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TMI Blog2022 (1) TMI 721X X X X Extracts X X X X X X X X Extracts X X X X ..... MENT DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER 1. The present appeals have been filed by the 'Appellants' under Section 61 of the 'Insolvency and Bankruptcy Code, 2016' (in short 'Code') against the impugned order dated 19.08.2020 passed by the 'Adjudicating Authority' (National Company Law Tribunal), Allahabad Bench in CA No.215/2019, CA No.73/2020 and I.A No. 160/2020 and CP(IB) No. 223/ALD/2018. 2. The Appeals as stated (supra) have been filed against the impugned order of Adjudicating Authority dated 19.08.2020. The relief sought in both the appeals primarily is asking for setting aside the said order dated 19.08.2020 apart from quashing the appointment of the Liquidator or restraining the Liquidator from discharging the employees etc. Since both these appeals are against the same impugned order and relief sought are common and requires same question of law against the same Corporate Debtor (CD), we have clubbed the appeals together during the course of the hearing and now being decided by the 'Common Judgment'. 3. While passing the impugned order on 19.08.2020 in CA No.215/2019, CA No.73/2020 and I.A No. 160/2020 and CP(IB) No. 223/ALD/2018 at paragraphs 15 to 25 had ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinent to refer Section 33(1 )(a) of the IBC, which mandates that "where the Adjudicating Authority before the expiry of 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, it shall pass an order requiring the Corporate Debtor to be liquidated in the manner as laid down in the manner." 19. Therefore, the Tribunal observes that upon failure of the resolution process and no approved resolution plan and further on completion of statutory CIRP process, there is no alternative left but to order in conformity with the decision of the CoC liquidation has to follow under Section 33 of the Code. Adherence of the statutory requirement has to be done, as the language of the Code is clear that the adjudicating authority must give effect to it whatever may be consequences. 20. Thus, the application is allowed by ordering liquidation of Corporate Debtor i.e. ,JVL Agro Industries Ltd. in the manner laid down in Chapter Ill Part Il of lBC, 2016 and further appoint Supriyo Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as compared to a 'Successful Resolution Process'. Therefore, R1 in cohorts with SBI attempted to drive the CD into liquidation. It is also stated that that the CD is profit making entity which underwent distress temporarily. In fact, the CD was under the process of bouncing back from the same, when the CIRP was admitted by the Adjudicating Authority. But the CD soon overcame its financial difficulties and operated as a going concern throughout the CIRP on its own accruals. Importantly, the CoC did not have to pay for the costs of the CIRP and the entire costs were borne from the internal accruals of the CD. As would appear from the 'Annual Report' of the CD for the 'Financial Year 2018-19', the CD owns Rs. 578.27 Crore as liquid assets and properties apart from owning assets and properties in terms of property, plant and equipment worth Rs. 550.40 Crore. In fact, the value of the land is taken at a book value and the market value of such land shall be much higher. Particulars of these assets, properties and funds are given below: Sl No. Particulars of the Asset Amount (in Rs. Crore) 1. Property, plant & Equipment 550.40 2. Current Asset 578.27 Total 1128.67 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made the liquidation application premature as even for CIRPs which were not completed by then, an additional 90 days' period was granted. But the RP disregarded to it the hilt and then blindsided the 'Adjudicating Authority' to obtain an order of liquidation on 19.08.2020. In this regard, the RP also disregarded two orders of the 'Adjudicating Authority' dated 30.04.2019 and 07.05.2019 which categorically provided that the CIRP should continue. f. In this regard, attention must be drawn at the intention and motive of the RP in the whole process. It has been brought to the notice of the Appellant that the RP was a former employee of the SBI, who is the lead banker of the consortium with a voting share of about 26%. In fact, he was appointed as the RP at the insistence of SBI and still manages to draw pension from it. In the circumstances, the motive of the RP is gravely impugned with malafides and, therefore, the RP should not be allowed to control the reigns of the CD as a Liquidator. g. It is also stated that the impugned order suffers from the vice of the coram non judice and is therefore, illegal. The impugned order is without jurisdiction since it has been passed by a bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an before the CoC, the RP in his haste to liquidate the CD, did not even allow for the said process to take place. The Hon'ble