TMI Blog2021 (4) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... Pertinently, the grounds, be it under Section 30(2) or under Section 61(3) are regarding testing the validity of the Resolution Plan approved by the CoC. The enquiry in such an Appeal would be limited to the power authorized to the RP under Section 30(2) of the IBC, or at best, by the Adjudicating Authority under Section 31(2) read with Section 31(1). This Tribunal can examine the challenge only in relation to the grounds specified in Section 61(3), which is limited. The Hon ble Supreme Court in K. Sashidhar [ 2019 (2) TMI 1043 - SUPREME COURT ] has laid down the role of the CoC in accepting or rejecting the Resolution Plan as well as the role of the Adjudicating Authority while considering the Application from approval or rejection of the Resolution Plan. There is an intrinsic assumption that the Financial Creditors are fully informed about the viability of the Corporate Debtor and the feasibility of the Resolution Plan. The opinion expressed after due deliberations in the CoC meeting through voting, is a collective business decision. The legislature, consciously, has provided only limited grounds to challenge the commercial wisdom or their collective decision by the Adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution Proceedings (CIRP) has been initiated vide an Order dated 09.10.2018 in CP (IB) No. 82/MB.II/2018. MA 3137/2019 in MA 2972/2019 was filed by the Suspended Directors and Promotors of the Corporate Debtor seeking impleadment in MA 2972/2019. The Company Petition was filed by Print House (India) Pvt. Ltd. hereinafter referred to as the ( Corporate Debtor ) under Section 10 of the Code. The Learned Adjudicating Authority passed a Common Order observing as follows; 49. We have considered the objections raised by the Applicants herein, to the Resolution Plan approved by the CoC. The main objection of the Applicants is that the Resolution Applicant intends to change the main business of the Corporate Debtor form printing business to running Data Centers. 50. We are of the view that there is nothing the Code that inhibits a Resolution Applicant from pursuing a line of business that is different to the erstwhile business of the Corporate Debtor . If this proposition is accepted, then it would mean that there can never be a situation where the successful Resolution Applicant can revive a Corporate Debtor by pursuing a different line of business. We can easily conceive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore in contravention to the objective of the Code, which is Resolution , maximization of the value of assets of the Corporate Debtor , promoting entrepreneurship, availability of credit and balancing the interests of the Stakeholders . The Learned Counsel submitted that the Resolution Plan is not compliant with the intent, object and purpose of the Code; that the Resolution Applicant ( SIFY ) intended to expand its own business by creating Data Centers instead of continuing the Printing Business of the Corporate Debtor ; that the Resolution is not a sale or an auction or a recovery or a liquidation, but the Resolution of the Corporate Debtor as a going concern; that the Resolution Professional did not adhere to the duties mandated under Section 25 of the Code; that Regulation 39(3) mandates that the Committee of Creditors at the time of approval of Resolution Plan shall record its deliberations on the feasibility and viability of the Resolution Plan, which was not done in the instant case; that in the event the entire business of the Corporate Debtor is allowed to be given a sharp U-turn from printing, then approximately 8 out of the 10 leading magazines, newspapers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Learned Counsel contended that the Resolution Professional and the CoC approved the Plan despite the fact that the Plan did not provide for continuation of existing business of the Corporate Debtor nor maximization of the assets and did not take care of the interests of all stakeholders, despite the fact that there is a workforce of 2700 employees. Learned Counsel further contended that Regulation 38(3)(b) which provides for the feasibility and viability of the Plan was not adhered to in the present case. Learned Counsel placed reliance on the Judgements of the Hon ble Supreme Court in Binani Industries V/s. Bank of Baroda and Anr. Company Appeal (AT) (Insolvency) No. 82 of 2018 in support of his submission that the Resolution Plan is not a sale or an auction for being sold to a bidder who pays the higher price. He also relied on the Judgement of the Hon ble Supreme Court in Arcelor Mittal India Private Limited V/s. Satish Kumar Gupta Ors. (2019) 2 SCC 1, wherein the Hon ble Supreme Court has held that the Corporate Debtor consists of several employees and workmen whose daily bread is dependent on the outcome of the CIRP and if a Resolution Applicant can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me be submitted by 22.08.2019. On 26.08.2019 in the 18th CoC Meeting after going through various aspects of both the plans, submitted by the Appellant and SIFY, CoC approved the Resolution Plan of SIFY with a majority of 70.5%. 11. The Learned Counsel for the first Respondent submitted that both the Resolution Plans of the Appellant and SIFY were examined in accordance with Section 30(2) and Regulations 37 and 38 of the CIRP Regulations and only after having been satisfied that they had complied the requirements under the Code and CIRP Regulations together, the Resolution Plans were submitted for approval. Learned Counsel placed reliance on the Judgement of the Hon ble Supreme Court in K. Shashidhar V/s. Indian Overseas Bank and Ors. Civil Appeal No. 10673 of 2018 in which the Hon ble Apex Court has observed that commercial decisions of the Committee of Creditors are not open to judicial review . Learned Counsel for the first Respondent also submitted that the Corporate Debtor was in the business of Printing and Leasing and as the printing business was not viable, owing to several micro factors affecting the enterprise, substantial portion of the premises was not being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in point for consideration in this Appeal is whether the Resolution Plan approved under Section 31 by the Learned Adjudicating Authority is in contravention with the scope and objective of the Code which is Resolution , maximization of value of assets of the Corporate Debtor and promoting entrepreneurship , availability of credit and balancing interest of all stakeholders . 