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TMI Blog2022 (10) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... , for Erstwhile RP. For the Respondent/SRA: Mr. Abhinav Vasisth, Sr. Advocate along with Mr. Prateek Kumar, Ms. Raveena Rai & Mr. Rohit Ghosh, Advocates for SRA. 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. Advocate with Ms. Pooja Mahajan, Ms. Mahima Singh & Ms. Diksha Gupta, for Erstwhile RP For the Respondent/SRA : Mr. Abhinav Vasisth, Sr. Advocate with Mr. Prateek Kumar, Ms. Raveena Rai & Mr. Rohit Ghosh, Advocates for SRA. JUDGEMENT [ Per ; Shreesha Merla , Member ( T ) ] 1. Challenge in these Appeals viz., Company Appeals (AT) (Insolvency) No. 100 & 101 of 2020, is to the Impugned Order dated 28.11.2019 passed by the Learned Adjudicating Authority (National Company Law Tribunal, Mumbai Bench), in MA 691/2019 & MA 01/2019 respectively in CP (IB) No. - 156/MB/2018, by which Order, the Adjudicating Authority has dismissed the Applications filed by the Appellant seeking a direction for admitting the Appellant's Claim in the Resolution Plan. The Adjudicating Authority has also approved the Resolution Plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellants/'Connect Residuary': * It is submitted by the Learned Sr. Counsel that on 11.06.2018, 'Connect Residuary' submitted the 'Claim Form-B' for Rs. 25,52,08,897/- and a follow up reminder letter was also sent to the RP on 01.12.2018 enquiring about the status of the said 'Form-B'. Even after 6 months time, the RP did not admit the 'Claim' of the Appellant/'Connect Residuary' on the ground that there was insufficient documentation, that the Respondent/'Ricoh India' has already paid an amount more than the value of the equipment, and also that the equipment was untraceable. * It is submitted that on 15.01.2019, Alvarez & Marshal India Private Limited ('A&M') submitted their Report to the RP on avoidance of certain transactions including renting transactions of 'Connect Residuary'. Learned Counsel drew our attention to paragraphs 7.11.1 to 7.11.9 of the Report, the relevant extracts of which are as follows: "7.11.7 Automatic extension of lease term by 2 years causing additional lease pay-outs: In an email dated 17 October, 013 from Mr. Arvind to Mr. Manish Sehgal, Mr. Arvind Singhal had requested Mr. Manish to legally vet the MRA to be signed with 'Connect Residuary'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat when the Board acknowledged the outstanding of Rs.18Crores/-, it was the RP's duty to collate these claims. * Learned Sr. Counsel submits that 'Connect Residuary' had leased the equipment seeking repurchase of the used Kits. The Adjudicating Authority has erroneously come to a conclusion that the transaction was extortionate and preferential in nature and fraudulent. Adjudicating Authority had clubbed MA 01/2019 with MA 262/2019 which was filed by the Resolution Professional seeking avoidance of the renting transactions between the parties alleging it to be extortionate and relying upon A&M Report. In this Application, the RP had sought to direct 'Connect Residuary' to contribute Rs.34.34Crores/- to 'Ricoh India'. * On 12.02.2019, a consortium of Kalparaj Dharmashi and Rekha Jhunjhunwala, (Respondents 8 & 9) submitted a revised Resolution Plan which was approved on 14.02.2019. On 16.02.2019 an addendum to the approved Resolution Plan to amend Clause 33 therein was made, affording NIL/Zero payment treatment against the contested Claim of 'Connect Residuary'. Learned Counsel submitted that this payment treatment is to apply even if the Claims are admitted at a later date by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -related 'Operational Creditors' a sum of Rs.19.07Crores/-. It is argued that even if the Appellant succeeds in Comp. App. (AT) (Ins.) No. 100/2020, and/or the outcome of the avoidance proceedings and the Claim of the Appellant is reinstated, still, by virtue of the addendum, the Appellant will be entitled NIL/Zero payment, which is totally unfair and discriminatory. * Learned Counsel referred to Sections 26 & 51 of the Code which are as hereunder: "26. Application for avoidance of transactions not to affect proceedings. The filing of an avoidance application under clause (j) of sub-section of section 25 by the resolution professional shall not affect the proceedings of the corporate insolvency resolution process." ................................... "51. Orders of Adjudicating Authority in respect of extortionate credit transactions. Where the Adjudicating Authority after examining the application made under sub-section (1) of section 50 is satisfied