TMI Blog2021 (1) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... embers of CoC. Both the Appeals sans merit hence dismissed-no order as to costs. - Company Appeal (AT) (Insolvency) No. 274 & 291 of 2020 with - - - Dated:- 12-1-2021 - Mr. Bansi Lal Bhat, Acting Chairperson Mr. Anant Bijay Singh, Member (Judicial) and Mr. V. P. Singh Member (Technical) For Appellant : Mr Apoorv Agarwal and Mr A. M. Dar, Advocates For Respondent : Mr Arun Kathpalia, Senior Advocate with Mr Abhishek Anand, Mr Shikhar Singh, Mr Viren Sharma and Mr Aman Nath, Advocates for R-1 Mr Abu John Mathew, Mr Nalin Kumar and Mr Aman Nath, Advocates for ICICI JUDGMENT These two Appeals emanate from the common Impugned Order dated 09th January 2020 passed by the Adjudicating Authority/National Company Law Tribunal, Principal Bench, New Delhi in Company Petition (IB.) No. 706(PB)/2018, whereby the Adjudicating Authority has passed an order for liquidation of the Corporate Debtor under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (in short 'I B Code'). The Parties are represented by their original status in the Company Petition for the sake of convenience. 2. These brief facts of the case are as follows: The Resolution Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, none of them was put to the vote. They were all dismissed, based on mere discussion and deliberations. Though the Hon'ble Supreme Court has time and again emphasised CoC's commercial wisdom and voting importance. The Resolution Professional failed in his duties towards the Corporate Debtor, which is evident from the recorded minutes of the CoC meetings. It is evident from the recorded minutes that the RP did not make any efforts in coming up with a resolution for the Corporate Debtor. The Resolution Professional has always shown a strong inclination towards taking the Company to liquidation instead of utilising the time, negotiating the terms of Resolution Plan and maximising the value of the assets of the Corporate Debtor which led to huge depreciation in the valuation of the property of the Corporate Debtor. The Resolution Professional has also failed in his duties in apprising the CoC with the latest development in law whereby the Hon'ble Supreme Court in Municipal Corporation of Greater Mumbai v Abhilash Lal 2019 SCC Online SC 1479 clarified that in the event property is not owned by the Corporate Debtor, the Administrative Authorities that leased the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. We have heard the arguments of the Learned Counsel for the parties and perused the records. 11. The Liquidation order is challenged mainly because the Resolution Professional had not laid the Resolution Plans before the CoC for voting and based on discussion and deliberations Plans were rejected. 12. The Appellant's challenge to the Liquidation Order is two-fold. Firstly, the government's leasehold land cannot be considered for deciding the liquidation value and Assets of the Corporate Debtor. The valuation made therein is included to count the liquidation value of assets of the Corporate Debtor. Secondly, five Resolution Plans have been compliant with the terms and provisions of the I B Code. The said Resolution Applicants could not compete due to the higher valuation wrongly shown after considering the leasehold right of the Corporate Debtor. 13. The Learned Counsel for the Appellant emphasised the judgment of Hon'ble Supreme Court passed in Municipal Corporation of Greater Mumbai ('MCGM') Vs. Abhilash Lal (2019) SCC Online SC 1479 and contended that the leasehold property could not be transferred in liquidation. The valuation of the said prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits that during CIRP, the RP ran the Corporate Debtor as a going concern. Employees were not granted increments for the last three years which were provided by the RP during CIRP. The TDS on employees' salary was not deposited by the promoters from Financial Year 2017-18 till the commencement of CIRP. An amount of ₹ 17 Crores was due towards statutory liability on the date of initiation of CIRP. During the CIRP period, all statutory dues were duly deposited by the RP besides the TDS on salaries of employees from Financial Year 2017-18 onwards. It is further submitted that commercial wisdom of the CoC is paramount and the legislature has not endowed the Adjudicating Authority or the Appellate Authority to analyse or evaluate the commercial wisdom of the CoC. The Learned Counsel placed reliance law laid down by the Hon'ble Supreme Court in case of K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150. 19. Learned Counsel for the RP further referred the report of Bankruptcy Law Reforms Committee dated 04th November 2015, wherein primacy have been given to CoC to evaluate the various possibilities and make a decision. It has been observed that: The key econ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... professional as the manager of the resolution period, so that the creditors can negotiate the assessment of viability with the confidence that the debtors will not take any action to erode the value of the enterprise. The professional will have the power and responsibility to monitor and manage the operations and assets of the enterprise. The professional will manage the resolution process of negotiation to ensure balance of power between the creditors and debtor, and protect the rights of all creditors. The professional will ensure the reduction of asymmetry of information between creditors and debtor in the resolution process. . IV. The Code will ensure a collective process. (9) The law must ensure that all key stakeholders will participate to collectively assess viability. The law must ensure that all creditors who have the capability and the willingness to restructure their liabilities must be part of the negotiation process. The liabilities of all creditors who are not part of the negotiation process must also be met in any negotiated solution. V. The Code will respect the rights of all creditors equally. (10) The law must be impartial to the type ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of the Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, 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. 