17. It is not in dispute that the CoC shortlisted the final list of Resolution Applicants including; (a) SIFY Technologies Limited (b) Staple Pins Private Limited (c) Next Orbit Ventures Fund. 18. At this juncture, it is relevant to refer to Sections 30 31 of the I B Code which read as under; 30. Submission of resolution plan. - (1) A resolution applicant may submit a resolution plan along with an affidavit stating that he is eligible Under Section 29-A to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law. (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in Sub-section (2). (4) The committee of creditors may approve a resolution plan by a vote of not less than sixty-six per cent of voting share of the financial creditors, after considering its feasibility and viability, the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in Sub-section (1) of Section 53, including the priority and value of the security interest of a secured creditor] and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, where the resolution applicant is ineligible Under Section 29-A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it: Provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution plan does not confirm to the requirements referred to in Sub-section (1), it may, by an order, reject the resolution plan. (3) After the order of approval Under Subsection (1), - (a) the moratorium order passed by the Adjudicating Authority Under Section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database. (4) The resolution applicant shall, pursuant to the resolution plan approved Under Sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under Subsection (1) or within such period as provided for in such law, whichever is later: Provided that where the resolution plan contains a provision for combination, as referred to in Section 5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resoluti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate debtor.] [(1-B) A resolution plan shall include a statement giving details if the resolution applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any other resolution plan approved by the Adjudicating Authority at any time in the past.] (2) A resolution plan shall provide: - (a) the term of the plan and its implementation schedule; (b) the management and control of the business of the corporate debtor during its term; and (c) adequate means for supervising its implementation. [(3) A resolution plan shall demonstrate that (a) it addresses the cause of default; (b) it is feasible and viable; (c) it has provisions for its effective implementation; (d) it has provisions for approvals required and the timeline for the same; and (e) the resolution applicant has the capability to implement the resolution plan.] 39. Approval of resolution plan. [(1) A prospective resolution applicant in the final list may submit resolution plan or plans prepared in accordance with the Code and these regulations to the resolution professional electronically within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 31(2) read with Section 31(1). This Tribunal can examine the challenge only in relation to the grounds specified in Section 61(3), which is limited. 22. An Appeal against an Order approving the Resolution plan can be made under Section 61(3) of the IBC on the following grounds; 61. Appeals and Appellate Authority. (3) An appeal against an order approving a resolution plan under section 31 may be filed on the following grounds, namely:- (i) the approved resolution plan is in contravention of the provisions of any law for the time being in force; (ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period; (iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board; (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (v) the resolution plan does not comply with any other criteria specified by the Board. 23. We are of the view that the Resolution Plan approved by the CoC in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India to both Domestic and International customers. The future expansion of capacity in relation to facility and power will be focused towards maximizing the philosophy of Make in India. Sify s Data Center investment will have multiplier effect on the local economy contributing to the national development. 4. Attract and invest in local talent pool: Sify s investment in Data Center facilities will create and indirect employment for more than 150 people, which will be from the local talent pool. Any expansion of the facility and services will lead to more employment opportunities in the state. 5. Maximise value for stakeholders Sify drives to create value for all the stakeholders involved. Sify has not defaulted on repayment of its borrowers and creditors. Sify believes in developing business models that benefits the local community with employment opportunities without damaging the environment, Government to increase revenues, customers to receive best in class services, suppliers to be sustainable and the providers of finance to generate return on the borrowings/investments made. Resolution Applicant can take over 100% shareholding of the Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the debt is to be restructured will only emanate from the deliberations of CoC in response to the current economic and market scenario. 