TMI Blog2022 (9) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30. Further, the procedure encapsulated under the regulations and as per Regulation 39(1-B) the Committee shall not consider any resolution plan received after the time as specified by the Committee under Regulation 36B. In view of the reasons every Resolution Applicant shall comply with the procedure as prescribed under the law and regulations. The due procedure and the scrutiny are a continuous process and cannot be considered as a simple contractual negotiation between two parties. In the instant case, the Respondents have failed to submit the Resolution Plan within the time therefore there is no immunity to the respondents to file beyond the time prescribed. The RP rightly rejected the request of the Respondents - the Respondents failed to establish that the RP violated the CIRP process. It is only the case of the Respondents such averments allegations have been made and the Adjudicating Authority without going into the reality simply ratified the submissions of the Respondents, which this Tribunal highly deprecate the said stand. It is not in dispute that the CIRP period has been expired prior to submission of plan by the Respondents and the Respondents have not evince ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 28.05.2021 limited to I.A. No. 227 of 2020 in CP No. 51 of 2018. 3. It is submitted that the `CIRP was initiated against M/s Associate D cor Limited, the `Corporate Debtor vide order dated 26.10.2018 by the Adjudicating Authority ( NCLT , Bengaluru Bench). In compliance of the I B Code, 2016 and Regulations, the `Resolution Professional initiated the process namely issuance of Form-G , inviting Expression of Interest (in short EoI ) etc. In response thereto, the Respondents herein formed as Consortium submitted their EoI on 06.09.2019 and reconfirmed their interest vide e-mails dated 14.09.2019, 03.10.2019 and 12.10.2019. Accordingly, the Consortium was a part of the provisional list of Resolution Applicants and the RP provided the copies of Information Memorandum (in short IM ), evaluation matrix and Request For Resolution Plan (in short RFRP) in accordance with Section 25(2)(h) of the I B Code, 2016 on 09.10.2019, in order to enable the consortium to submit Resolution Plan for the Corporate Debtor . Even Virtual Data Room (in short VDR) access was provided to the consortium on 15.10.2019 along with 20 others Prospective Resolution Applicants (in short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n CP No. 51 of 2018 under Sections 30 31 of the I B Code before the Adjudicating Authority for its approval. 7. It is submitted that after completion of CIR Process, the Consortium / Respondents submitted its Resolution Plan to the RP vide e-mail dated 27.05.2020 and the RP responded to the said mail on 18.06.2020 stating that CIRP period was already expired on 16.03.2020. Against the said reply of the RP , the Respondents filed an application before the Adjudicating Authority bearing I.A. No. 227 of 2020 seeking direction against the RP for placing its plan for consideration before the CoC. The RP contested the I.A. by filing its counter. The Adjudicating Authority passed the impugned order in I.A. No. 227 of 2020 directing RP to place before the CoC / Appellant the Respondents (consortium) plans along with Resolution Plan submitted by METL for its consideration. 8. Apart from the facts as narrated above, the Learned Senior Counsel raised the following grounds in the appeal. It is submitted that the Respondents have not shown interest in submitting a Resolution Plan after having stated that it had decided not to submit Resolution Plan vide e-mail dated 06.11.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OI s on as is where is basis is impermissible under the code. It is submitted that as is where is basis is a well-established practice in other similar context such as distress sales and auctions, in which context it has been given effect to in numerous occasions by the Hon ble Supreme Court in the matter of UT Chandigarh Admn. Vs. Amarjeet Singh (2009) 4 SCC 660 and also by this Tribunal in Tarun International Vs. Vikram Bajaj dated 03.03.2021 in CA (AT) (Ins) No. 1194 of 2019. 12. It is submitted that the Adjudicating Authority erred in directing consideration of the Respondents plan despite gross delay in submission. The Appellant issued Form-G inviting EoI dated 10.06.2019. The Respondents submitted its EoI for submitting Resolution Plan in respect of the Corporate Debtor on 06.09.2019 and confirmed the EoI on 24.09.2019. The Appellant issued provisional list of Resolution Applicants including the Respondents on 09.10.2019 and a final list was issued including the name of the Appellant on 19.10.2019. The Respondents requested a site visit on 11.11.2019 and also sought an extension for submission of its plan vide its letter dated 05.11.2019. However, the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not provided. The second being that the time for submissions of the Resolution Plan as on 06.11.2019 was 11.11.2019. In view of non-availability of vital material, the Respondents could not submit plan. The Respondents was under the bonafide belief that the process was still ongoing, undertook all efforts to collate all information pertaining to the Corporate Debtor from the website of the Ministry of Corporate Affairs. 17. The Respondents submitted its plan on 27.05.2020 and a reminder was sent to the Appellant on 16.06.2020 for placing their plan before the CoC. However, the Appellant vide reply dated 18.06.2020 rejected the plan without placing the same before the CoC for its considerations. Aggrieved by the same, the Respondents filed I.A. No. 227/2020 before the Adjudicating Authority. 