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TMI Blog2021 (12) TMI 910X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal raises a limited issue as to whether the Adjudicating Authority while considering Application of pre-packaged insolvency under Section 54C of the 'I&B Code' can, before admission of the Application, hear Objectors/ Interveners. We need to notice only necessary facts for deciding the above issue. 2. Appellant, the Corporate Debtor who claims to be under a debt of Rs. 673,16,36,869.63/-, instituted an Application for pre-packaged insolvency resolution process under Section 54C of the 'I&B Code'. On 28.09.2021, the Corporate Debtor issued an e-mail addressed to its stakeholders that the Company is intending to take recourse to pre-packaged insolvency process in accordance with Chapter III-A of the 'I&B Code'. The Corporate Debtor in the e-mail indicated that it shall be appointing Resolution Professional. On 30.09.2021, the Corporate Debtor issued an e-mail at 3.30 A.M. addressed to stakeholders issuing notice of the meeting of Financial Creditors to be held by way of Video Conferencing on 30.09.2021 at 5.00 P.M. Another notice was issued on 02.10.2021 convening a meeting for 03.10.2021 at 10.30 A.M. Company claimed that the Resolution Professional was appointed and approval of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess is to be completed in a time bound manner and the scheme as delineated by Chapter III-A and the Insolvency and Bankruptcy Board of India (Pre-packaged Insolvency Resolution Process) Regulations, 2021 does not contemplate giving any opportunity to the objectors to oppose the Application prior to its admission. He submits that there is no provision of any intervention. Learned Counsel for the Appellant has also placed reliance on judgment of the Hon'ble Supreme Court in "Ebix Singapore Pvt. Ltd. vs. Committee of Creditors of Educomp Solutions Limited and Anr.- (2021) SCC OnLine SC 707" decided on 13.09.2021. 7. Learned Counsel appearing for the Objectors has opposed the submission raised by Shri Dushyant Dave. It is submitted that the Application for pre-packaged insolvency resolution process has been initiated without complying the statutory provisions of the 'I&B Code'. It is submitted that the Adjudicating Authority had every jurisdiction to grant time to the objectors to show that the Application having not been filed in compliance with the provisions of Section 54A, the same cannot be admitted by the Adjudicating Authority. It is submitted that from the facts disclosed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) it is not undergoing a corporate insolvency resolution process; (c) no order requiring it to be liquidated is passed under section 33; (d) it is eligible to submit a resolution plan under section 29A; (e) the financial creditors of the corporate debtor, not being its related parties, representing such number and such manner as may be specified, have proposed the name of the insolvency professional to be appointed as resolution professional for conducting the pre-packaged insolvency resolution process of the corporate debtor, and the financial creditors of the corporate debtor, not being its related parties, representing not less than sixty-six per cent. in value of the financial debt due to such creditors, have approved such proposal in such form as may be specified: Provided that where a corporate debtor does not have any financial creditors, not being its related parties, the proposal and approval under this clause shall be provided by such persons as may be specified; (f) the majority of the directors or partners of the corporate debtor, as the case may be, have made a declaration, in such form as may be specified, stating, inter alia, - (i) that the corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e declaration, special resolution or resolution, as the case may be, and the approval of financial creditors for initiating pre-packaged insolvency resolution process in terms of section 54A; (b) the name and written consent, in such form as may be specified, of the insolvency professional proposed to be appointed as resolution professional, as approved under clause (e) of sub-section (2) of section 54A, and his report as referred to in clause (a) of sub-section (1) of section 54B; (c) a declaration regarding the existence of any transactions of the corporate debtor that may be within the scope of provisions in respect of avoidance of transactions under Chapter III or fraudulent or wrongful trading under Chapter VI, in such form as may be specified; (d) information relating to books of account of the corporate debtor and such other documents relating to such period as may be specified. (4) The Adjudicating Authority shall, within a period of fourteen days of the receipt of the application, by an order,-- (a) admit the application, if it is complete; or (b) reject the application, if it is incomplete: Provided that the Adjudicating Authority shall, before rejecting an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all include - (a) fee payable to him for performing duties under sub-section (1) of section 54B; (b) fee payable to him and expenses to be incurred by him for conducting the process; and (c) fee payable to him and expenses to be incurred by him in case management of the corporate debtor is vested with him under section 54J. (7) The approval for filing of application under sub-section (3) of section 54A shall be in Form P4. (8) Where the corporate debtor has no financial debt or where all financial creditors are related parties, the applicant shall convene a meeting of operational creditors, who are not related parties of the corporate debtor and provisions of sub-regulations (1) to (7) shall mutatis mutandis apply." 12. The Scheme under Chapter III-A and the Regulations 2021 do not contain any express provision either prohibiting the Adjudicating Authority from hearing any of the objectors or interveners prior to the admission of pre-packaged insolvency resolution process application or providing for giving notice or hearing to the interveners or objectors. The objectors who had filed applications were all Homebuyers who have purchased one or more units in the Real Estat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of any rules made thereunder, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure........" 15. The legislative intent which is clear by Section 424 (1) is that the Tribunal while disposing of any proceeding before it shall not be bound by procedure laid down by Code of Civil Procedure but shall be guided by the principle of natural justice and subject to the other provisions of this Act or Code 2016 and any of the Rules made thereunder. Further, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure. The statutory scheme delineated by Chapter III-A of 'I&B Code' as well as the Regulations, 2021 as observed above does not indicate any prohibition on the Adjudicating Authority to hear any objector or intervener before admitting an Application of pre-packaged insolvency resolution process. When there is no prohibition in hearing an objector or interveners by the Adjudicating Authority, the orders passed by the Adjudicating Authority giving time to the objectors to file objection cannot be said to be in breach of any statutory provisions. We may hasten to add that hearing of objectors or interveners in each case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that notice for the meeting dated 30.09.2021 which was scheduled to take place at 5.00 P.M. was issued only at 3.30 A.M on the same date. We have noticed above that Regulations 14 required atleast five days' notice and shorter notice only when all have agreed for shorter notice. There is no material to indicate that there was any agreement with all Financial Creditors to hold the meeting on the same day on which notice was issued. Prima facie there is breach of Regulation and no valid meeting has been convened as per the own case of the Appellant whether the claim of the Appellant is unrelated Financial Creditor has approved the Resolution ought to be accepted without looking into any of the claims of the Respondent is the question on which the Adjudicating Authority has exercised its discretion and gave time to the objector to file their objection. We are satisfied that there is no error in the exercise of discretion by Adjudicating Authority in giving time to the objectors to file their objection. 18. We have noticed that cardinal principle of procedure to be followed by the Adjudicating Authority is the adherence of Rules of natural justice which is statutorily provided for und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded process for further negotiations or a withdrawal, would have a deleterious impact on the Corporate Debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time. A failed negotiation for modification after submission, or a withdrawal after approval by the CoC and submission to the Adjudicating Authority, irrespective of the content of the terms envisaged by the Resolution Plan, when unregulated by statutory timelines could occur after a lapse of time, as is the case in the present three appeals before us. Permitting such a course of action would either result in a down-graded resolution amount of the Corporate Debtor and/or a delayed liquidation with depreciated assets which frustrates the core aim of the IBC. 245. If the legislature in its wisdom, were to recognize the concept of withdrawals or modifications to a Resolution Plan after it has been submitted to the Adjudicating Authority, it must specifically provide for a tether under the IBC and/or the Regulations. This tether must be coupled with directions on narrowly defined grounds on which such actions are permissible and procedural directions, which may include the timelines ..... X X X X Extracts X X X X X X X X Extracts X X X X
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