TMI Blog2022 (10) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... missing the Applications preferred by the Appellant herein based on the findings of the A M Report. It is significant to mention that the Resolution Plan was approved by the Adjudicating Authority on 28.11.2019 and has since been implemented. The contention of the Learned Sr. Counsel appearing for the Appellant that the addendum is unfair and discriminatory and hence ought to be set aside - the submissions of the Learned Sr. Counsel for the Appellant that there are no reasons for the specific addendum to have been added in the Resolution Plan, the reason being the final Report of A M and the categorical findings of the Adjudicating Authority cannot be agreed upon. Appeal dismissed. - COMPANY APPEAL ( AT ) ( INSOLVENCY ) NO. 100 of 2020 COMPANY APPEAL ( AT ) ( INSOLVENCY ) NO. 101 of 2020 - - - Dated:- 10-10-2022 - [ Justice Ashok Bhushan ] Chairperson , [ Ms. Shreesha Merla ] Member ( Technical ) And [ Mr. Naresh Salecha ] Member ( Technical ) For the Appellant : Mr. Ramji Srinivasan, Sr. Advocate with Mr. Nazish Alam, Mr. R.N. Durga Prasad, Mr. Rohan Narula, Mr. Rajaram Dangi Rajshree Chaudhari, Advocates For the Respondent/RP: Mr. Arun Kathpalia, Sr. Advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r renting of UID/NPR Kits for 600 units for a period of 21 months. On 25.09.2014 the Board of Ricoh India approved and ratified the transactions for procurement of IT related assets from Connect Residuary . 4. Ricoh India executed three more Rental Schedules RIL 002, RIL 003 and RIL 004 for renting 4,650 units of which 2,700 was SLB and two more Rental Schedules RIL 005 RIL 006 for renting fit outs and furniture. For the SLB transaction covered in RIL 004, entered into on 26.03.2015, Connect Residuary acquired 2,700 partly used UID Kits from Ricoh India at Rs.9,71,16,469/-. Between the period 23.11.2016 and 02.12.2016 there was communication from Ricoh India offering to pay back the UID Kits and sought a price quotation from Connect Residuary . It is averred that the correspondence was in relation to rent payment default and failure to return the equipment taken on rent. 5. While so, Ricoh India filed an Application on 29.01.2018 under Section 10 of the Code. On 16.02.2018, Connect Residuary served a Demand Notice for Rs.6,24,00,577/-. On 14.05.2018, the Petition filed under Section 10 was admitted by the Adjudicating Authority and a Public Announcement was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment had requested Connect to provide the buyback value of the UID Kits under schedules 1 to 4. Further email communication at varying dates were noted indicating continuous efforts by RIL in getting the buyback value of assets from Connect, citing the reason that immense efforts would be required in collecting the UID Kits from different locations across the country and the fact that these assets which have already been used, may not have any value in the market. On December 2, 2016 an email was received from a Mr. Neeraj Bhargav of Connect, indicating unwillingness to sell these assets to RIL. Further, as per another email communication dated October 25, 2017 received from him, a buy back value of INR 22.50 Crore was demanded in relation to UID Kits leased under Schedules 1 to 4. As per the email, the buyback offer would stand valid till November 8, 2017 It is submitted that even prior to receipt of the aforementioned Report (January 2019) RP had rejected the Appellant s Claim in 2018; that the bona fide of the Appellant can be seen from the fact that attempts were made to reduce the bona fide value and also drew or attention to the email communication between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered with excepting the limited scope as provided for in Sections 30 31 of the Code. It is vehemently contended by the Learned Sr. Counsel Mr. Ramji Srinivasan that the addendum dated 16.02.2019 to the approved Resolution Plan affording NIL treatment was bad in law. The condition that even if the Claim made by the Appellant are admitted at a later date by the RP and/or the Adjudicating Authority, pursuant to any circumstance, the payment shall be NIL/Zero is unjustified. It is not clear as to when and how the addendum was conveyed, voted and approved by the CoC. Pertinently, the Resolution Plan itself was put to voting and was finally approved on 13/14.02.2019 in the 15th CoC Meeting and the addendum was approved on 16.02.2019 and within two days, on 18.02.2019, the RP moved an Application before the Adjudicating Authority seeking its approval. Being aware