TMI Blog2023 (5) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... in paragraph 15.1.1. hereinabove) make it clear that the Adjudicating Authority independently applied its mind to the process of valuation and presentation of the matter to CoC. Rejection of all the objections in that regard by the NCLT, called for no interference. The Appellate Tribunal appears to have unnecessarily and rather unjustifiably presumed that there had been blatant statutory violations and irregularities. Even if certain issues were raised in some of the meetings of CoC as regards the process of valuation, the clarifications from the resolution professional and the steps taken by him for valuation and re-valuation had been to the satisfaction of CoC. It has rightly been contended on behalf of the appellants with reference to the decision in Maharashtra Seamless [ 2020 (1) TMI 903 - SUPREME COURT ] that resolution plan is not required to match the liquidation value as such - The findings of the Appellate Tribunal in regard to the question of valuation and thereby taking the resolution plan to be in contravention of Sections 30(2) and 61(3) of the Code cannot be approved and are required to be set aside. Publication of Form G: Regulation 36-A - HELD THAT:- It ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that such an issue of eligibility could not have been raised before NCLAT for the first time because the question of eligibility of the resolution applicant goes to the root of the matter but, we do agree with the other part of the submission in this regard that there is no concept of deemed disqualification under Section 164(2)(b) of the Companies Act - the Appellate Tribunal had not been right in holding the resolution applicant ineligible by virtue of Section 164(2)(b) of the Companies Act. Point C1 is answered accordingly. Effect of Section 88 Trusts Act - HELD THAT:- In view of the claim made by the resolution applicant himself, coupled with the fact that in CIRP in question, two resolution plans were submitted by this appellant, one in individual capacity and another as managing director of the said trust, it is difficult to detach him from the said resolution applicant-Sri Balaji Vidyapeeth. Hence, it cannot be said that the Appellate Tribunal committed any error in observing that the appellant was attempting to act as alter ego of the said ineligible applicant (the trust); and the benefit from his own (individual s) resolution plan cannot escape the operation of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the corporate debtor and maximization of value of its assets. This wisdom is not a matter of rhetoric but is denoting a well-considered decision by the protagonist of CIRP i.e., CoC. These observations read with the observations in Essar Steel [ 2019 (11) TMI 731 - SUPREME COURT ] with reference to the reasons stated in the report of Bankruptcy Law Reforms Committee of November 2015, make it clear that commercial wisdom of CoC is assigned primacy in CIRP for it represents collective business decision, which is arrived at after thorough examination of the proposed resolution plan and assessment made with involvement of experts by the body of persons who are most vitally interested in rapid and efficient decision making. It follows as a necessary corollary that to be worth its name, the commercial wisdom of CoC would come into existence and operation only when all the relevant information is available before it and is duly deliberated upon by all its members, who have direct and substantial interest in the survival of corporate debtor and in the entire CIRP. The requirement of CIRP Regulations, particularly of placing the resolution plan in its final form before the CoC, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby holding against the resolution plan in question for want of provision for related party. NCLAT s findings regarding settlement offer of promoter - HELD THAT:- The proposal in question was forwarded for consideration only at the eleventh hour, i.e., a day before CoC was to vote on the resolution plan in its ninth meeting. The CoC, in the said meeting, indeed, took into consideration the proposition of settlement and application for withdrawal request letter, which was circulated two hours before the meeting. The creditors with significant voting shares such as SBI and Bank of India were clear in their stand that they would stick to the agenda and would not deviate therefrom. The resolution professional had to request the representatives of the corporate debtor to allow the agenda items to go through as per the wishes of the majority of CoC and no further discussions were to be made on the letter sent to CoC. When the substantial majority of CoC was not in favour of such discussion which was proposed to be thrusted on them only a few hours before the meeting, their approach cannot be faulted at - When the creditors with substantial voting share were against any such propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on applicant ineligible to submit a resolution plan with reference to Section 164(2)(b) of the Companies Act, 2013 (as held in point C1). The disapproval by the Appellate Tribunal, with reference to the settlement offer of promoter in terms of Section 12-A of the Code, and its purported non-consideration is also not approved by us and such findings of the Appellate Tribunal are required to be set aside (as held in point F). Similarly, the Appellate Tribunal has erred in applying the principles of non-discrimination in relation to the related party (as held in point E). However, the other findings in relation to points C2, C3 and D1 and the consequential order passed by the Appellate Tribunal deserve to be approved. Putting it in different words, we are clearly of the view that even while respecting the commercial wisdom of CoC, in the present case, the resolution plan in question could not have been approved by the Adjudicating Authority for two major reasons: one, for the ineligibility of the resolution applicant; and second, for not placing of the revised resolution plan in the CoC before seeking approval from the Adjudicating Authority. Of course, on the questions relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) .............................................. 40 Proceedings in this Court ................................................................................ 59 The events during pendency of these appeals...................................................... 62 Rival submissions ............................................................................................ 65 Points for determination .................................................................................. 84 Relevant statutory provisions .......................................................................... 87 Objectives and scheme of IBC: crucial role-players: ..................................... 109 Point A Valuation: Regulations 27 and 35 .................................................. 116 Point B Publication of Form G: Regulation 36-A ........................................ 118 Point C1 Effect of Section 164(2)(b) Companies Act ................................. 120 Point C2 Effect of Section 88 Trusts Act .................................................... 121 Point C3 Effect of Section 166(4) Companies Act ..................................... 