Supreme Court in Innoventive Industries Vs. ICICI bank (2018) 1 SCC 407 identified the duty of the RP to be synonymous with acting as a conduit between the Creditors and the Debtor in the following words: "The law must appoint a resolution 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." j. This Appellate Tribunal in 'Tata Consultancy Services Ltd. Vs. Vishal Ghisulal Jain', CA(AT) No. 237 of 2020, has reiterated that it is both the primal objective of the Code as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date provided in the request for EOI. Thereafter, in the 5th CoC meeting held on 27.11.2018, it was decided to re-issue the request for EOI and a revised Request for EOI was published in the newspapers. Accordingly, in response to the said publication, 12 EOIs were received by the RP within the due date provided in the revised Request for EOI. Based on the examination of the EOI, the RP shortlisted all 12 potential Resolution Applicants and provided them access to the virtual data room and issued Information Memorandum as well as 'Request for Submission of the Resolution Plan' (RFRP) to the potential Resolution Applicants. The last date for submission of Resolution Plan as per the RFRP was 2nd February, 2019. However, no Resolution Plan was received by RP till the last date and therefore, the RP requested the CoC to extend the Resolution Plan submission date. The same was agreed upon the 7th CoC meeting held on 31.01.2019 and accordingly, the last date for submission of Resolution Plan was extended till 02.03.2019. b. It is stated that on 19.02.2019, the RP received an email from 'SREI Multiple Asset Investment Trust Vision India Fund' (SREI) attaching therewith an EOI for submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the RFRP and accordingly submit the BG as per the RFRP before 23.04.2019. However, the SREI submitted an additional BG of Rs. 4 Crore only towards the EMD. It was based on deliberations in the CoC meeting on 24.04.2019 Resolution Pan submitted by SREI was considered. However, the SREI financial commitment was below the liquidation value and EMD was below the required amount, on conclusion of voting process on 07.05.2019, the Resolution Plan so submitted by SREI was rejected by 98.18% of voting share. Again SREI convened to the Resolution Applicant to improve financial offer and revised the same from Rs. 395 Crore to Rs. 401 Crore. In any case, the RP forwarded the same to the members of the CoC. No CoC member shown interest in pursuing the new offer and CIRP period of 270 days was already over. Constraint to file the Application under Section 33(1) of the Code for Liquidation of the CD, the RP did the same on 29.07.2019. SREI even gone to the Adjudicating Authority through CA No.214 of 2019 in CP(IB) No. 223 /ALD/2018 for calling the meeting of CoC and considering their revised offer and the Adjudicating Authority dismissed the said application through an elaborate order that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. There is no provision under the Code allowing a RA to wait for an indefinite period or till other RA(s) plans are rejected by the CoC or the Adjudicating Authority and then file a Resolution Plan. In this regard, emphasis is supplied on the following provisions of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016: "36A. Invitation for expression of interest ..(3) The Form G in the Schedule shall - ...(b) provide the last date for submission of expression of interest which shall not be less than fifteen days from the date of issue of detailed invitation. (5) A prospective resolution applicant, who meet the requirements of the invitation for expression of interest, may submit expression of interest within the time specified in the invitation under clause (b) of sub-regulation (3). (6) The expression of interest received after the time specified in the invitation under clause (b) of sub-regulation (3) shall be rejected. (10) the resolution professional shall issue a provisional list of eligible prospective resolution applicants within ten days of the last date of submission of expression of interest to the committee and to all prospecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any extension of the period of CIRP granted under this section and the time taken in legal proceedings in relation to such resolution process of the CD." 30. Submission of resolution plan - The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (f) conforms to such other requirements as may be specified by the Board. (4)The committee of creditors may approve a resolution plan by a vote of not less than seventy-five 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 also that nothing in the second proviso shall be construed as extension of period for the purposes of the proviso to sub-section (3) of section 12, and the corporate insolvency resolution process shall be completed within the period specified in that sub-section. d. It is evident