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TMI Blog2022 (4) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... , Advocates in IA No. 2146/2021 And I.A. No. 2146 of 2021 JUDGEMENT ( Per : Shreesha Merla, Member (T) ) 1. Aggrieved by the Impugned Order dated 04/12/2020 in I.A. No. 397 of 2020 in C.P. (IB) No. 586/NCLT/AHM/2019 passed by the Learned Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench, Ahmedabad, Court - II), M/s. Pani Logistics/'The Financial Creditor' preferred this Appeal. By the Impugned Order, the Adjudicating Authority has dismissed the Application preferred by the Liquidator seeking the following relief(s): "i. Order and direct the substantive consolidation of the Corporate Debtor and the Respondents Nos. 2-6 into a single proceedings solely for the purpose of CIRP in accordance with the provisions of the Code, including but not limited to the acceptance, confirmation and all other actions with respect to the resolution plan for the Corporate Debtor and the Respondent Nos. 2-6 and any and all amendments or modifications thereto, in such consolidated proceedings; ii. Order and direct that solely for the purpose of the consolidated proceedings, all assets and liabilities of the Corporate Debtor and the Respondent Nos 2-6 are consolidated and are d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 5 and 6 hold substantial share in the Corporate Debtor but mere shareholding does not mean that these are group companies. Had it been group company, there would have been a single order for initiation of CIRP. Since, the companies are holding separate entities and there is separate cause of action and date of default on the part of the Corporate Debtor, the CIRP proceeding has been initiated separately. Moreover, the IB Code does not provide for any consolidation of the Company when the Companies are holding substantial shares in each other. It is seen that the Applicant has placed on record number of citations and the case laws. There is no dispute with regard to those case laws, however, it varies from case to case as well as factual parameters. Moreover, the object of IB Code is resolution and not the liquidation, as such. 10. It is pertinent to note that Substantial consolidation as a remedy should always be treated as an exception rather than the rule. Moreover, this remedy can be an option for group companies however, in the instant matter the companies are not group companies but only hold substantive shares in the Corporate Debtor. 11. Under the above facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s signed by same person, it appears that all these are related parties." 2. Common Assets and Liabilities The Forensic Audit reports of Respondent No. 2 and 3, respectively demonstrate that the transactions between the Respondents are classified as Relate Party Transactions. Respondent No. 2, in its Reply at para 7 of its Affidavit states, "..multiple loan liabilities of Respondent No. 1 were transferred in the books of Respondent No. 2 for a consideration of interest of 9% payable to the creditors. Hence, the Respondents are dependent upon each other for their economic survival and their accounts are interlinked for benefit of each other." The Audit Report of Respondent No. 3 at 4.4.7 records the following: "The 'Corporate Debtor' has provided the Corporate guarantee to SBI Cap. Trustee Co. Ltd. on behalf of M/s. Sona Alloys Private Limited against the loan of Rs. 11,59,97,00,000/- and also NICPL has mortgaged his office premises to SBI Cap. Trustee Co. Ltd. on behalf of M/s. Sona Alloys Private Limited." 3. Interdependence and Interlacing of Finance Respondent No. 4 to 6 are financial creditors of Respondent No. 2 and 3. The Forensic Audit of Respondent No. 2 recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, (hereinafter referred to as 'the Code') and need not be interfered with. On 22/03/2021, this Tribunal directed the Adjudicating Authority to pass any Order either Approving/Rejecting the Resolution Plan. On 26/05/2021, disregarding the fact that the proceedings were stalled, the Appellant filed I.A. dated 26/05/2021 for rejection of the Resolution Plan which is contrary to the spirit of the Code. To expedite the disposal of the Application for the avoidance transactions, RP preferred IA 2501/2021 and prayed before this Tribunal for direction that Order dated 22/03/2021 shall not defer the hearing of avoidance Application and all such IAs pending adjudication. The said Application has not been listed before this Tribunal. It is submitted that the Appeal was filed after 300 days in the present CIRP and there is no case for consolidation in accordance with the provisions of the Code. The case of 'State Bank of India' (Supra) is not applicable to the facts of this case as it provides an inclusive list of common control, common directors, common assets, common liabilities, intertwined accounts, cross shareholding and pooling of resources etc., which in the instant case are ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t' and the stage of the Insolvency Proceedings of the Respondent Companies is at different junctures. A perusal of the business activities and operations carried out by the Respondent Companies show that they can never form a single group identity apart from the fact that the Learned Counsel for the Appellant has not brought to the notice of this Bench under which provisions of the Code such a substantive consolidation is provided for. The Consolidation Application IA No. 397/2020 was filed solely by the Appellant on 21/07/2020 even before the IRP rejected the Claim of the Appellant on 22/07/2020 vide an email. We find force in the contention of the RP that the Appellants' prayer to the adjudication of the status of Admission/rejection of their Claim filed this Application against the total claim of Rs. 7.33Crs./-, part of the Claim submitted by the Appellant was admitted for Rs. 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been endowed with the jurisdiction to reverse the commercial wisdom of the dissenting financial creditors and that too on the specious ground that it is only an opinion of the minority financial creditors....." 152. This Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra) after reproducing certain paragraphs in K. Sashidhar (supra) observed thus: "Thus, it is clear that the limited judicial review available, which can in no circumstance trespass 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" 153. 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. 154. In the case of Maharashtra Seamless Limited (supra), NCLT had approved the plan of appellant therein with regard to CIRP o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty ought not to have interfered with the order of the adjudicating authority by directing the successful resolution applicant to enhance their fund inflow upfront. 156. 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." (Emphasis Supplied) From the aforenoted Judgements, it is clear that unless there is any material irregularity or that the Resolution Plan does not meet the essential requisites under Section 30(2) of the Code, the Learned Adjudicating Authority has very limited jurisdiction regarding the approval of the 'Resolution Plan'. When R-2 & R-3 are already under Liquidation, the question of consolidation, when 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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