125 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t initiated on 05.05.2020, with the NCLT admitting an application moved under Section 7 of the Code by one of its financial creditors, Tourism Finance Corporation of India Limited TFCI , for short . In the course of proceedings, after various rounds of CoC meetings, ultimately, the resolution plan in question was approved with 87.39 per cent. majority of voting share on 22.01.2021. However, the CoC recommended certain changes to be made in the resolution plan. After incorporating the changes as suggested by CoC, an application was moved before the Adjudicating Authority (NCLT) under Section 30(6) of IBC for approval of the resolution plan. During the proceedings before NCLT, several objections were raised by various financial creditors, other resolution applicants and by the promoter and erstwhile director of corporate debtor against the resolution plan. The promoter also stated his grievance about want of consideration of his settlement proposal in terms of Section 12-A of the Code. However, the NCLT dismissed all the objections and approved the resolution plan declaring it binding on the corporate debtor and other stakeholders by the common order dated 15.07.2021. 2.2. Chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited scope of interference by the Courts. Fifth, that the Appellate Tribunal has overstepped its jurisdiction by declaring the resolution applicant ineligible under Section 88 of the Trusts Act and disqualified under Section 164(2)(b) of the Companies Act. Sixth, that the claims of related party creditors cannot be treated at par with the unrelated creditors. And seventh, that Section 12-A IBC application of the promoter was merely a dilatory tactic and that he was not entitled to file any such application. These and other grounds raised in these appeals have been duly contested by the respondents with their respective stands and positions in these cases. This apart, some of the financial creditors have also moved the applications for impleadment and have placed their respective viewpoints for consideration. 4. During the pendency of these appeals, this Court did not stay the operation of impugned order dated 17.02.2022; and during the course of hearing of these appeals, on 07.03.2022, it was informed by RP that pursuant to the order impugned, another meeting of CoC had been conducted on 03.03.2022. It is noticed that in the said CoC meeting held on 03.03.2022, the settlemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting an application moved under Section 7 of the Code by one of its financial creditors, TFCI. This application had been registered as IBA No. 1459 of 2019. The application for approval of the resolution plan, moved before NCLT was registered as IA No. 150/CHE/2021 in the said IBA No. 1459 of 2019. This application and several other correlated applications were considered together and were dealt with in the common order dated 15.07.2021 whereby, the National Company Law Tribunal, Chennai rejected the objections and approved the resolution plan approved by the committee of creditors. 6.1. Four separate appeals were preferred before the National Company Law Appellate Tribunal, Chennai Bench against the aforesaid order dated 15.07.2021, being Company Appeal (AT) (CH) (Insolvency) Nos. 164, 176, 218 and 219 of 2021. The appeals bearing numbers 164 of 2021 and 219 of 2021 were filed by the promoter and erstwhile director of corporate debtor, respectively in challenge to the approval of resolution plan and rejection of his application for consideration of a settlement proposal. On the other hand, the appeal bearing number 176 of 2021 was filed by one of the creditors of the corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into three categories with reference to their respective stands vis- -vis the order of the Appellate Tribunal, the CIRP, and the resolution plan in question. 7.1 The first category is of the parties who are aggrieved of the order passed by the Appellate Tribunal on several counts and are opposing the rejection of resolution plan and remand of the matter to CoC. They are: 7.1.1. Mr. M.K. Rajagopalan He is the resolution applicant and had submitted the resolution plan in question, which was approved by a majority of 87.39 per cent. of the voting share of CoC but was rejected by the Appellate Tribunal, as being in contravention of Section 30(2) of the Code. He is appellant in Civil Appeal Nos. 1682-1683 of 2022, 1827 of 2022 and 1810 of 2022. In all the civil appeals filed by the resolution professional, he is arrayed as one of the respondents. 7.1.2. Mr. Radhakrishnan Dharmarajan He is the resolution professional, who was appointed by the CoC in the third meeting dated 04.09.2020 and his appointment was confirmed by the NCLT in order dated 02.11.2020. He is appellant in Civil Appeal Nos. 1756 of 2022, 1807 of 2022, 1757 of 2022 and 1759 of 2022. In all the civil appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These financial creditors, with about 21.13% voting share in CoC, too had voted in favour of the resolution plan in question. They have raised questions on the order passed by NCLAT on various grounds. This apart, they have underscored certain other areas of concern including the amount deposited by the resolution applicant, and have also suggested that CIRP must be allowed to go on while leaving the promoter a right to better the resolution plan by way of a Swiss Challenge Process only after depositing the matching amount in an escrow account prior to voting on his settlement offer. 8.3. Tourism Finance Corporation of India Limited This financial institution with 5.62% of the voting share in CoC got initiated the CIRP in question with admission of its application under Section 7 of the Code by the NCLT on 05.05.2020 (IBA No. 1459 of 2019). The relevant factual and background aspects 9. Having taken note of the relevant particulars of the proceedings as also the principal parties involved, we may now take note of the relevant factual and background aspects, in brief, as infra. 10. The corporate debtor, Appu Hotels Limited, is a limited company with corporate ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editor. Further, a perusal of the record of proceedings dated 04.02.2020, also shows that the Corporate Debtor was putting in efforts to settle of the dues of the Financial Creditor and upon such representation being made, the Corporate Debtor was granted time to settle the matter and the matter was finally posted to 02.03.2020 for reporting settlement or to proceed with the matter. Thus, when the matter was taken up for enquiry on 02.03.2020, it has been brought to the notice of this Tribunal by the Counsel for the Financial Creditor that the Corporate Debtor has not paid the dues of the Financial Creditor and also the Learned Counsel for the Financial Creditor submitted that even in the affidavit filed by the Corporate Debtor, the outstanding debt has been admitted which Is owed to the Financial Creditor. 13. Thus, we are satisfied that there is a debt and default on the part of the Corporate Debtor and the Corporate Debtor is unable to repay its dues to the Financial Creditor. It has also been consistently held by the Hon'ble Supreme Court both in Innoventive Industries Ltd. -Vs- ICICI Bank and another (2018) 1 SCC 407 as well as Mobilox Innovations Pvt. Ltd .. -Vs- Kir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r shall also be forwarded to IBBI for its records. Further, the IRP above named be also furnished with copy of this order forthwith by the Registry, who will also communicate the initiation of the CIRP in relation to the Corporate Debtor to the Registrar of Companies concerned. CoC Meetings and ancillary proceedings 12. CIRP in relation to the corporate debtor having thus been initiated, various steps were taken in terms of the requirements of the Code and the CIRP Regulations, including the meetings of CoC which ultimately led to the approval of the resolution plan in question. Some of those steps carry their own relevance in these appeals in view of the issues raised by the parties. We may briefly take note of the relevant steps/proceedings in their feasible chronology as follows: 12.1. Pursuant to the initiation of CIRP, IRP issued a public announcement in Form A on 08.05.2020 inviting claims from various stakeholders in the corporate debtor. Further, for conducting the first meeting of the committee of creditors on 22.06.2020, IRP issued a notice on 18.06.2020. The said meeting was attended by all the members of the CoC including the promoter and erstwhile director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akrishnan Dharmarajan as the resolution professional. 