that the terms of a credit transaction required exorbitant payments to be made by the corporate debtor, it shall, by an order - (a) restore the position as it existed prior to such transaction; (b) set aside the whole or pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofessional of 'Ricoh India' Limited: * It is submitted by the Learned Sr. Counsel that on 11.06.2018, the Appellant submitted its 'Claim' in 'Form-B' claiming as an 'Operational Creditor' and accordingly in the list of Creditors issued on 15.02.2018, the name of the Appellant was included in the list of 'Operational Creditors'. In pursuance of his duties, the erstwhile RP, under Section 25(2)(d) read in conjunction with Sections 43, 45, 49, 50 & 66 of the Code, on 13.07.2018, appointed A&M to assist in conducting an investigation and examination of potential avoidance transactions in respect of the 'Corporate Debtor'. Based on the avoidance of the Report, it was noted that Rs.34.34Crores/- out of Rs.70.32Crores/- was paid by the 'Corporate Debtor' to the Appellant during the two years preceding the Insolvency commencement date, i.e., the period from 15.05.2016 till 14.05.2018. * The Claim of the Appellant/'Connect Residuary' was rejected on 10.12.2018 on the ground that 'Ricoh India' had already paid an amount much more than the value of the equipment, the equipment was physically untraceable and MA 01/2019 was rejected by the Adjudicating Authority vide Order dated 28.11.2019. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors', the 'Resolution Plan' is in derogation to Section 30 (2) (e) of the 'I&B Code' as it is not fair and equitable to all creditors. In the present case, as the Appellant has been categorised as 'contingent creditor', we hold that the Appellant who claims to be 'Operational Creditor' but his claim has not been crystalized which made him 'contingent creditor' and as such cannot claim equitable treatment with all other Creditors. Therefore, no ground is made out to interfere with the impugned order of approval of the plan." 8. Submissions of the Learned Sr. Counsel appearing on behalf of Successful Resolution Applicant/Respondents 8 & 9: * It is submitted by Learned Sr. Counsel Mr. Vasisth that this Tribunal vide Judgment dated 05.08.2020 in 'Kotak Investment Advisors Ltd.' Vs. 'Krishna Chamadia & Ors.', Comp. App. (AT) (Ins.) No. 344-355 of 2020, set aside the Impugned Order and passed further directions to the CoC of the 'Corporate Debtor' to be implemented within 10 days from the date of the Impugned Order, and if no decision was communicated to the Adjudicating Authority by the CoC and the timeline for completion of CIRP had already expired, then the NCLT, Mumbai Bench is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Adjudicating Authority in the Insolvency Petition disposing of objections by various Creditors ('Objective Order') has been upheld, and with the Resolution Plan having been successfully and irreversibly implemented by Respondents 8 & 9, the present Appeal is to be rendered infructuous. * It is submitted that in any case, under the provisions of the Code, a Resolution Applicant submits its Resolution Plan based on the Claims admitted by the Resolution Professional and the said information is provided to Resolution Applicant which takes the same into consideration during the preparation of the Resolution Plan. However, the Claims of Creditors as such cannot remain indeterminate, and must be crystallized Claim which can be accounted for in a definitive Resolution Plan submitted by the Resolution Applicant. It is settled law that upon approval of a Resolution Plan, the Resolution Applicant takes over the control, operations and management of the Corporate Debtor on 'fresh slate' basis and cannot be faced with undecided or contingent Claims after the approval of the Plan as it would interfere with the revival of the 'Corporate Debtor' and may even lead to Liquidation. Therefore, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It has also been informed by A&M that 3850 UID Kits were sold for a sum of Rs.23.10 Crores after showing a use off about 20months. Those UID Kits were sold to Connect/the Applicant and AS International. It has also been informed that there was a complex purchased & leased & repurchase of kits through several transactions between the Corporate Debtor, AS International and CRPL/Applicant. Certain misinformation was communicated to the management because OPEX Model (i.e., leasing model) was proposed as opposed to CAPEX Model (i.e., sale model). The Corporate Debtor had unnecessarily deposited security of Rs. 3.26 Crores to CRPL between