TMI Blog2022 (12) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is placed before the Committee of Creditors by the Resolution Professional and upon several deliberations by Committee of Creditors, the crucial decision pertaining to the approval or rejection of a Resolution Plan is taken. Thereafter, if a rejected plan is placed before the Adjudicating Authority, the Adjudicating Authority is expected to do nothing more, but to initiate the Liquidation process under section 33(1) of I B Code, 2016, but if the plan is approved by at least 66% Voting Share of Committee of Creditors and is placed before the Adjudicating Authority for its approval, the Adjudicating Authority has to look into two basic check boxes, only then the Plan stands approved and binding on all the Stakeholders. This Appellate Tribunal is very conscious of the fact that Liquidation should be the last resort as this virtually tantamount to death knell of the Corporate Debtor, However, it is also to be considered that the Corporate Insolvency Resolution Process proceedings are required to be completed within stipulated period as stipulated in Insolvency Bankruptcy Board of India (Corporate Insolvency Resolution Process) Regulations, 2016, herein this case the Adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in the Final List of the `Prospective Resolution Applicants (`PRA ). 4. Raju Palanikkunathil Kesavan is the 2nd Respondent who was appointed as Resolution Professional by the Adjudicating Authority and later as the Liquidator of the Corporate Debtor on the recommendation of Committee of Creditors . 5. The 2nd Respondent published a Public Announcement in Newspapers in `Form A on 12.02.2020 and verified the `Claims received and also formed the `Committee of Creditors (`CoC ). Kerala State Financial Corporation, State Bank of India Dhanlaxmi Bank Ltd. are respectively the 3rd, 4th 5th Respondents in this `Appeal who together constitute the Committee of Creditors of the Corporate Debtor . The 3rd Respondent held 48.11% of the `Voting Share and the 4th Respondent held 35.87% of the `Voting Share and the 5th Respondent held 16.02% of the `Voting Share . 6. The Appellant (along with the two co-applicants, viz. Dr. Pradeep Mahajan and Mr. Ramu Tatini) had submitted a Resolution Plan which was approved by the Committee of Creditors at its meeting held on 07.10.2021 and a `Letter of Intent was issued to the Appellant and his two co-applicants. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. However, the Resolution Applicant failed to execute the performance guarantee within the stipulated time, i.e., on or before 20.10.2021. [emphasis supplied] 8. The Learned Counsel for the Appellant stated that as per the understanding between the Appellant and his co-applicants, the co-applicants were required to make arrangements for depositing a Performance Bank Guarantee of Rs. 5 Crore with the Committee of Creditors . However, as the co-applicants did not make the required arrangement, the Appellant was unable to furnish the same. In view of the failure to submit the Performance Bank Guarantee, the same being a pre-requisite to file a Resolution Plan before the Adjudicating Authority , the Committee of Creditors , in its meeting held on 21.10.2021, authorised the 2nd Respondent to file for `Liquidation of the Corporate Debtor . 9. The Learned Counsel for the Appellant stated that he sought permission to replace two Original Co-applicants with two new Applicants i.e. Dr. Chitra Sudeep and Dr. Sudeep Kumar and except for replacement of the co-applicants, the Resolution Plan was retained exactly as approved by the Committee of Creditors at its meetin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also permitted to submit their Resolution Plan , before the Committee of Creditors , for its consideration. 13. The Learned Counsel for the Appellant assailed the order of the Adjudicating Authority allowing the ₹ 1st Respondent at a late stage which according to the Appellant was not advisable and permissible under I B Code, 2016. Pursuant to this Impugned Order , the 2nd Respondent invited a fresh EoI from the Appellant and the 1stRespondent has asked for the same to be submitted with the supporting documents, Affidavit and Non-Disclosure Agreement by 30.12.2021. 14. It has been brought to the notice of this Appellate Tribunal that the Committee of Creditors , evaluated the Resolution Plans of both the parties at their 21st Meeting held on 19.02.2022 and were divided on the vote and neither plan received the 66% minimum votes required to be approved by the Committee of Creditors with one Financial Creditor (holding 48.11% voting share) for the Resolution Plan in favour of the Appellant herein and the other two Financial Creditors (holding the balance 51.89% of voting share) for the Resolution Plan submitted by the1stRespondent. The Committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of relevant Section of I B Code, 2016 along with Regulation 39 of the Insolvency Bankruptcy Board of India (Corporate Insolvency Resolution Process) Regulations, 2016, which reads as under:- THE INSOLVENCY BANKRUPTCY CODE, 2016: Section33: Initiation of liquidation (1) Where the Adjudicating Authority,- (a)before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast track corporate insolvency resolution process under section 56, as the case may be, does not receive are solution plan under sub-section (6) of section 30; or (b)rejects the resolution plan under section 31 for the non-compliance of the requirements specified therein it shall-(i)pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter; (ii)issue a public announcement stating that the corporate debtor is in liquidation; and (iii)require such order to be sent to the authority with which the corporate debtor is registered. (2) Where the resolution professional, at any time during the corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plan. (1) A resolution applicant may submit a resolution plan 1[along with an affidavit stating that he is eligible under section 29A] to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a)provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the 2[payment] of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be paidJ1 to such creditors in the event of a liquidation of the corporate debtor under section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, where the resolution applicant is ineligible under section 29A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it: Provided further that where the resolution applicant referred to in the first proviso is ineligible under clause (c) of section 29A, the resolution applicant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with the proviso to clause (c) of section 29A: Provided also that nothing in the second proviso shall be construed as extension of period for the purposes of the proviso to sub-section (3) of section 12, and the corporateinsolvencyresolutionprocessshallbecompletedwithintheperiodspecifiedinthatsub-section. Provided also that the eligibility criteria in section 29A as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 shall apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Code and regulations made thereunder along with the details of following transactions, if any, observed, found or determined by him: - (a) preferential