of the legal procedure and while MA 01/2019 and MA 262/2019 were pending adjudication before the Adjudicating Authority, on 16.02.2019, the Successful Resolution Applicant ( SRA ) had introduced an addendum to the Resolution Plan to amend the existing Clause pertaining to treatment of Operational Creditors other t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution Plan. Inasmuch as, in order to have a Resolution Plan which is effective of its implementation it is an implicit statutory condition to have adequate provisions for payment to Creditor whose claims are sought for avoidance in the CIRP. In view hereof, hence, the approved Resolution Plan with amended Clause 3.3 vide the addendum dated 16.02.2019 wherein NIL payment treatment is afforded against the claim of the Appellant, the claim which is the subject matter of the Comp. App. (AT) (Ins.) No. 100 of 2020 (to challenge illegal rejection of claim by the RP) and M.A. 262 of 2019 (which is an avoidance proceeding preferred by RP to set aside the claim of the Appellant on extortionate reason) will be devoid of an effective implementation, and to the said extent the approved Resolution Plan (with an amended Clause 3.3) is bad in law and illegal. The Learned Counsel also placed reliance on Regulation 38 of the IBBI Regulations, 2016 which stipulates the mandatory contents of the Resolution Plan in support of his submission that the Resolution Plan must include as to how to deal with the interest of all the stakeholders including Operational Creditors which in this case w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed over to the SRA. It is submitted by Learned Counsel Mr. Arun Kathpalia that the provisions of the Resolution Plan have been strictly adhered to in consonance with Section 31(1) of the Code. Learned Sr. Counsel placed reliance on the Judgements of the Hon ble Supreme Court in Committee of Creditors of Essar Steel Limited, Though Authorized Signatory Vs. Satish Kumar Gupta Ors. , (2020) 8 SCC 531, wherein the Hon ble Supreme Court inter alia has held as follows: Section 31(1) of the Code makes it clear that once a resolution plan is approved by the Committee of Creditors it shall be binding on all stakeholders, including guarantors. This is for the reason that this provision ensures that the successful resolution applicant starts running the business of the corporate debtor on a fresh slate as it were. (Emphasis Supplied) The SRA cannot be saddled with undecided or disputed claim at such a belated stage as held by the Hon ble Supreme Court in Committee of Creditors of Essar Steel Limited, Though Authorized Signatory , (Supra) and also in JSW Steel Ltd. Vs. Mahender Kumar Khandelwal Ors. , Comp. App. (AT) (Ins.) No. 957/2019, wherein it was hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wisdom, and this Tribunal in Kotak Investment Advisors Ltd. , (Supra) was not correct in law in interfering with the commercial decision taken by CoC by a thumping majority of 84.36%. That this Tribunal in Kotak Investment Advisors Ltd. , (Supra) acted in excess of jurisdiction in interfering with the conscious commercial decision of CoC. That during the pendency of the Kotak Investment Advisors Ltd. , (Supra) as well as the Ricoh Appeal before this Tribunal, there was no restraint or stay on implementation of the Resolution Plan, which was duly approved by the Adjudicating Authority in the Impugned Order. That during the said period of pendency of Appeals challenging the Impugned Order before this Tribunal, various steps have been taken by Respondents 8 9 by spending a huge amount for implementation of the Resolution Plan. That the decision taken by CoC dated 13.02.2019-14.02.2019, is taken in accordance with its Commercial Wisdom and which is duly approved by the Adjudicating Authority, will prevail. That the Kotak Investment Advisors Ltd. , (Supra) is quashed and set aside, and the Orders passed by NCLT dated 28.11.2019 (i.e., Impugned Order) are r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase rentals of INR 65.71 as mentioned in para 7.11.7 as against a total price of UID kits of INR 32.17 Crore. Accordingly, in A M view, this transaction is extortionate in terms of the value paid and demanded by Connect. (Emphasis Supplied) 10. The Adjudicating Authority based on this Report has come to the conclusion that the transaction was extortionate in terms of the value paid and demanded. The Adjudicating Authority had dismissed the Application MA 01/2019 observing as follows: 5.3 To verify the correctness of the claim, the Resolution Professional had appointed on 13.07.2018 