12.7. In the fifth CoC meeting held on 12.11.2020, in the first item on the agenda, the members took note of the appointment of Mr. Radhakrishnan Dharmarajan as the resolution professional. Thereafter, on the second item, the CoC approved that the resolution professional shall file an application before NCLT to seek extension of time period from 05.05.2020 to 31.10.2020 under Section 12(2) of the Code due to Covid-19 and lockdown. In the third agenda item as regards updates from RP and to decide on the resolution plan deadline extensions/possible reissuance of Form G, various views were expressed by various stakeholders which culminated in the following observations and resolution: - Since there were mixed views of CoC the process and way forward, RP declared that it is the CoC who needs to decide on the commercial viability of the Resolution Process to its best advantage, be it re issuance of the Form G and or extension of the timelines and he will act as per the directions of the CoC. CoC members further discussed on the Form G, receipt of Resolution Plans and any potential requests from any of the RA s about exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... significant difference in the value of land and building submitted by the valuers appointed by IRP, the RP has to appoint third valuer in accordance with provisions of Regulation 35 of CIRP Regulations 2016. After it was noted that valuation of non-core assets was not done, the third valuer appointed by RP has submitted the value of non-core assets and the same has been shared with CoC members who have submitted their undertaking. The RP emphasized that their value is not very significant, and it will not affect the liquidation value much. However, second valuation for the non-core assets will be needed in order to reach a final value. RP apprised the CoC members that the valuers appointed by IRP are based in Delhi and they are asking much higher price for carrying the valuation of non-core assets. Therefore, the RP will hire a local valuer keeping the cost in mind. The RP agreed to try and convene the next CoC meeting before Christmas eve, subject to getting the revised resolution plans. 12.9. In the interregnum, the Tribunal, by its order dated 23.12.2020, allowed the application moved by RP for exclusion of the period between 05.05.2020 and 31.10.2020 179 days ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIRP in relation to the Corporate Debtor within the timelines as prescribed under the Code. Accordingly, the application stands allowed. 12.9.1. Two equity shareholders of the corporate debtor challenged the aforesaid order of the Tribunal before the Appellate Tribunal in Company Appeal (AT)(CH)(Ins.) Nos. 19 of 2021 and 20 of 2021 but, the appeals were dismissed on 05.05.2021 with the following observations There had been other observations occurring in this judgment and order dated 05.05.2021, which have been relied upon by NCLT while approving the resolution plan in question and have formed a part of contentions in these appeals, as shall be noticed later : - 33. ..In the instant case, even though we find that Regulation 30-C could have been applied for exclusion of 179 days on account of the unprecedented situation created by the Covid 19 pandemic and some of the Financial Creditors opined for fresh publication of form G for the invitation of EOI. But the COC had unanimously decided only for seeking exclusion of 179 days, i.e. from 5 May 2020 to 31 October 2020, for completion of CIRP. But the CoC, under its commercial wisdom, did not prefer for publication of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be paid to dissenting financial creditors shall not be less than the amount paid to such creditors in accordance with Section 53 in the event of liquidation of the corporate debtor. Therefore, resolution applicant was asked to further revise the resolution plan. The relevant resolution on Agenda Item No. A.1. in the ninth CoC meeting, having its relevance to the present matter is reproduced as under: - Agenda Item No. A.1 To discuss and put to vote the Resolution Plan submitted by Mr. M.K. Rajagopalan. The Resolution Professional apprised the CoC members that as decided in the last CoC meeting the revised Resolution Plan submitted by Mr. M.K. Rajagopalan will be put to physical voting for approval of the CoC members. The Resolution Professional then asked each member of CoC present in the meeting whether the revised Resolution Plan have their approval or not and the result of physical voice voting is as follows: S. No. Name of Financial Creditor Voting Share Voting (Yes/No) 1. RSM Industries 1.43 No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith Section 30(2) of IBC and there will not be any change in the amount provided in the Resolution Plan for assenting creditors. 12.14. On 25.01.2021, the resolution applicant submitted the revised resolution plan incorporating the changes. He also submitted a bank guarantee to the tune of Rs. 25 crore to the resolution professional on 01.02.2021. Thereafter, on 03.02.2021, the resolution professional furnished Form H Compliance Certificate, containing the details of the compliance of the resolution plan submitted by the resolution applicant. 12.15. Though, in the chronology of events, after the aforesaid proceedings of CoC and submission of Form H by the RP, the proceedings before the Adjudicating Authority are to be noticed but, there remains one significant feature of this case that in the ninth meeting dated 22.01.2021, even while approving the resolution plan, the CoC asked the resolution applicant to further revise the resolution plan, particularly in relation to the dissenting financial creditors. The resolution applicant indeed revised the resolution plan but, such a revised plan was not placed in CoC before presenting the matter to the Adjudicating Authority for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide in support of its withdrawal proposal. However, the said support was subsequently withdrawn by Mr. Veerayan, the President of the said Saveetha Institute of Medical and Technical Sciences. 13. Having taken note of the basic background aspects in relation to the initiation of CIRP and CoC meetings as also the ancillary matters, we may now examine the decision of the Adjudicating Authority leading to the approval of the resolution plan in question in necessary details. Resolution plan approved by the Adjudicating Authority (NCLT) 14. As noticed, upon approval of the resolution plan of the resolution applicant Mr. M.K. Rajagopalan - by CoC with 87.39% majority of the voting share, the application bearing IA No. 150 of 2021 was filed by the resolution professional under Section 30(6) of IBC before the Adjudicating Authority (NCLT) for approval of the resolution plan. 14.1. During the proceedings before the Adjudicating Authority, several objections were raised by the related party, the promoter, an unsuccessful potential resolution applicant and by some of the unsecured financial creditors. 