TMI Blog2022 (4) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... Order of this Tribunal directing the Adjudicating Authority not to pass any Order with respect to approval/rejection of the Resolution Plan. Respondents 4 to 6 cannot be brought under the Resolution Process of the Code for the simple reason that there is no material on record to establish any default being committed by the said Respondents under the Code - the second Respondent is already undergoing Liquidation Process since the last two years and this Tribunal is of the earnest view that the clock cannot be set back at this stage. Mere common shareholding does not give any substantial grounds to the Appellant herein to seek substantive consolidation based on the facts and circumstances of the attendant case on hand. Having regard to the fact that all the Respondent Companies are in different stages of CIRP/Liquidation under the Code having different dates of default , separate causes of action, and unrelated business activities, this Tribunal is of the earnest view that the Adjudicating Authority has rightly passed the Impugned Order - Appeal dismissed. - COMPANY APPEAL (AT) (INSOLVENCY) No. 04 of 2021 And I.A. No. 2146 of 2021 - - - Dated:- 4-4-2022 - [ Justice Anant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and the Respondents Nos. 2-6; vi. That a comprehensive Resolution Plan dealing with the Corporate Debtor and the Respondent Nos 2-6 may be formulated and approved by the common Committee of Creditors and put up for approval before this Tribunal for its approval in accordance with the provisions of the Code; vii. Any such order and/ or relief that this Hon'ble Tribunal deems fit in the interest of justice and equity. 2. The Adjudicating Authority, while dismissing the Application, preferred by the Liquidator, observed as follows: 6. It is a matter of record that the CIRP of the Corporate Debtor/Respondent No. 1, Sana Alloys Pvt. Ltd., admitted on 16.06.2020 vide C.P.(I.B) No. 586/2019. Thereafter, against the Ganga Advisory Pvt. Ltd. (Respondent No. 2) CIRP is initiated by the Adjudicating Authority on 24.01.2019 on filing an application under section 7 of the IB Code by Pani Logistics and thirdly against Neuromed Imaging Centre Pvt. Ltd., CIRP is initiated on 12.07.2019 by this Adjudicating Authority on filing an application by Mahaveer transport under section 7 of the IB Code. 7. Evidently, as also matter of record that there are 3 separate orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /AHM/2019; on 07/09/2020 Liquidation Process was initiated against the third Respondent/ Nueromed Imaging Centre Private Limited in CP (IB) No. 237/2018, on 21/07/2020, the Appellant preferred the Application for substantial consolidation of the Respondent Company for CIRP. Vide Order dated 04/12/2020, the Adjudicating Authority has rejected the Application for substantial consolidation on the ground that mere shareholding does not mean that the Respondent Companies are group Companies. The Appellant is part of the CoC of Respondents 1 to 3 and the voting share of the Appellant is as hereunder: Corporate Debtor Voting Share of the Appellant Respondent No. 1 0.264% Respondent No. 2 69.22% Respondent No. 3 2.9% Learned Counsel for the Appellant argued that there are several grounds conducive for consolidation which are detailed as hereunder: Grounds for Consolidation 1. Common Control, Common Directors and Cross Shareholding Amit Kumar Jain is the Common Director of Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Form 26AS Funds of Respondent No. 2 to 6 are infused in Respondent No. 1 to carry out its business activities. Respondents depend upon each other for their existence. Learned Counsel submitted that Respondents 4 to 6 are Financial Creditors of Respondents 2 3 and placed reliance on the Forensic Audit Reports of the Respondents 2 3. Learned Counsel strenuously contended that the Respondents come within the definition of Group Companies as defined under Section 2(6) of the Companies Act, 2013 as the Respondent Companies have common directorship and shareholding. Learned Counsel relies on the doctrine of substantial consolidation applied in the case of State Bank of India Vs. Videocon Industries Limited Anr. C.P. (IB) No. 02/2018 dated 08/08/2019. 