from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Resolution Plan within the deadline, and whose eligibility under Section29A has not been confirmed by the RP, cannot file a Resolution Plan belatedly and directly before the Adjudicating Authority. No Resolution Applicant can be allowed herein to bypass and frustrate the prescribed mandatory and statutory procedure prescribed under the Code by attempting to slip in a Resolution Plan and make a backdoor entry. It is also stated by the CoC that under the proviso to Section 12 of the Code, for pending CIRP an additional period of ninety days has been given from the commencement of the Code (Amendment) Act, 2019, i.e. 06.08.2019. Thus, the CIRP period of the CD expires on 04.11.2019. However, it is only subsequent to the filing of the aforesaid application, the Code (Amendment) Act 2019 came into force with effect from 06.08.2019. Therefore, the amendment brought to Section 12 of the Code, in not applicable in the instant case. g. The Liquidation Application has been filed and directions have been passed by the Adjudicating Authority under Section 33(1) of the Code which does not contemplate any prior approval of CoC. The Liquidation Application was filed by the RP in term of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of 2013)". Thus, the impugned order has been passed by the Adjudicating Authority having jurisdiction and constituted in accordance with the provisions of the Companies Act, 2013. j. It is also submitted by the Ld. Sr. Counsel for the CoC that the Appellant has made false allegations that the RP being an ex-employee of the SBI and is acting hand in glove with SBI to push the CD into liquidation as SBI would get a better value from its secured assets at the time of liquidation. However, the Appellant's band allegations in this regard are strongly denied. The RP is an independent professional and has no nexus with SBI. The Hon'ble Supreme Court of India in the case of SBI Vs. M/s. Metenere Ltd (Civil Appeal No. 2570 of 2020) has held that merely because the RP was in service of SBI and getting a pension from it, he was not disentitled to be the RP. As a matter of fact, SBI had voted in favor of SREI's Resolution Plan. However, SBI only has a 26% voting share in the CoC and the Resolution Plan was rejected by 71% majority of the CoC. Therefore, contrary to the Appellant's stand, SBI had in fact supported resolution to the CD, however the same could not sail through because of di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The CD was incorporated on 17.11.1989 as M/s. Jhunjhunwala Vansapati Ltd. The CD commenced its operations as a small scale industry for manufacturing of hydrogenated vegetable oil in 1989. Thereafter, the name of the CD was changed to M/s. JVL Agro Industries Limited on 21.10.2008. b. It is also stated that the CD is engaged in manufacturing of vegetables oil and fats (other than hydrogenated). Its products including Vasnaspati, refined oil, mustard oil, rice and bakery shortening. Its refined oil variants including olein, soyabean, cotton seed, palm and sunflower. Its mustard oil variants including kachchighani and pakkighani. Its Vanaspati variants include Vanaspati ghee variant. Its rice variants include steamed, par-boiled and white rice. The Registered office of the CD is located in Varanasi. The CD gradually set up and its manufacturing facilities at 5 different locations in India. The CIRP process was admitted against the CD vide an order dated 25.07.2018 passed by the Adjudicating Authority. c. It is stated that the RP was an employee of the SBI, which has the largest share/voting percentage in the CoC i.e. 26%. The R! is acting at the behest of SBI and to secure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... going on and not concluded in interest of all stakeholders. The order dated 03.02.2020 is extracted below: "After the rejection of the resolution plan submitted by SREI, it would be equitable that the resolution process is open for all resolution applicants in order to maximize the recovery for the creditors of the CD" as there were interest resolution applicants (appearing at page No. 69 of the Appeal paper book in CA(AT) (Ins) No. 846 of 2020). f. It is also stated that the Resolution Plan never put before the CoC for it to apply its commercial wisdom. Application C.A No.70 of 2020 having plan of the appellant filed before the Adjudicating Authority on 06.02.2020 i.e. within 3 days of direction passed in the order dated 03.02.2020. However, the plan never placed before the CoC, no document or record of the same on record. The Adjudicating Authority vide order dated 14.02.2020 observed the plan will be submitted to RP within 24 hours and put for consideration on 20.02.2020. The Application of the Appellant was listed before the Adjudicating Authority on 06.07.2020 and was considered. It was proposed the plan be submitted before CoC which confirmed higher value of plan than pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not