18. It is submitted that the Respondents being consortium is one of the biggest building material constructions, home furnishing and real estate companies with more than 30 years of experience in that field. The Adjudicating Authority rightly granted the relief as prayed for in I.A. No. 227 of 2020. 19. It is submitted that the submission of their plan is within the CIRP period a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied out within a period of 12 weeks from the receipt/uploading of this order. This period is considered appropriate considering the present Covid-19 pandemic situation and the ensuing lockdown in several states. The RP is granted liberty to bring an application before this Adjudicating Authority for any further exclusion of time, if the same is for exceptional and justifiable reasons, and in the interest of completing the process and achieving the objects of the Code. 2. All the IAs in C.P. (IB) No. 51/BB/2018 are disposed of as above. No order as to cost. 3. Post the case for report of the RP on 30th June 2021. 24. Aggrieved by the above order of the Adjudicating Authority , the Appellant filed the present Appeal raising various grounds and sought interim stay of the impugned order vide I.A. No. 353 of 2021 in the above Company Appeal. This Tribunal stayed the impugned order on 03.08.2021 in respect of directions passed hereinabove. 25. The facts are not in dispute with regard to initiation of CIRP against the Corporate Debtor i.e. M/s Associate Decor Limited by the Financial Creditor M/s Oriental Bank of Commerce under Section 7 of the I B Code, 2016 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that no Resolution Plan shall be entertained post 4 p.m. on 07.12.2019. Thus, from the mail from RP dated 02.12.2019, the last date for submission of plan has been extended till 07.12.2019. 29. The Respondents vide their e-mail dated 06.11.2019 (supra) expressly shown their inability to submit their Resolution Plan. However, the Respondents submitted their Resolution Plan by e-mail dated 27.05.2020 and sent a reminder letter dated 16.06.2020. The fact remains that the RP vide his e-mail dated 02.12.2019 extended the time from 30.11.2019 to 07.12.2019 till 4:00 p.m. From the mail, it is evident that the said mail has been sent to the Respondents and the Respondents are aware of the said extension of date for submission of resolution plans. The Respondents have vide their communication dated 06.11.2019 expressed their inability not to participate in the Resolution Plan. However, they have submitted their Resolution Plan on 27.05.2020 i.e. after lapse of more than 5 months from the last date of submission of plan i.e. 07.12.2019. The RP vide reply dated 18.06.2019 addressed to the Respondents as under: I am surprised to see this mail and submission of a purported Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically referred that non-availability of documents in virtual data room and non-availability of financials of Corporate Debtor and therefore, in absence of the said documents, the Respondents decided not to participate in submission of Resolution Plan. 33. The fact remains that the Respondents themselves vide their e-mail dated 06.11.2019 clearly expressed their decision not to participate in the Resolution Plan and it is clearly stated in the letter that they have gone through the available documents in virtual data room and non-availability of audited financials of the Corporate Debtor and further a preliminary due diligence from their end. The Respondents have at no point of time requested the RP to furnish the said documents. In the aforesaid e-mail, it is only stated that the reason being non-availability of audited financials. It is also clear that the Respondents have done due diligence of the documents. It is apt to record the submissions and the stand taken by the RP before the Adjudicating Authority in I.A. No. 227 of 2020 that the Respondents submitted their EoI on 06.09.2019 and was reaffirmed vide e-mails dated 24.09.2019, 03.03.10.2019 and 12.10.2019. From th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited judicial review available is to see that the Committee of Creditors have taken into account the fact that the Corporate Debtor needs to keep going as a going concern during the insolvency process, that it needs to maximise the value of the assets and that the interests of all stakeholders including Operational Creditors has been taken care of. In view of the aforesaid facts the Hon ble Supreme Court held that if the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the CoC to resubmit such plan after satisfying the aforesaid parameters . In the said context the Hon ble Supreme Court has held that the Adjudicating Authority can only look from that point of you and if the Adjudicating Authority satisfied that the CoC has paid attention to these key features, it must then pass the resolution plan. From the aforesaid judgment, it is unequivocal that the Hon ble Supreme Court has not given any power to the Adjudicating Authority to consider the resolution plan of a new applicant who has submitted its plan beyond a period of five months from the last date for submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the parties to freely negotiate terms of the Resolution Plan with unfettered discretion, that are not grounded in the intent of the IBC. 149. The IBC and the regulations provide a detailed procedure for the completion of CIRP. An application for initiation of CIRP is filed either by the financial creditor, operational creditor or the Corporate Debtor itself under Sections 7, 9 and 10 of the IBC, respectively. Once the application is admitted by the Adjudicating Authority, it passes