26. The Hon ble Supreme Court in K. Sashidhar (Supra) has laid down the role of the CoC in accepting or rejecting the Resolution Plan as well as the role of the Adjudicating Authority while considering the Application from approval or rejection of the Resolution Plan. There is an intrinsic assumption that the Financial Creditors are fully informed about the viability of the Corporate Debtor and the feasibility of the Resolution Plan. The opinion expressed after due deliberations in the CoC meeting through voting, is a collective business decision. The legislature, consciously, has provided only limited grounds to challenge the commercial wisdom or their collective decision by the Adjudicating Authority. 27. The Hon ble Supreme Court in Kalpraj Dharamshi Anr. (Supra) in Para 148 has referred to the observations of the Court in K. Sashidhar (Supra); 57. ...Indubitably, the remedy of appeal including the width of jurisdiction of the appellate authority and the grounds of appeal, is a creature of statute. The provisions inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar 152. It can thus be seen, that this Court has clarified, that the limited judicial review, which is available, can in no circumstance trespass upon a business decision arrived at by the majority of CoC. 28. Discussing the legislative intent and the commercial wisdom of CoC the Hon ble Apex Court in Kalpraj Dharamshi Anr. (Supra) has laid down as follows; 155. It would thus be clear, that the legislative scheme, as interpreted by various decisions of this Court, is unambiguous. The commercial wisdom of CoC is not to be interfered with, excepting the limited scope as provided Under Sections 30 and 31 of the I B Code. 156. No doubt, it is sought to be urged, that since there has been a material irregularity in exercise of the powers by RP, NCLAT was justified in view of the provisions of Clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount of liability (in Rs.) Settlement Amount (in Rs.) % of liability Upfront payment (in Rs.) 1. FinancialCreditors 81,91,45,955 42,50,00,000 51.88 38,50,00,000 2. Workmen Employee 9,24,55,241 14,41,00,000 34.52 6,90,83,040 3. Operational other Creditors 32,50,29,235 Total 123,66,30,431 56,91,00,0000 45,40,83,040 B. Payment schedule: (a) Financial Creditors- within a period of two quarter beginning from 60 days from effective date. (b) Others- Upon finalization of claim amount. After going through various aspects of both the plans, the Committee evaluated plans as per evaluation Matrix determined. As per evaluation matrix, the pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70.05% with a weighted score of 93.85, whereas the Plan submitted by the Appellant herein scored only 22.44 Pts. Therefore, the submissions of the Learned Counsel that deliberations of the 15th and 16th CoC Meetings were not considered pales into insignificance, keeping in view the Minutes of the final CoC Meeting and further we are of the considered view that the issues raised in this Appeal need to be decided on the touchstone of the Principle laid down by the Hon ble Supreme Court decided in K. Sashidhar V/s. Indian Overseas Bank 2019 SCC OnLine SC 257 and in Kalpraj Dharamshi Anr. (Supra). 31. It was strenuously argued by the Counsel for the Appellant that the workman s dues were disregarded and therefore, the interests of all stakeholders were overlooked. The portion of the Plan dealing with the issue on hand, is detailed as hereunder; 11. INTERESTS OF ALL STAKEHOLDERS The Resolution Plan proposed by the Resolution Applicant adequately deals with the interests of all stakeholders, including Financial Creditors and Operational Creditors, of the Company, in the following manner: (a) Employees/ Workmen: The Current plan proposes to continue the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced reliance on the ratio laid down in Binani Industries (Supra). Dictionary meaning of Feasibility and Viability : 34. Black s Law Dictionary defines feasible as being reasonably capable of being completed or accomplished . Viability is defined as the ability to live, grow and develop; the ability to function adequately; the ability to succeed or being sustained. 35. Feasibility means analyzing the strengths and weaknesses of an existing business or a proposed business venture, taking into consideration the opportunities offered and the risks present. Feasibility can be economic feasibility, legal feasibility, market and real estate feasibility, resource feasibility, financial feasibility, etc. Viability on the other hand is the study of the existing business or proposed venture s sustainability. Apart from determining whether the proposal should be approved or not, it involves dealing with strategies on how to make the business grow and last. Business growth and sustainability are the important aspects of viability. In the instant case feasibility and viability is to be viewed holistically. The technical, market, economic, financial, model vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narrow compass which is not the scope and objective of the Code. 38. The Hon ble Supreme Court has observed that paramount importance is to be given to the decision of CoC, which is taken on the basis of commercial wisdom which cannot be interfered with excepting under the limited scope as provided under Sections 30 31 of the I B Code. At the cost of repetition IBC provides for restructuring of the Corporate Debtor change in technology, change in portfolio of goods and services produced or rendered by the Corporate Debtor as long as the scope and objective of the Code is not hampered and therefore we are of the considered view that if the Resolution Plan contemplates a change in the nature of business to another line when the existing business is obsolete or non-viable, it cannot be construed that the Resolution Plan is not feasible or viable . It can be seen from the aforenoted Sections 30(2) 31 and Regulations 37, 38 and 39 that there is nothing in the Code which prevents a Resolution Applicant from changing the present line of business to adding value or creating Synergy to the existing assets and converting an obsolete line of business to a more viable and f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
