TMI Blog2021 (12) TMI 910X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Estate Projects of the Appellant - 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 insolvenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate 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 Financial Creditors to pre-packaged insolvency resolution process was also obtained on 30.09.2021. A report dated 05.10.2021 was submitted by Insolvency Professional. On 08.10.2021, the Corporate Debtor filed an Application before the Adjudicating Authority to initiate pre-packaged insolvency resolution process under Section 54C. On 21.10.2021, the matter first came up for hearing before the Adjudicating Authority on which date several objectors appeared who opposed the Application. The Adjudicating Authority granted one-week time to the objectors to file their objections. On 09.11.2021, an Application being I.A. 5140 of 2021 was filed by the Objectors on which notice was issued on the Appellant. 3. On 23.11.2021, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 the Application itself, it is clear that the notice for convening meeting of unrelated Financial Creditors was issued on 30.09.2021 itself by e-mail at 3.30 A.M. and the meeting was held at 5.00 P.M on the same day, whereas statutory Regulations require atleast five days notice, hence the meeting for obtaining approval of unrelated Financial Creditors was not convened in accordance with law. The whole process was adopted in hot haste to defeat the rights of Financial Creditors i.e. Homebuyers. It is submitted that the Application has been filed malafidely and fraudulently to defeat the rights of Homebuyers who are Financial Creditors. It is submitted that from the document filed alongwith Application, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 debtor shall file an application for initiating pre-packaged insolvency resolution process within a definite time period not exceeding ninety days; (ii) that the pre-packaged insolvency resolution process is not being initiated to defraud any person; and (iii) the name of the insolvency professional proposed and approved to be appointed as resolution professional under clause (e); (g) the members of the corporate debtor have passed a special resolution, or at least three-fourth of the total number of partners, as the case may be, of the corporate debtor have passed a resolution, approving the filing of an application for initiating pre-packaged insolvency r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 application, give notice to the applicant to rectify the defect in the application within seven days from the date of receipt of such notice from the Adjudicating Authority. (5) The pre-packaged insolvency resolution process shall commence from the date of admission of the application under clause (a) of sub-section (4) . 11. Section 54C (1) provides that where a Corporate Debtor meets the requirements of Section 54A, a corporate applicant may file an application with the Adjudicating Authority for initiating pre-packaged insolvency resolution process. The requirements having been provided under Section 54A, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Estate Projects of the Appellant. In the order dated 23.11.2021, extracted above, the Applications No. 5344/2021, 32/2021, 33/2021, 34/2021 35/2021 has been referred to. It is sufficient to notice the contents of I.A 5344/2021 to find out the nature of objections raised before the Adjudicating Authority. Application 5344/2021 was filed by Kelvin Buildcon Pvt. Ltd. claiming to be unrelated Financial Creditor of Appellant and allottee of 27 license plots against total consideration of ₹ 33,94,88,869/-. The substances of the objection raised by unrelated Financial Creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 where pre-packaged insolvency resolution process application has been filed is not a matter of course and has to be limited to exceptional cases. We are cautious that proceeding under the I B Code are time bound procedure where unnecessary delay has to be avoided by the Adjudicating Authority and giving time to objections which are meritless and giving time to objectors and interveners has to be exercised on sound discretion on valid grounds. 16. When we look into the provisions of Section 54A read with Section 54C, it is clear that certain statutory requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under Section 424 of the Companies Act, 2013. The time given for objection to the objectors in the facts of the present case, is in accordance with principle of natural justice which is to be followed by the Adjudicating Authority. Further, there is no violation of any Regulations or Rules or provisions of the I B Code in giving opportunity to objectors to file their objection nor any such violation has been pointed out before us. It is further relevant to notice that all the objectors who have filed different IAs for objection are the persons who are inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 in which they can be proposed, voting requirements and threshold for approval by the CoC (as the case may be). They must also contemplate at which stage the Corporate Debtor may be sent into liquidation by the Adjudicating Authority or otherwise, in the event of a failed negotiation for modification and/or withdrawal. These are matters for legislative policy. 20. The Apex Court in the above judgment has clearly laid down that residual powers of the Adjudicating Authority under the IBC cannot be exercised to create procedural remedies which hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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