the following orders under Section 13(1) of the IBC: (i) declaration of a moratorium for the purposes referred to in Section 14 of the IBC; (ii) causing a public announcement to be made for the initiation of CIRP and issuing a call for submissions of claims as may be specified under Section 15 of the IBC; and (iii) appointing an IRP in accordance with Section 16 of the IBC. (Emphasis Supplied) 35. From the judgment of the Hon ble Supreme Court (supra), it is clear that the delay in CIRP cannot be condoned because of imposition of lockdown and it is apt to recapitulate the relevant observation of the Hon ble Supreme Court thus read as Regulation 40(c) provides that the delay in completi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he plan. Once the plan is approved by the Committee of Creditors , the Adjudicating Authority empowered to approve the plan under Section 31 which was approved by the Committee of Creditors and meets the requirements as referred to in sub-section (2) of Section 30. Further, the procedure encapsulated under the regulations and as per Regulation 39(1-B) the Committee shall not consider any resolution plan received after the time as specified by the Committee under Regulation 36B. In view of the reasons every Resolution Applicant shall comply with the procedure as prescribed under the law and regulations. The due procedure and the scrutiny are a continuous process and cannot be considered as a simple contractual negotiation between two parties as held by the Hon ble Supreme Court in the matter of Ebix Singapore (supra) at para 145 as under: 145. The absence of any specific provision in the IBC or the regulations referring to a CoC-approved Resolution Plan as a contract and the lack of clarity in the BLRC report regarding the nature of such a Resolution Plan, constrains us from arriving at the conclusion that CoC approved Resolution Plans will be governed by the Contract Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute that the CIRP period has been expired prior to submission of plan by the Respondents and as held (supra) the Respondents have not evinced any interest in submitting of resolution plan, after they backed out from the submission of plans vide letter dated 06.11.2019. It is not in dispute that the Respondents backed out and submitted its plan beyond the CIRP period by levelling baseless allegations against the RP to pressurise the RP to place its plan before the CoC . Such conduct of the Respondents is unwarranted. 41. It is unequivocal that the 5th Respondent M/s Mohammed Enterprises (Tanzania) Ltd. (in short METL ) evinced its EoI on 04.10.2019 and submitted its plan on 11.02.2020 and the same has been approved by the CoC in an e-voting took place from 13.02.2020 to 06.03.2020 with 100% voting share. The said MET L declared as Successful Resolution Applicant on 09.03.2020 and issued a Letter of Intent (in short LoI). Thus, the plan of the METL has been approved by the CoC and the RP filed an application being I.A. No. 161 of 2020 before the Adjudicating Authority for approval of plan. The METL also furnished a performance bank guarantee on 19.03.2020 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retation of economic statutes, where the interpretative maneuvers of the Court have an effect of transgressing into the law-making power of the legislature and disturbing the delicate balance of separation of powers between the legislature and the judiciary. Judicial restraint must be exercised in such cases as a matter of prudence, since the court neither has the necessary expertise nor the power to hold consultations with stakeholders or experts to decide the direction of economic policy. A court may be inept in laying down a detailed procedure for exercise of the power of withdrawal or modification by a successful Resolution Applicant without impacting the other procedural steps and the timelines under the IBC which are sacrosanct. Thus, judicial restraint must be exercised while intervening in a law governing substantive outcomes through procedure, such as the IBC. In this case, if Resolution Applicants are permitted to seek modifications after subsequent negotiations or a withdrawal after a submission of a Resolution Plan to the Adjudicating Authority as a matter of law, it would dictate the commercial wisdom and bargaining strategies of all prospective Resolution Applicants w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad) is to approve the 'Resolution Plan' approved by the Committee of Creditors' with 100% voting in favour of 'KALS Group'. I A No. 53/2021 (stay application) I A No. 54/2021 (for urgent hearing) are closed. 46. This Tribunal in the matter of Union Bank of India Vs. Mr. Kapil Wadhawan Ors. in CA (AT) (Ins) Nos. 370, 376-377 and 393 of 2021 dated 27.01.2022 a similar issue fell for consideration and the Tribunal framed the following issue as under: Whether after Approval of the resolution plan by the COC and pending Approval, the Adjudicating Authority can direct the COC to convene a meeting and place the settlement proposal as offered for consideration, decision and voting on that within a certain period? 47. In the above case, the Adjudicating Authority vide its impugned order had directed the CoC to consider the 2nd settlement offer of the 1st Respondent therein, when the resolution plan after approval from CoC was pending adjudication under Section 31 before the Adjudicating Authority . 48. In the present case also in the Adjudicating Authority in I.A. No. 227 of 2020 directed the RP to place the Resolution Plan of the Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Applicants evinces a sense of a negotiated agreement that is arrived between the parties, which resembles an exercise of contractual freedom by the CoC and the Resolution Applicant. 