transactions under section 43; (b) undervalued transactions under section 45; (c) extortionate credit transactions under section 50; and (d) fraudulent transactions under section 66, and the orders, if any, of the adjudicating authority in respect of such transactions.] [(3) The committee shall- (a) evaluate the resolution plans received under sub-regulation (2) as per evaluation matrix; (b) record its deliberations on the feasibility and viability of each resolution plan; and (c) vote on all such resolution plans simultaneously. (3A) Where only one resolution plan is put to vote, it shall be considered approved if it receives requisite votes. (3B) Where two or more resolution plans are put to vote simultaneously, the resolution plan, which receives the highest votes, but not less than requisite votes, shall be considered as approved: Provided that where two or more resolution plans receive equal votes, but not less than requisite votes, the committee shall approve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2020;] (6)A provision in a resolution plan which would otherwise require the consent of the members or partners of the corporate debtor, as the case may be, under the terms of the constitutional documents of the corporate debtor, shareholders agreement, joint venture agreement or other document of a similar nature, shall take effect notwithstanding that such consent has not been obtained. (7)No proceedings shall be initiated against the interim resolution professional or the resolution professional, as the case may be, for any actions of the corporate debtor, prior to the insolvency commencement date. (8)A person in charge of the management or control of the business and operations of the corporate debtor after a resolution plan is approved by the Adjudicating Authority, may make an application to the Adjudicating Authority for an order seeking the assistance of the local district administration in implementing the terms of a resolution plan. [(9)A creditor, who is aggrieved by non-implementation of a resolution plan approved under sub-section (1) of section 31, may apply to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Regulations. Explanation - The records referred to in this regulation includes records pertaining to the period of a corporate insolvency resolution process during which the interim resolution professional or the resolution professional acted as such, irrespective of the fact that he did not take up the assignment from its commencement or continue the assignment till its conclusion.] [39B.Meeting liquidation cost. (1) While approving a resolution plan under sub-section (4) of section 30 or deciding to liquidate the corporate debtor under sub-section (2) of section 33, the committee may make a best estimate of the amount required to meet liquidation costs, in consultation with the resolution professional, in the event an order for liquidation is passed under section 33. (2) The committee shall make a best estimate of the value of the liquid assets available to meet the liquidation costs, as estimated in sub-regulation (1) (3) Where the estimated value of the liquid assets under sub-regulation (2) is less than the estimated liquidation costs under sub-regulation (1), the committee shall approve a plan providing for contribution for meeting the dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the committee under section 30 or 33, as the case may be. 39D. Fee of the liquidator While approving a resolution plan under section 30 or deciding to liquidate the corporate debtor under section 33, the committee may, in consultation with the resolution professional, fix the fee payable to the liquidator, if an order for liquidation is passed under section 33, for (a) the period, if any, used for compromise or arrangement under section 230 of the Companies Act, 2013; (b) the period, if any, used for sale under clauses (e) and (f) of regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016; and (c) the balance period of liquidation.] 20. This `Appellate Tribunal notes that from the reading of the Impugned Order dated 02.06.2022, it is quite evident that the Adjudicating Authority did everything under its command and available options within its purview under I B Code, 2016 and Insolvency Bankruptcy Board of India (Corporate Insolvency Resolution Process) Regulations, 2016 to avoid `Liquidation of the Corporate Debtor . The Adjudicating Authority gave fair and equal chance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or giving us an opportunity again. 22. Towards the end of the Corporate Insolvency Resolution Process , a Resolution Applicant proposes a Resolution Plan which is placed before the Committee of Creditors by the Resolution Professional and upon several deliberations by Committee of Creditors , the crucial decision pertaining to the approval or rejection of a Resolution Plan is taken. Thereafter, if a rejected plan is placed before the Adjudicating Authority , the Adjudicating Authority is expected to do nothing more, but to initiate the `Liquidation process under section 33(1) of I B Code, 2016, but if the plan is approved by at least 66% `Voting Share of Committee of Creditors and is placed before the Adjudicating Authority for its approval, the Adjudicating Authority has to look into two basic check boxes, only then the `Plan stands approved and binding on all the `Stakeholders . Firstly, whether the plan has been approved by not less than 66% of `Voting Share by the Committee of Creditors members or not and secondly, whether the requirements stated under section 30(2) of the I B Code, 2016 are being complied with or not. However, there are no pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erally nothing else, except `Approve or `Reject the `Plan , after ensuring that the plan fulfills the criteria under section30(2) of the Code. This concept was set as a bed-rock in one of the landmark judgments of I B Code, 2016 i.e. K. Sashidhar v. Indian Overseas Bank, wherein the Apex Court held that 52. ......There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination oftheproposedresolutionplanandassessmentmadebytheirteamofexperts. The opinion on the subject matter expressed by them after due deliberations in the CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the commercial wisdom of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable. 64........There solution professional is not required to express his opinion on matters within the domain of the financial creditor(s), to approve or reject the resolution plan, under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors, the limited judicial review available is to see the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. 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 Committee of Creditor store-submit such plan after satisfying the aforesaid parameters. There as on given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass there solution plan, other things being equal. [emphasis supplied] 26. This `Appellate Tribunal is very conscious of the fact that `Liquidation should be the last resort as this virtually tantamount to death knell of the Corporate Debtor , However, it is also to be considered that the Corporate Insolvency Resolution Process proceedings are requ ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