lay down any law to the effect that matters which are otherwise justiciable under the Code can be made non-justiciable only because of a view taken by the CoC. The Application for liquidation was allowed by the Adjudicating Authority without considering and / or considering the objective of the Code as explained by the Hon'ble Supreme Court in several judgments including the following: Swiss Ribbons Pvt.Ltd Vs. Union of India (2019) 4 SCC 17 Committee of Creditors, Essar Steel India Ltd, through authorized Signatory Vs. Satish Gupta & Ors. (Civil Appeal No. 8766-8677 of 2019) Duncans Industries Ltd Vs. J Agrochem (2019) 9 SCC 725 Civil Appeal No. 9402-9405 of 2018 ArcelorMittal India Pvt, Ltd. Vs. Satish Kumar Gupta & Ors. i. The Judgment of this Tribunal in CA(AT) (Ins) No. 606 of 2019 Hammond Power Solutions Pvt. Ltd. Vs. Mr. Sanjit Kumar Nayak & Ors., wherein the Hon'ble Tribunal has set aside the impugned order and remit the matter back to the Adjudicating Authority with a direction to send back the Resolution Plan to the CoC to resubmit the plan after satisfying the parameters as laid down by the Hon'ble Supreme Court in the judgment in the matter of "Essar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime between the 1st meeting of the CoC and the appointment of the present RP. The Application for exclusion of time was allowed by the Adjudicating Authority on 14.08.2019 thereby extending the CIRP period by a further period of 18 days i.e. till 09th May, 2019. It is pertinent to mention that the order dated 14.08.2019 passed by the Adjudicating Authority has intentionally been suppressed by the Appellant herein. c. It is also stated that in the CoC meeting held on 26.03.2019, it was agreed to further extend the Resolution Plan submission date to 06th April, 2019. Despite further extension, no Resolution Plan was received till 06.04.2019 i.e till the last date for submission of Resolution Plan. However, the RP had received a request from one of the prospective Resolution Applicants, namely, SREI, for further extension of timeline for submission of Resolution Plan by 10 days i.e. till 16.04.2019. The CoC agreed to further extend the Resolution Plan submission date till 16.04.2019. On 16.04.2019 SREI submitted its Resolution Plan in respect of the CD. However, since SREI had submitted the Earnest Money Deposit (EMD) in the form of Bank Guarantee (BG) of INR 1,00,00,000 as against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployees which includes non-existence of trust on the date of filing of the Resolution Plan and the employee who is filing the Resolution Plan, he himself disqualified and he also could not find out how a new trust can generate funding from different sources. 9. Submission of the Respondent No.2:- Committee of Creditors a. As far as the issue of order delivered by a single Judicial Member Bench of the Adjudicating Authority. It is clarified that Section 419 of the Companies Act, 2013 is amply clear on this subject that a single member can constitute the Bench. For brevity and clarity, the same is depicted below: Section 419 of the Companies Act, 2013 "Section 419: Benches of Tribunal. (1) There shall be constituted such number of Benches of the Tribunal, as may, by notification, be specified by the Central Government. (2) The Principal Bench of the Tribunal shall be at New Delhi which shall be presided over by the President of the Tribunal. (3) The powers of the Tribunal shall be exercisable by Benches consisting of two Members out of whom one shall be a Judicial Member and the other shall be a Technical Member: Provided that it shall be competent for the Members of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted by the parties, we observed the followings: a. It is not in dispute that the CIRP commenced from 25.07.2018. b. It is also not in dispute that the RP published the request for EOI on 05.10.2018 and thereafter, again on 05.12.2018. c. It is also not in dispute that 12 Applications for EOI were responded to the RP. Only one M/s. SREI wish to participate in the Resolution Process and submitted an EOI on the extension of the deadline for submission of the Resolution Plan in February, 2019. d. The CoC agreed to accept the EOI of SREI and further extended the date of submission of the Resolution Plan from 02.03.2019 to 25.03.2019. However, SREI submitted the Resolution Plan on 16.04.2019 which was rejected by the CoC on 07.05.2019 by approx.98% vote. SREI went on improving the proposal just by a minuscule amounts and finally CoC decided to put the resolution plan to vote on 24.07.2019. However, the Resolution Plan was rejected by the CoC by approx.71% of the vote and rejection was communicated to the SREI. On 25.07.2019, SREI further sent a standalone financial offer raising its proposal from Rs. 395 Crore to Rs. 401 Crore. The RP sent the same proposal to members of the CoC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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