Alvarez Marshal India Private Limited (A M) as prescribed under Section 66 of the I B Code. An adverse report was submitted by pointing out several irregularities. No cogent documentation on records were available to establish the delivery of these kits/equipment to the Corporate Debtor or installation or use of these assets at the customer site. The management of the Corporate Debtor informed that the entire transaction relating to the UID Kits was managed by Mr. Arvind Singhal and Mr. Anil Saini, then CFO and COO of the Corporate Debtor. From a review of various emails exchanged by Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain the correct facts, that too, after due diligence and investigation, hence in his wisdom rightly appointed A M. As per Section 25 of Insolvency Code duties of Resolution Professional has been assigned, hence in compliance an investigation was carried out by appointing an Agency so as to ascertain whether the transaction as claimed by the Applicant CRPL was genuine and correct. On investigation it was reported that the transaction was extortionate, preferential in nature, incorrect and fraudulent, hence, the claim allegedly made as Operational debt was rejected. 7. After careful examination of the evidences and the reasoning given by the Resolution Professional based upon the report of A M this Bench is of the view that there was no fallacy in rejection of the Claim. I find no force in this Miscellaneous Application, hence rejected. (Emphasis Supplied) 11. The Hon ble Supreme Court in Anup Jain, IRP for Jaypee Infratech Ltd. Vs. Axis Bank Ors. (2019) SCC OnLine SC 1775, has held that the Resolution Professional is duty bound under Section 25(2)(j) of the Code to identify the avoidance transactions including preferential transactions under Section 43 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 herein), the RP and the CoC in Civil Appeal Nos. 2943-2944/2020 namely Kalparaj Dharamshi Anr. Vs. Kotak Investment Advisors Limited , in which Judgement, the Hon ble Apex Court in paragraphs 150 to 159 observed as follows: 150. The position is clarified by the following observations in paragraph 59 of the judgment in the case of K. Sashidhar (supra), which reads thus: 59. In our view, neither the adjudicating authority (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..... 151. 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to run the company and infuse more funds. In such circumstances, we do not think the appellate authority ought to have interfered with the order of the adjudicating authority in directing the successful resolution applicant to enhance their fund inflow upfront. 154. This Court observed, that the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. This Court clearly held, that the appellate authority ought not to have interfered with the order of the adjudicating authority by directing the successful resolution applicant to enhance their fund inflow upfront. 155. 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. 156. No doubt, it is sought to be urged, that since there has been a material irregularity in exercise of the powers by RP, NCLAT was justified in view of the provisions of clause (ii) of subsection (3) of Section 61 of the I B Code to interfere with the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he subsequent approval of the resolution plan of KIAL by CoC becomes nonest in law. For, it was only to abide by the directions of NCLAT. We are of the view that nothing would turn on it. The decision of CoC dated 13/14.2.2019 is a decision, which has been taken in exercise of its commercial wisdom . As such, we hold, that the decision taken by CoC dated 13/14.2.2019, which is taken in accordance with its commercial wisdom and which is duly approved by NCLT, will prevail. Further, NCLAT was not justified in interfering with the stated decision taken by CoC. 159. In that view of the matter, we find, that Civil Appeal Nos. 29432944 of 2020 filed by Kalpraj; Civil Appeal Nos. 29492950 of 2020 filed by RP and Civil Appeal Nos. 31383139 of 2020 filed by Deutsche Bank deserve to be allowed. It is ordered accordingly. The order passed by NCLAT dated 5.8.2020 is quashed and set aside and the orders passed by NCLT dated 28.11.2019 are restored and maintained. ( Emphasis Supplied ) 14. From the aforenoted observations, it is evident that the Commercial Wisdom of the CoC is non-justiciable except when there is any material irregularity or error apparent on the face of record, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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