127. If this court were to hold that CoC-approved Resolution Plans are indeed contracts, their provisions would still have to conform to the statutory provisions of the IBC. However, such an interpretation would entail that CoC-approved Resolution Plans are at the intersection of the IBC and the Contract Act. This would mean that certain principles of contract law, for example those relating to discharge, penalties, remedies and damages would become applicable to CoC-approved Resolution Plans. For instance, in the United States, plans confirmed by courts have been characterised as contracts, whose breach can even give rise to contractual remedies. In In re Hoffinger Indus, Inc, a bankruptcy court in Arkansas has held that a confirmed plan should be enforceable and amenable to damages between contractually bound parties. Indeed, it has been argued before us that Resolution Plans should be enforced through the contractual remedy of specific performance. Further, a determination that Resolution Pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory provision and not because they have actually consented to be parties to such an arrangement. Other elements governing the Resolution Plan indicate that the entire process from initiation and leading up to its acceptance by the CoC takes place within the framework of the IBC. In addition, the IBC provides penalties for non-compliance with the Resolution Plan after its Approval under Section 31 and forfeiture of the PBG for failing to implement the Resolution Plan or contributing to the failure of its implementation. The violation of the terms of the Resolution Plan does not give rise to a claim of damages, rather it leads to prosecution and imposition of punishment under Section 74 of the IBC. On the contrary, a CoC's withdrawal of the CIRP under Section 12A is coupled with a requirement of payment of CIRP costs, but no damages are statutorily payable to the Resolution Applicant, irrespective of the stage of the withdrawal. 130. The CoC even with the requisite majority, while approving the Resolution Plan must consider the feasibility and viability of the Plan and the manner of distribution proposed, which may take into account the Order of priority amongst creditors a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved that such a compromise or arrangement once sanctioned by the court is not merely an agreement between parties because it binds even dissenting creditors or members through statutory force. This Court made the following observations: 12. The scheme when sanctioned does not merely operate as an agreement between the parties but has statutory force and is binding not only on the Company but even dissenting creditors or members, as the case may be. The effect of the sanctioned scheme is to supply by recourse to the procedure thereby prescribed the absence of that individual agreement by every member of the class to be bound by the scheme which would otherwise be necessary to give it validity [see J.K. (Bombay) Pvt. Ltd. v. New Kaiser-i-Hind Spg. Wvg. Co. Ltd. [AIR 1970 SC 1041: (1969) 2 SCR 866, 891: (1970) 40 Comp Cas 689]].. 132. While the above observations were made in the context of a scheme that has been sanctioned by the Court, the Resolution Plan even prior to the Approval of the Adjudicating Authority is binding inter se the CoC and the successful Resolution Applicant. The Resolution Plan cannot be construed purely as a 'contract' governed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority (NCLT) nor the appellate Authority (Nclat) has 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 38. The Court, also held (in paragraph 62) that the legislative history of the IBC indicated that there is a contra indication that the commercial or business decisions of financial creditors are not open to any judicial review by the adjudicating authority or the appellate authority . 39. The above principles have been re-emphasised and taken further by a three-Judge Bench in Essar Steel India Limited (supra). The Court, speaking through Justice R F Narminan, held: 73. There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or sub-class of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of the corporate debtor and the fact that it has adequately balanced the interests of all stakeholders including operational creditors. This being the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the plan as approved by the CoC. b) Once the requirements of the IBC have been fulfilled, the Adjudicating Authority and the Appellate Authority are duty-bound to abide by the discipline of the statutory provisions. Neither the Adjudicating Authority nor the Appellate Authority has an unchartered jurisdiction in equity. The jurisdiction arises within and as a product of a statutory framework. c) The jurisdiction of the Adjudicating Authority is confined by the provisions of Section 31(1) to determining whether the requirements of Section 30(2) have been fulfilled in the plan as approved by the CoC. d) There was no scope for negotiations between the parties once the CoC had approved the Resolution Plan. Thus, contractual principles and common law remedies, which do not find a tether in the wording or the intent of the IBC, cannot be imported in the intervening period between the acceptance of the CoC and the Approval by the Adjudicating Authority. 9.7 In the instant case, we found that after Approval of the Resolution Plan by the Committee of Creditors, the application was pending before the Adjudicating Authority under Section 31 of the Insolvency and Bankrup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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