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. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision . The legislature, consciously, has not provided any ground to challenge the commercial wisdom of the individual financial creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only in relation to the grounds specified in Section 61(3) of the I B Code, which is limited to matters other than enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (NCLT/Nclat) have been endowed with limited jurisdiction as specified in the I B Code and not to act as a court of equity or exercise plenary powers. 59. In our view, neither the adjudicating authority (NCLT) nor the appellate authority (Nclat) has been endowed with the jurisdiction to reverse the commercial wisdom of the dissenting financial creditors and that too on the specious ground that it is only an opinion of the minority financial creditors. The fact that substantial or majority per cent of financial creditors have accorded approval to the resolution plan would be of no avail, unless the approval is by a vote of not less than 75% (after amendment of 2018 w.e.f. 6-6-2018, 66%) of voting share of the financial creditors. To put it differently, the action of liquidation process postulated in Chapter III of the I B Code, is avoidable, only if approval of the resolution plan is by a vote of not less than 75% (as in October 2017) of vot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led discussions and deliberation, the unanimous view emerged that no alternative was available excepting for proposing liquidation of the CD, considering that no resolution plan is on the table apt for evaluation/consideration in view of the following factors:- 1) The major portion of financial proposals of both the Applicants, i.e. ₹ 50 Crores, out of total proposed consideration of ₹ 79.15 crores (besides proposed infusion of ₹ 25.00 crores in the form of working capital/Capex etc) of Alchemist ARC and ₹ 71.00 crores (plus ₹ 20.00 crs if received from arbitration awards and proposed infusion of ₹ 14.00 crs in the form of working capital) of M/s S.C. Agrawal , is dependent on realisation of said amount from the sale of Land Building of Pant Nagar unit of CD. No assurance/commitment was forthcoming from any RA in case such sale is not materialised. Alchemist ARC have even added that the RA shall try to sell the land of Pant Nagar Plant in one year and if the RA is not able to sell the same within one year then lenders shall be free to sell the same directly to any potential buyer through liquidation/RP/MC. 2) Various other conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tituents of CoC finally proceed to exercise their option (Business/Commercial decision) to approve or not to approve the proposed Resolution Plan. In such a case, non-recording of reasons would not per se vitiate the collective decision of the Financial Creditors. 25. In the instant case, when revised Resolution Plans were laid before the CoC in its 18th Meeting, the CoC upon discussions and deliberations was of unanimous view that no alternative was available excepting for proposing the Liquidation of the Corporate Debtor, considering that no Resolution Plan is on the table apt for evaluation/consideration. Finally, Resolution for liquidation of the Corporate Debtor was laid for voting before the CoC, which was approved by a vote share of 87.30%. Since, after a deliberate discussion on the proposed Resolution Plans, the CoC took a commercial decision with required vote share and approved Resolution for liquidation of the Corporate Debtor. Therefore, this decision is non-justiciable and Adjudicating Authority had no power to reverse the commercial decision. 26. The Learned Counsel for the RP further placed reliance on the decision of the Hon'ble Supreme Court in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme formulated by that corporation (MCGM). 29. The facts of the MCGM case is mentioned in para 2 of the judgment, which is given below: Para 2. MCGM owns inter alia, Plot Nos. 155-156, 162 and 168 (all plots hereafter called the lands ) in village Marol, Andheri (East) Mumbai. By a contract (dated 20th December, 2005) Seven Hills Healthcare (P.) Ltd. (the Company facing insolvency proceedings, hereafter Seven Hills ) agreed to develop these lands (which were to be leased to it for 30 years) and construct a 1500 bed hospital. MCGM stipulated several conditions, including that 20% of the beds had to be reserved for use by the economically deprived, and that Seven Hills had to complete the construction in 60 months (excluding monsoons). The sixty-month period ended on 24th April, 2013; the project however, was not completed. In terms of Clause 15(g), the lease deed had to be executed within a month after completion. However, the deed was not executed as the project was not completed. Further, Seven Hills had to pay lease rent at the annual rate of ₹ 10,41,04,000. MGCM alleges that there were defaults in these payments. In these circumstances, MCGM issued a sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss period or the maximum period permitted for completion of the corporate insolvency resolution process under Section 12 or the fast track corporate insolvency resolution process under Section 56, as the case may be, does not receive a resolution plan under sub-section (6) of Section 30; or (b) rejects the resolution plan under Section 31 for the non-compliance of the requirements specified therein, it shall- (i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter; (ii) issue a public announcement stating that the corporate debtor is in liquidation; and (iii) require such order to be sent to the authority with which the corporate debtor is registered. (2) Where the Resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the Committee of creditors 1[approved by not less than sixty-six per cent. of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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