14.2. One of the objectors to the resolution plan was the suspended direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions pertaining to valuation and the valuation reports, after extensive extraction of the relevant minutes of the meetings of CoC had been as under: - (I) VALUATION REPORT:- *** *** *** 80. In the present case, it is seen from the minutes extracted supra from the 6th CoC meeting that RP further apprised the CoC members, that due to significant difference in the value of land and building submitted by the valuers appointed by IRP, the RP had to appoint third valuer in accordance with provisions of Regulation 35 of CIRP Regulations, 2016. Accordingly, the third valuer has submitted his report before the RP and accordingly the fair value and the Liquidation value in relation to the Corporate Debtor was arrived at by the Resolution Professional. 81. Thus, it is clear that the RP has arrived at a Fair Value and the Liquidation Value based on the average of all the three valuers and the same has been done in accordance with Regulation 35 of the IBBI (IRPCP) Regulations 2016. Further, the valuation certificate dated September 2019 relied on by the promoter / suspended Director of the Corporate Debtor would be of no relevance as the same was not done in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by filing the present Appeal only to distract and delay the Insolvency Resolution Process and to bring about a halt to the approval of the Resolution Plan which the Committee of Creditors has approved with a majority of 87.34% which is pending for approval before the Adjudicating Authority. 15. The Appellant s contention about the valuation of the Corporate Debtor of ₹1600 crores is unsupported by any evidence. The fact remains that the Resolution Plan amount has arrived after following the procedure prescribed under the Code and the Rules and Regulations made thereunder (emphasis supplied) 83. Thus, the Hon'ble NCLAT also has rendered a finding that the Resolution Plan amount has been arrived at after following the procedure prescribed under the Code and the Rules and Regulations made thereunder. 84. Hence for reasoning stated supra, this Adjudicating Authority finds that there was no error committed by the IRP / RP in so far as appointing the registered valuers in relation to the Corporate Debtor, nor there was any error on the valuation being submitted by those Registered valuers and as a consequence thereof, the objections as raised by all the obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TFCI said that he can't opine on this letter as it is addressed to the CoC, when prompted by Mr. Kaliannan, that this letter is being put up through TFCI, Mr. Anoop Bali said that this can't be taken up as it has not come in the appropriate required form and he will not be able to comment on this and requested the RP to carry on with the agenda for the day, that of voting on the Resolution Plan. Mr. Senni Malai requested other creditors to comment. Mr. Arun Shah of Aryav Exports said that CoC can discuss this. However other creditors with significant voting share such as SBI, Bank of India said that we should stick to the Agenda on hand and not deviate from the main agenda. RP then requested the representatives from Corporate Debtor to allow for the agenda items to go through as the majority of the CoC in favour of that and no further discussions can be made on the letter sent to the CoC. 86. A perusal of the aforesaid minutes would show that the promoter of the Corporate Debtor has proposed for a 12A settlement only at the 9th CoC meeting, when the Resolution Plan of the Resolution Applicant was about to be put to vote. Further, it is also seen that the Petitioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gularities, observed and held as under: - (II) PROCEDURAL IRREGULARITIES: - 89. Another major objection in relation to the Resolution Plan was that the IRP I RP has violated umpteen provisions of the Regulations by not adhering to the timelines framed thereunder. In this regard, it is to be seen that the model timelines given under the IBBI Regulations were designed by keeping into mind the CIRP period of 180 days; however in many cases the CIRP period has exceeded more than 330 days and still continues. Thus, it cannot be gainsaid that the IRP or the RP as the case may be has to strictly adhere to the model timelines stipulated under the Regulations. For instance, an avoidance Application as found in Section 43, 45 and 50 can be filed either by the RP or by the Liquidator and the model timeline prescribed under the attendant Regulations states that the same should be filed in T+75 days. If the said model timelines is construed as mandatory then the avoidance transactions which entitle the Liquidator to file an Application, would be rendered as nugatory. 90. It is significant to note here that, a statutory provision regulating a matter of practice or procedure wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d MA/48/CHE/2021 are related party in respect of the Corporate Debtor and that the decision of the IRP / RP in categorizing the Applicant viz. M/s. Dharani Finance Limited as Related Party of Corporate Debtor is free from all legal infirmities and does not warrant any interference by this Adjudicating Authority. Accordingly, MA/18/CHE/2021 and MA/48/CHE/2021 stands dismissed. 15.4.1. The Adjudicating Authority also examined the question of discrimination in the resolution plan in respect of distribution of amount to the financial creditor-related party compared with the financial creditor-unrelated party. The Adjudicating Authority referred to the principles stated by this Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Ors.: (2020) 8 SCC 531 and rejected those contentions while observing that in the scheme of the Code, there was no provision which mandatorily requires payment to the related party in parity with the unrelated party. In this regard, the Adjudicating Authority, inter alia, observed as under: - (IV) DISCRIMINATION IN THE RESOLUTION PLAN:- 94. Another rival contention put forth by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces by the plan in the following manner: - (V) APPROVAL OF RESOLUTION PLAN 103. Thus, after overruling all the objections raised in relation to the Resolution Plan, this Adjudicating Authority in so far as the approval of the Resolution Plan is concerned, section 30(6) of the IBC, 2016 cast certain duties upon this Adjudicating Authority to examine the Resolution Plan as to whether the Plan falls within the contours of the said Section. Hence, a comparison of the mandatory compliance as required under IBC, 2016 vis-a-vis the compliance as made in the Resolution Plan is being tabulated hereunder. MANDATORY COMPLIANCE UNDER IBC CODE AND REGULATIONS COMPLIANCE UNDER RESOLUTION PLAN S. 30(1) - Resolution Applicant to submit an affidavit stating that he is eligible under Sec.29A of the Code, 2016 The Affidavit of the Resolution Applicant (RA) is found in Format 3B in Volume II of the Resolution Plan wherein Mr. M. K. Rajagopalan, the Resolution Applicant has stated that he is eligible under Section 29A of IBC, 2016 to submit a Resolution Plan. Further, the Resolution Professional in Form - H has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution Plan shall demonstrate: a) it address the cause of default b) it is feasible and viable c) it has provisions for effective implementation d) it has provisions for approval required and the timeline for the same e) the resolution applicant has the capability to implement the resolution plan Clause 4.7, 5.16, 5.10, 5.13 and 5.16(iv) of the Resolution Plan deals with the causes of default of the Corporate Debtor and the operational Viability of the project by the Resolution Applicant. S. 30(2)(e) - Does not contravene any of the provisions of the law for the time being in force The Resolution Professional in Form H has confirmed that the Resolution Plan is not in contravention with the provisions of any Applicable Law.