February 2014 to July 2015. It has also been reported that there was auto extension clause which was not approved, therefore as a consequence the Corporate Debtor RICOH paid an additional amount of Rs.29.57 Crores to CRPL. In all as per Rental Schedule the Corporate Debtor had paid 70.32 Crores to the Applicant CRPL. According to the Report of A&M the strange position was that in the absence of whereabouts of the kits payments have been made by the Corporate Debtor. Hence it was reported that the present claim was false. It has also been reported that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not satisfactory. * 'Corporate Debtor' has already paid an amount much more than the value of the said equipment for which the 'Claim' has been filed. * The equipment referred to in the Rental Agreement is physically untraceable. 12. During arguments, Learned Sr. Counsel Mr. Ramji Srinivasan for the Appellant contended that the RP has not chosen to admit the Claim even prior to the receipt of A&M Report. A brief perusal of the material on record shows that the draft of A&M Report was received in October 2018 and was already available with the RP and the same was also tabled before the CoC on 14.11.2018 prior to non-admission of the Claim. We do not find any facts on record to the contrary. It is only the final Report which was shared by A&M on 15.01.2019 and it was the consistent case of the RP that the opinion was not based on A&M findings alone but also based on the nature of transactions, the examination of account books and records and enquiry made with the concerned officials. SEBI had also noted large scale fraud in the IT service business conducted by the 'Corporate Debtor' in the past. Be that as it may, the contention of the Appellant that only the buyback value d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... review, which is available, can in no circumstance trespass upon a business decision arrived at by the majority of CoC. 153. 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 Rs.597.54 crore to the "financial creditors", "operational creditors" and other creditors by paying an additional amount of Rs.120.54 crore. NCLAT further directed, that in the event the "resolution applicant" failed to undertake the payment of additional amount of Rs.120.54 crore in addition to Rs.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 its liquidation value arrived at by the valuers seems inequitable. Here, we feel the Court ought to ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Form 'G' could not be accepted. However, it has been the consistent stand of RP as well as CoC, that all actions of RP, including acceptance of resolution plans of Kalpraj after the due date, albeit before the expiry of timeline specified by the I&B Code for completion of the process, have been consciously approved by CoC. It is to be noted, that the decision of CoC is taken by a thumping majority of 84.36%. The only creditor voted in favour of KIAL is Kotak Bank, which is a holding company of KIAL, having voting rights of 0.97%. We are of the considered view, that in view of the paramount importance given to the decision of CoC, which is to be taken on the basis of 'commercial wisdom', NCLAT was not correct in law in interfering with the commercial decision taken by CoC by a thumping majority of 84.36%. 157. It is further to be noted, that after the resolution plan of Kalpraj was approved by NCLT on 28.11.2019, Kalpraj had begun implementing the resolution plan. NCLAT had heard the appeals on 27.2.2020 and reserved the same for orders. It is not in dispute, that there was no stay granted by NCLAT, while reserving the matters for orders. After a gap of five months and eight da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the findings of the A&M Report. 15. 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 and that the Hon'ble Supreme Court has not delved into the merits of the matter cannot be sustained as notably, The Hon'ble Supreme Court has categorically confirmed in para 159 of the Judgement in 'Kalparaj Dharamshi & Anr.', (Supra) the Orders passed by the Adjudicating Authority dated 28.11.2019 and this Resolution Plan which is approved by the Hon'ble Supreme Court specifically includes the addendum of the Resolution Plan. Therefore, we are of the considered view that the approval of the Resolution Plan including the addendum has attained finality. We do not agree with 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. It is significant to note that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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