into consideration the same Mr. Naresh Basia had become ineligible in his personal capacity and that in view of the provision of Section 29A of IBC, 2016 read with explanation provided there under, the other joint applicants also become ineligible. It is also brought to the notice of this Tribunal by the RP that Punjab National Bank had invoked guarantee given by Mr. Naresh Basia in favor of CD and in the circumstances he has become ineligible. 13. Even though the RP has repor .....

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hich has been annexed as Annexure-9 to the report filed by the RP vide Dy. No. 2203 dated 18.4.2018. 16. It is seen from the said e-mail that RP has required of the resolution applicants to comply with the formalities as provided under the provisions of IBC, 2016 as it stood as well as to abide by the relevant regulations in relation to the resolution plan, namely, Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and also to duly sign the resolution plan as submitted by the resolution applicants. 17. Coming back to the minutes of the CoC meeting held on 13.4.2018 being the 6th meeting, the CoC had taken note of the fulfilment of net worth criteria as prescribed by it in the 4th CoC held on 23.01.2018 meeting which also stands extracted as above which is to the following effect: 1. Calculation of Net-worth, which was fixed at ₹ 10 crores by the CoC There was a difference in the method of calculation of total net worth of the resolution applicants as required under the provisions mentioned in the EoI published by the RP for inviting potential bidders to participate in the revival proceedings of the CD. As per the c .....

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was not mentioned in the plans. The RP also informed otherwise the resolution applicants had submitted revised resolution plans after incorporating all the suggested and required modifications, in the resolution plans. The CoC had a detailed discussion on the 2 resolution plans submitted by the resolution applicants and then put their queries to the resolution applicants. 18. It is also seen from the minutes of 6th CoC meeting that the resolution plan was considered in detail and that after consideration of the same certain queries seem to have also been addressed in relation to is commercial viability, namely, the concern of funding of the working capital to implement the resolution plan in the initial years, basis of value of equity shares proposed to be issued at ₹ 25 per share (rupees 15 per share premium to the financial creditors), provision of payment of statutory liabilities during the implementation of the resolution plan, business plan proposed under the resolution plan and capital induction by the resolution applicants. When the resolution plan was put to vote as well as upon voting, it is seen that the resolution plan was opposed by 83.45% of the CoC members wher .....

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connection, it should be highlighted that interventions of this Tribunal in the decision of the CoC and as gathered from the reading of Arcelormittal India (P.) Ltd. (supra) as rendered by the Hon'ble Supreme Court should be in relation to legal aspects more than the commercial aspects of the decision of the CoC and as to whether it is sustainable. Commercial decisions as to how to deal with the CD are to be left to the decision of the CoC as they are the right persons in view of the report of BLRC extracted with the approval by the Hon'ble Supreme Court in Innoventive Industries Ltd. case as extracted in paragraph supra that the affairs of the CD shift from the hands of the promoters to that of the creditors. It is no doubt true that this Tribunal is required to see that the interest of the stakeholders are duly balanced and that every effort should be made for resolving the insolvency of the CD and maximization of the value of assets rather than its liquidation. However, such an exercise cannot be skewed to only the interests of promoters thereby completely giving a go by to the statements and object for enactment of the Code in the first place for the purpose of resolvin .....

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26.10.2017 as well as the subsequent resolution plans which had been submitted and got rejected for not fulfilling the criteria set by the CoC on 23.1.2018 in its meeting held on 13.4.2018 and the EoI exercise completed much prior to that and a perusal of the said Resolution Plan shows that even in relation to the resolution exercise which has been prescribed by the Resolution Applicants as evidenced by way of two tabulations extracted herein below from the respective resolution plans disclose as follows: Under Resolution Plan which was rejected by CoC on 26.10.2017 The Revival Plan Restructuring without extra funding by Lenders Cut off dated 31st July, 2017 Particulars Existing O/S Amt. TL1 TL2 WC Proposed Outstanding % Value of Shares % Sacrifice Amt % Secured Loans ICICI Bank Ltd. 32.90 4.94 6.58 4.94 16.45 50.00 16.45 50.00 0.00 0.00 PNB 9.00 1.35 1.80 1.35 4.50 50.00 4.50 50.00 0.00 0.00 SIDBI 1.24 0.19 0.37 0.00 0.56 45.00 0.00 0.00 0.68 55.00 Standard Chartered Bank 1.98 0.30 1.09 0.00 1.38 70.00 0.00 0.00 0.59 30.00 Kotak Mahindra Prime 0.02 0.00 0.01 0.00 0.02 70.00 0.00 0.00 0.01 30.00 BMW India Fin. Services 0.10 0.02 0.06 0.00 0.07 70.00 0.00 0.00 0.03 30.00 HDFC Bank 0 .....

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ng concern despite the RP calling twice for bids one prior to 22.11.2017 and subsequently thereafter by calling for EoIs as required subsequently thereafter demonstrates the situation of the CD in the open market. The maximisation in value of the assets thus according to the majority of the CoC based on commercial consideration seems therefore to favour liquidation rather than approval of the sole Resolution Plan submitted by the KMP of the CD in whom presently they seem not to have any confidence which again is a considered decision taken by the CoC considering their interest which again the applicants cannot seek to challenge as illegal or contrary to law taken by the CoC in rejecting the resolution plea is perverse or mala fide or arbitrary or capricious which we do not find in the instant case. 24. Taking into consideration all the above aspects and since the resolution plan as submitted by the resolution applicants stand rejected by the CoC and we do not find any legal infirmity in rejecting the resolution plan by the CoC as it is seen that the CoC has repeatedly considered the case of the promoters of the CD, this Tribunal is of the view that liquidation process in relation t .....

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ng unanimously rejected the only Resolution Plan available before it thereby effectively approved for the liquidation of the Corporate Debtor and there being no Resolution Plan being placed before it, this Tribunal orders for liquidation of the Corporate Debtor and in the circumstances the CD stands liquidated and the incidence of liquidation to follow, on and from the date of this order in terms of provisions of IBC, 2016 and more particularly as given in Chapter-III of IBC, 2016 and also in terms of Insolvency and Bankruptcy (Liquidation Process) Regulations, 2017. Further in terms of the said Regulations, the Liquidator shall file his report to this Tribunal as mandated therein. 28. The present RP, namely Mr. Vijender Sharma shall act as the liquidator based upon his consent expressed, as the liquidator of the CD. He shall issue the public announcement that the CD is in liquidation. In relation to officers/employees and workmen of the CD, taking into consideration Section 33(7) of IBC, 2016, this order shall be deemed to be a notice of discharge. The Liquidator appointed being the Resolution Professional during the CIRP period shall follow up and continue to investigate the fina .....

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