- S. 30(4) - Committee of Creditors approve the Resolution Plan by not less than 66% of voting share of Financial Creditors, after considering its feasibility, viability and such other requirement as specified by the Board The CoC in its 9th meeting held on 22.01.2021 has approved the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 87.39 12.62 17. The Adjudicating Authority, thereafter, referred to the decisions of this Court in the cases of Essar Steel (supra); K. Sashidhar v. Indian Overseas Bank: (2019) 12 SCC 150; Jaypee Kensington Boulevard Apartments Welfare Association and Ors. v. NBCC (India) Limited and Ors.: (2022) 1 SCC 401 and Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh and Ors.: (2020) 11 SCC 467 as regards the principles that the Adjudicating Authority would not be sitting in appeal over the commercial wisdom of CoC and also observed that there was no requirement that the bid of the resolution applicant has to match the liquidation value of the corporate debtor. The Adjudicating Authority also left the questions of various reliefs/concessions sought for by the resolution applicant to be taken up in the appropriate forum or before the appropriate authority in accordance with law. 17.1. With the above-mentioned observations and findings, the Adjudicating Authority concluded on the matter with approval of the resolution plan a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeded to allow the same by its impugned judgment and order dated 17.02.2022. The Appellate Tribunal reversed the order of the Adjudicating Authority and while rejecting the resolution plan in question, remanded the matter to the CoC with directions to the resolution professional, inter alia, to proceed from the stage of publication of Form G , and to invite the EOI afresh as per the CIRP Regulations. Having regard to the questions raised in these appeals, it shall be apposite to take note of the observations, findings, and conclusions of the Appellate Authority as relevant for the present matter in necessary details It may be indicated that the emphasis in bold/italics/underlining in the extractions from the judgment of the Appellate Tribunal are as in the copy thereof placed on record before us. 19.1. As regards the issue of valuation, the Appellate Tribunal, after discussing the requirements of Sections 30(2) and 61(3) of the Code and taking note of the minutes of the second CoC meeting as to the appointment of valuators and the other legal issues concerning the valuation of assets, held that the valuation process had been in violation of the Regulation 27 and 35 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een appropriately valued. Therefore, the 3rd Valuer was also supposed to value the Non-Core Assets. Still, the RP, as evident from the minutes of the 6th meeting of the Committee of Creditors, made it clear that another valuer needs to be appointed to value the Company's non-core assets, which was not done. Therefore, the Valuation of the non-core assets is not in compliance with Regulation 35 (1) (a) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. 82. It is pertinent to point out that due to lockdown, quarantine and travel restrictions, the appointed valuers could not conduct the Valuation and their agents at or near Chennai who are not registered valuers and lacked the expertise to conduct the exercise on their behalf. Therefore, further physical verification of the assets by the registered valuers is indispensable, and the Respondent has taken the same note before furnishing the Valuation to the COC. Moreover, the details of the purported Associates of the Registered Valuers have not been disclosed, and the COC has neither considered nor approved the said Associate Valuers. Conveniently, the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Adjudicating Authority/NCLT's observation that A statutory provision regulating a matter of practice or procedure will generally be read as a directory and not mandatory is erroneous. Compliance with statutory requirements in regulating a matter of practice and procedure are mandatory. The Tribunal is a creature of statute, and by interpretation, it cannot dilute the statutory compliances. 19.3. After noticing non-compliance of Regulation 36-A(2)(iii) of the CIRP Regulations that mandates publication of Form-G at the earliest and not later than 75th day from the insolvency commencement date, the Appellate Tribunal held that the publication of Form G on the designated website was essential and failure to advertise as mandated had a direct impact on the maximization of asset value, more so when the entire CIRP was conducted during lockdown at the time of Covid-19 pandemic when most of the people avoided reading the newspaper under the apprehension of infection. The relevant parts of the order of the Appellate Tribunal in this regard read as under: - 89. Non-Publication of Form-G As Per Regulation 36A(2) (iii) of the IBBI Regulations for Corporate Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of CIRP Regulations mandates publication of Form-G at the earliest, not later than the 75th day from the insolvency commencement date, from interested and eligible prospective resolution applicants to submit Resolution Plans. 100. Non-compliance with the above regulatory provision is admitted. It is also important to point out that this entire CIRP was conducted during lockdown when the world faced Covid19 Pandemic. At that time, most people avoided reading the newspaper under the apprehension of Covid infection. So the publication of Form-G for inviting Expression of Interest was essential. It is also important to point out that the Government of India also brought some amendments in the Code considering the impact of the Pandemic. Relevant Regulation about inviting EOI is given below for ready reference; 19.4. Further, the Appellate Tribunal declared the resolution applicant ineligible to submit a resolution plan in terms of Section 29-A(e) of the Code on account of being disqualified as a director under Section 164(2)(b) of the Companies Act as also because of operation of Section 88 of the Trusts Act. 19.4.1. As regards the ineligibility in terms of the Trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h' has already been declared as ineligible, the 2nd Respondent cannot act as its alter ego in implementing the Resolution Plan and attain any financial advantage or gain is barred by Section 88 of the Indian Trusts Act. The said provision is extracted hereunder for ready reference. Section 88. Advantage gained by fiduciary. Where a trustee, executor, partner, agent, director of a company, legal adviser, or other person bound in a fiduciary character to protect the interests of another person, by availing himself of his character, gains for himself any pecuniary advantage, or where any person so bound enters into any dealings under circumstances in which his own interests are, or may be, adverse to those of such other person and thereby gains for himself a pecuniary advantage, he must hold for the benefit of such other person the advantage so gained. *** *** *** 108. It is illogical and fallacious to claim that the Resolution Plan can be tested in terms of the provisions of IBC, 2016 and not under Section 88 of the Indian Trusts Act. Therefore, it is submitted that even as per the provisions of IBC, a Resolution Plan shall be by the provisions of all other statutes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aji Vidyapeeth' has already been declared