4. Submissions of the Resolution Professional (RP) on behalf of the 1st Respondent/ Corporate Debtor : Learned Counsel representing the first Respondent submits that the Appellant herein has filed I.A. 397/2020 seeking substantive consolidation before the Adjudicating Authority as on 21/07/2020, even before the IRP rejected the claim of the Appellant on 22/07/2020 meaning thereby that the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... falls for consideration in this Appeal is whether the Adjudicating Authority was justified in rejecting the substantial consolidation prayed for. 6. Succinctly put, the admitted facts are that the first Respondent/the Corporate Debtor is undergoing CIRP where the Resolution Plan is under consideration. The status of the other Respondents with respect to the proceedings under the Code is detailed as hereunder: Parties Company Name Status Business Respondent No. 1 SONA Alloys Pvt. Ltd., through its Resolution Professional, Mr. Vikas G. Jain Under CIRP (Resolution Plan under consideration) Engaged in producing Pig Iron, Mild Steel, Alloys Steel Intermediate and rolled products. Resolution Plan approval by CoC on 17.03.2021. Respondent No. 2 Ganga Advisory Private Limited through its Liquidator, Mr. Umesh Harjivandas Ved. Under Liquidation (CIRP Order 24.01.2019) (Liquidation Order 04.03.2020) Engaged in providing finance to various companies in the form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.99Crs./-. The Resolution Plan was approved by the CoC by a majority of 99.732% voting share on 17/03/2021 in the 9th CoC Meeting. At this juncture, we find it relevant to place reliance on the ratio of the Hon ble Supreme Court in K Sashidhar Vs. Indian Overseas Bank Ors. 2019 12 SCC 150, has observed as follows: 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 investing jurisdiction and authority in NCLT or NCLAT as noticed earlier, have not made the commercial decision exercised by CoC of not approving the resolution plan or rejecting the same, justiciable. This position is reinforced from the limited grounds specified for instituting an appeal that too against an order approving a resolution plan under Section 31. First, that the approved resolution plan is in contravention of the provisions of any law for the time being in force. Second, there has been material irregularity in exercise of powers by the resolution professional during the corporate insolvency resolution period. Third, the debts owed to operational creditors have not been prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 154. In the case of Maharashtra Seamless Limited (supra), NCLT had approved the plan of appellant therein with regard to CIRP of United Seamless Tubulaar (P) Ltd. In appeal, NCLAT directed, that the appellant therein should increase upfront payment to ₹ 597.54 crore to the financial creditors , operational creditors and other creditors by paying an additional amount of ₹ 120.54 crore. NCLAT further directed, that in the event the resolution applicant failed to undertake the payment of additional amount of ₹ 120.54 crore in addition to ₹ 477 crore and deposit the said amount in escrow account within 30 days, the order of approval of the resolution plan was to be treated to be set aside. While allowing the appeal and setting aside the directions of NCLAT, this Court observed thus: 30. The appellate authority has, in our opinion, proceeded on equitable perception rather than commercial wisdom. On the face of it, release of assets at a value 20% below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Adjudicating Authority has such limited jurisdiction is not executable. In the instant case, the Resolution Plan has not yet been approved on account of the Order of this Tribunal directing the Adjudicating Authority not to pass any Order with respect to approval/rejection of the Resolution Plan. Respondents 4 to 6 cannot be brought under the Resolution Process of the Code for the simple reason that there is no material on record to establish any default being committed by the said Respondents under the Code. The second Respondent is already undergoing Liquidation Process since the last two years and this Tribunal is of the earnest view that the clock cannot be set back at this stage. Respondent 3 is also undergoing Liquidation Process since 07/09/2020 and this Tribunal is of the considered opinion that no interference can be warranted in terms of any kind of consolidation at this stage. Mere common shareholding does not give any substantial grounds to the Appellant herein to seek substantive consolidation based on the facts and circumstances of the attendant case on hand. The Hon ble Supreme Court has time and again stressed on the importance of the adherence to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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