as ineligible, the 2nd Respondent cannot act as its alter ego in implementing the Resolution Plan and attain any financial advantage or gain is barred by Section 88 of the Indian Trusts Act. 19.4.3. As to the question of disqualification under Section 164(2)(b), the Appellate Tribunal observed that Mr. M.K. Rajagopalan was the director of International Aviation Academy Private Limited, and as seen from the audited financial statements of the said company, from 2010-2011 to 2017-2018, a sum of Rs. 12,03,000/- was collected by the said company as share application money pending allotment . The Appellate Tribunal further noticed that the said sum was not refunded and as such, was to be treated as deposit in terms of Explanation (a) to Rule 2(1)(c)(vii) of the Companies (Acceptance of Deposits) Rules, 2014 as a consequence of which, in terms of Section 164(2)(b) of the Companies Act, the resolution applicant stood disqualified from acting as a director in any company for a period of five years from the date on which the said International Aviation Academy Private Limited failed to repay the deposit amount. Some of the relevant observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declaration that he does not suffer from any disqualification. Now, the 2nd Respondent has claimed that Rs.12,03,000/- was paid by himself to the said M/s. International Aviation Academy Private Limited and that him being a member/ Director of the said Company, such payment would not amount to 'deposit' as per Rule 2(1)(c)(viii) of The Companies (Acceptance of Deposits) Rules, 2014 and General Circular No. 5 dated 30.03.2015, issued by the Ministry of Corporate Affairs. 122. The 2nd Respondent has chosen not to file any document to support the above contention and has failed to discharge his burden under Section 106 of the Indian Evidence Act, 1872. 123. Suppose it is considered that the sum of Rs.12,03,000/- was paid by the 2nd Respondent to the said M/s. International Aviation Academy Private Limited, the Application of Rule 2(1)(c)(viii) of The Companies (Acceptance of Deposits) Rules, 2014 is subject to the conditions stipulated therein, which have not been complied with. Therefore, it is misleading to state that Private Limited Companies have been granted a specific exemption. 124. Further, even as per the General Circular No.5 dated 30.03.2015, any rene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the CoC Resolution. This revised Resolution Plan dated 25 January 2021 was never sent for Approval before the COC. 131. The Resolution Professional s statement that the revised Resolution Plan was approved at the 9th COC meeting is incorrect. Although the Resolution Plan was allegedly approved on 22 January 2021, it is not the Revised Resolution Plan. Instead, the Resolution Plan was further modified based on the CoC resolution Dt.22.1.2021. But the final Revised Resolution Plan, dated 25 January 2021, was never laid before the CoC for its approval. Thus the approval of the Resolution Plan by the Adjudicating Authority is not in compliance with Sec. 31(1) of the I B Code, 2016. 132. It is pertinent to mention that after Approval of the Resolution Plan by COC entire exercise for revising the Resolution Plan for making a complaint with Section 30 (2) of the Code was left with the Resolution Applicant. Revised Resolution Plan dated 25 January 2021, without further approval of CoC, was presented by RP before the Adjudicating Authority for approval, which was finally approved by the impugned Order. 133. It is also important to mention that the learned Adjudicating A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposal for conducting a meeting of the CoC on such an untenable and superficial ground. 141. It appears that based on the settlement offer, the appellant sent a letter to the Financial Creditor Tourism Finance Corporation of India that an investor has expressed its willingness to infuse funds of 350 crores to settle the secured Financial Creditors in full within 30 days. This amount will be deposited in the current account. Regarding the claims made by other Unsecured Financial Creditors, Operational Creditors, implies, and other stakeholders, it will be settled after discussion with them and out of the generation of funds from the company's operation. In the circumstances, the appellant requested to accept the settlement so that the 12 A application may be submitted before the NCLT. The term sheet of the Deutsche Bank was also annexed with the settlement offer. 142. It is also necessary to mention that when the appeal was filed, then on the 1st date of admission of the Appeal, i.e. 30 July 2021, the learned counsel for the appellant made a statement in the court that the appellant would deposit ₹ 450 crores. Therefore, he requires 2 or 3 days. Since the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttlement proposal submitted by the Appellant. Although, after getting the settlement proposal, it was incumbent upon the resolution professional to call the COC meeting to consider the settlement proposal. It is essential to mention that the settlement offer could not have been rejected without consideration by the COC. 19.7. As regards the question of discrimination between the claims of related party and unrelated party, the Appellate Tribunal, while placing reliance on the decision of this Court in Phoenix ARC (P) Ltd v. Spade Financial Services Ltd. and Ors.: (2021) 3 SCC 475 observed that related party was specifically treated as a class unto itself and was restricted from any involvement in the CIRP in any capacity (under Section 21 IBC) and disqualified from being a resolution applicant (under Section 29-A IBC), the underlying object being that involvement of a related party in the CIRP is seen as giving unfair benefit to the corporate debtor and in fact, the related party is treated in the same class as the corporate debtor itself. Therefore, according to the Appellate Tribunal, a related party could be treated as a separate class independent of an unrelated party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor itself. 151. Therefore, this statutory recognition as a different class would apply even to a Resolution Plan when the CoC decides whether, in its commercial wisdom, it should pay to a related party at all as this would mean paying to the same persons who are behind the Corporate Debtor. *** *** *** 157. Thus, it is well-settled that a related party can be treated as a separate class independent of an unrelated party. Such related party ought to be equated with the promoters as 'equity shareholders as partners. *** *** *** 162. In the instant case of approved resolution plan discriminates between related party unsecured Financial Creditor and other unsecured Financial Creditors, likewise related party operational creditors and other operational creditors. The appellant argues that its claim ought to be treated equally to an unrelated Operational/ Financial Creditor given the equality clause enshrined under Article 14 of the Constitution of India. *** *** *** 171. It is important to mention that related parties are barred from participating in the COC to avoid sabotaging the COC. Per contra, the claim filed by the related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sharing of only fair value and liquidation value figures on obtaining confidentiality undertaking from the members of the CoC was incorrect; (b) the compliance with statutory requirements in regulating a matter of practice and procedure was mandatory and observation of Adjudicating Authority that a statutory provision regulating a matter of practice or procedure would generally be regarded as directory and not mandatory was erroneous; (c) non-publication of notices of Form G, inviting EOI, was a material irregularity in exercise of the powers by resolution professional; (d) the resolution applicant was ineligible to submit the resolution plan; (e) the revised resolution plan was filed before the Adjudicating Authority without laying it before the CoC for approval violating Sections 30(2) and 30(3) of the Code and thereby, vitiating the entire CIRP and rendering the resolution plan as void ab initio; and (f) the related party financial or operational creditor could not have been discriminated by denying their right to get payments under the resolution plan only on being a related party. 19.9. The Appellate Tribunal recorded its conclusions in the following terms: - CONCLU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose. Non-publication of notices of Form G is a material irregularity in exercise of the powers by Resolution Professional during the Corporate Insolvency Resolution period. In the instant case, there has been a material irregularity in exercising the powers by Resolution Professional during the Corporate Insolvency Resolution Process. 180. Since the said Trust (Prospective Resolution Applicant) 'Sri Balaji Vidyapeeth' has already been declared as ineligible, the 2nd Respondent (SRA) cannot be permitted to act as its alter ego in implementing the Resolution Plan and attain any financial advantage or gain, which is barred by Section 88 of the Indian Trusts Act. 181. The Resolution Professional made an incorrect statement that the revised Resolution Plan was approved at the 9th COC meeting. The revised Resolution Plan was not approved on 22 January 2021. After 22nd January 2021, based on the COC Resolution Dt.22.1.2021, the Resolution Plan was further modified, and the final Revised Resolution Plan dated 25 January 2021 was never laid before the CoC for approval. Thus the approval of the Resolution Plan by the Adjudicating Authority can not be treated as valid unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional creditor and against the NRI shareholder and erstwhile director of the corporate debtor. The details whereof have been noticed hereinbefore in the particulars of proceedings and parties. 22. It would be worthwhile to mention a few relevant aspects from the record of proceedings in this Court. 22.1. On 07.03.2022, civil appeals bearing numbers 1682-1683 of 2022, 1759 of 2022, 1756 of 2022, 1757 of 2022, 1807 of 2022 were called for hearing by this Court. During the hearing, counsel for the resolution applicant and counsel for contesting parties were heard but the arguments of counsel for the resolution professional remained inconclusive and the matter was posted to 11.03.2022 for further hearing. It was further pointed out during the submissions that the resolution applicant has filed two other civil appeals, bearing numbers 1810 of 2022 and 1827 of 2022, respectively against Dr. V. Janakiraman and Dharani Finance Limited. The said appeals were ordered to be listed along with this batch of matters on 11.03.2022. Further, learned counsel for the resolution professional also placed before this Court the minutes of eleventh CoC meeting held on 03.03.2022 which were ordered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich had been placed before the Adjudicating Authority for approval. 24.1. In reply to the aforesaid application, it was submitted on behalf of the resolution applicant that the very consideration of Section 12-A application of the promoter by CoC was against the explicit direction of the Appellate Authority in its judgment dated 17.02.2022, which allowed only 15 days for the CoC to examine the pending or existing Section 12-A proposal of the promoter which was rejected by the CoC on 25.03.2022 and therefore, the only recourse after such a rejection available with CoC was to continue with the fresh CIRP and it had no legal authority to consider or vote on a new application after issuance of fresh Form G. 24.2. In the wake of the applications so moved, the matter was again taken on board by this Court on 17.11.2022 and after having heard learned counsel for the respective parties this Court requested the Adjudicating Authority to await the decision in these appeals while granting permission to learned counsel for the respective parties to file further submissions in relation to the said application by 21.11.2022. The events during pendency of these appeals. 25. To piec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In the seventeenth CoC meeting held on 26.08.2022, discussing about the compliance of resolution plans as submitted by the prospective resolution applicants, a query was raised by one of the members of CoC that despite being declared disqualified and ineligible by NCLAT, as to why the resolution plan of Mr. M.K. Rajagopalan resolution applicant herein was even being considered. To this, the Chairperson responded that in the order dated 16.03.2022 this Court while reserving the judgment clearly stated that all the meetings/proceedings of CoC shall continue subject to the final orders to be passed by the Court and this information was clearly laid down with disclaimers in the list of prospective resolution applicants as well as final list of eligible resolution applicants and was known to everyone. He also stated that as regards this, legal advice had been sought and the CoC also gave its consent. 26.5. In the eighteenth CoC meeting held on 29.09.2022, after informing the members of CoC that 7 resolution plans have been received till date and their evaluation was under process, the Chairperson apprised the CoC that a revised settlement proposal has been submitted by the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard learned senior counsel Mr. Rakesh Dwivedi appearing for Edelweiss associates and learned Solicitor General Mr. Tushar Mehta, appearing for SBI. 28. Learned senior counsel for the resolution applicant, Dr. Abhishek M. Singhvi, appearing in the lead matter has emphatically argued against the impugned order while questioning the findings and observations of the Appellate Tribunal with the following principal submissions: 28.1. As regards the proposition of settlement put forward by the promoter with reference to Section 12-A of the Code, it has been contended that the entitlement to file for withdrawal of the application admitted under Section 7 of the Code would be restricted to TFCI i.e., the applicant who had filed the application, with the approval of ninety per cent. voting share of the CoC and such an application for withdrawal could have only been moved through the resolution professional. In the absence of any such move by TFCI, the promoter did not have any right to move an application for withdrawal. 28.1.1. It has further been submitted that the letter of settlement dated 21.01.2021 was submitted without proof of funds and there was no commitment towards f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uidation value. Reliance has been placed on the judgment in Maharashtra Seamless (supra) to submit that the resolution plan would not be required to match the liquidation value. Learned senior counsel would submit that members of CoC were provided with liquidation and fair value; registered valuers were appointed for valuation of core and non-core assets; and these valuers physically visited the properties for that purpose, in compliance of Regulation 35 of the CIRP Regulations. Thereafter, the CoC approved this valuation in their commercial wisdom, following which NCLT approved it as well, which cannot be second-guessed at a subsequent stage. It has also been submitted that the question as to whether valuer was registered, was not required to be adjudged since it was not in question before IBBI. 28.4. Learned senior counsel has also submitted that insofar as non-publication of Form-G on the website is concerned, the issue was discussed during the fifth CoC meeting dated 12.11.2020 and the CoC proceeded with the CIRP in its commercial wisdom after a detailed deliberation. Moreover, the earlier judgment of NCLAT dated 05.05.2021 approving non-publication would act as res judicata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced stage, resolution applicant had given a bank guarantee of Rs. 25 crore on 01.02.2021 in pursuance of approved resolution plan, the initial amount of Rs. 150 crore, which was required to be remitted within 45 days of the approval of the resolution plan, was deposited within 15 days and the resolution applicant has always been ready with the remaining funds. It has also been vehemently submitted that deliberate dilatory tactics have been adopted by the promoter to frustrate the process of CIRP, with substantial amount of time having been lost on account of the delays. 28.9. As regards the application bearing IA No. 168602 of 2022 in Civil Appeal Nos. 1682-1683 of 2022 filed by the promoter and erstwhile director of the corporate debtor - seeking permission to bring on record subsequent facts that during the pendency of these appeals his proposal of settlement under Section 12-A of the Code was passed by CoC in its nineteenth meeting held on 12.10.2022 by 100% voting power of members - learned counsel for resolution applicant has submitted that the very consideration of Section 12-A application of the promoter by CoC had been against the explicit direction of the Appellate Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a confidentiality undertaking, which was done in the present case. There is no requirement to provide a copy of the report to the CoC or any other stakeholder. On the contention of valuation under the Companies (Valuation) Rules of 2017, it has been submitted that the interim resolution professional appointed three sets of valuers for the three main classes of assets. 30.1.1. With respect to the physical valuation of assets, learned senior counsel emphasised on agenda item No. 4 of the fourth CoC meeting, wherein it was clearly mentioned that the valuers visited the property of the corporate debtor. 30.1.2. Insofar as the issue of non-core assets not being valued is concerned, it was submitted on behalf of RP that although the value of non-core assets was fairly insignificant, in the seventh CoC meeting dated 29.12.2020, the RP informed that the second valuer Mr. G Vaidya Ramana, visited the premises for non-core assets and had subsequently submitted his report. The statement containing the said reports was placed before the Tribunal. It has, thus, been submitted that it was incorrect for the Tribunal to render a finding that the valuation of non-core assets had not been do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides for payment to financial creditors (including dissenting financial creditors) entitled to vote. Placing reliance on Section 30(2)(b)(ii), Section 21 and Regulation 38(1), it has been argued that the approved plan is in accordance with the Code and the Regulations. 30.8. In closing, it has been argued by the learned senior counsel for the resolution professional that he has preferred applications against the promoter-director of the corporate debtor under Section 43 of the Code seeking avoidance of certain transactions which are preferential in nature. The said applications are pending before the NCLT for adjudication. With regard to these avoidance applications, however, reliance on a judgement of the Delhi High Court in Venus Recruiters Private Limited v. Union of India and Ors.: 2020 SCC Online Del. 1479 is of no avail as in the said case, the High Court has examined the jurisdiction of the Adjudicating Authority to entertain an application under Section 43 after the approval of the resolution plan. 31. Learned senior counsel Mr. Mukul Rohatgi appearing on behalf of Dr. Perisamy Palani Gounder (promoter and erstwhile director), has supported the order impugned while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owledge of the COC. 31.2.1. It has also been submitted that the resolution applicant s plan to convert Coimbatore property into Hospital would directly result in a conflict of interest and breach of fiduciary duties owed by him as managing director of the company MGM Healthcare Private Limited. This, according to the learned counsel would be in direct violation of Section 166(4) of the Companies Act which prohibits a director of the company from involving himself in a situation in which he may have direct or indirect interest that conflicts or possibly may conflict, with the interest of the company. For this reason too, the resolution plan in question is contrary to law and cannot pass muster under Section 30(2)(e) of the Code. 31.2.2. Another argument by the learned senior counsel on behalf of promoter has been that the appellant is not eligible to submit a resolution plan under Section 29A(e) of the Code. It has been argued that the resolution applicant has been the director of a company named 'International Aviation Academy Private Limited'; and as per the audited financial statements of the said company for 2010-2011 to 2017-2018, there was evidence that Rs. 12,03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as allowed approval of an illegal resolution plan that hands over assets of the Corporate Debtor at severe undervaluation. 31.3.2. Further, it has been contended that the decision in Maharashtra Seamless (supra) would not be relevant to the present case because it does not refer to a situation in which the determination of fair value and liquidation value is done in an illegal manner and in a way that grossly undervalues the assets of the corporate debtor. In the present case, the total debt of the corporate debtor is much lower than the liquidation value of its assets. This apart, according to the learned counsel, the proposition concerning the application of principles of res judicata remains wholly misplaced since the said proceedings in NCLAT were at the instance of a different party and the principal issue in the previous litigation had nothing to do with the resolution plan, or statutory violations in the CIRP. 31.4. Dealing with the issue of non-publication of Form G on the website, it has been submitted that Regulation 36A(2)(iii) of the CIRP Regulations, which mandates the publication on the website of IBBI and the website of corporate debtor has been violated as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess was between him and the resolution applicant and some procedural issues were to be addressed whereafter, the deposited money would be returned. 32. Learned senior counsel Mr. K.V. Vishwanathan, also appearing for the promoter, has re-emphasised that the revised plan was never put to vote and that there was duty of valuers to physically valuate the assets which they did not carry out. This apart, it has also been argued that the shareholders would not have the requisite locus to intervene in the CIRP process, by placing reliance on the decision of this Court in Jaypee Kensington (supra). 33. Mr. Dhruv Mehta, learned senior counsel appearing for the other promoter and erstwhile director Dr. V. Janakiraman has made largely the similar submissions, relying on the minutes of the ninth CoC meeting that there was a violation of Section 30(4) and 30(6) of IBC. Learned senior counsel has further referred to the judgment in Essar Steel (supra) to emphasise on the point that the revised resolution plan was never placed before the CoC and hence, the entire process stands vitiated. 34. Learned counsel for Dharani Finance, Ms. Haripriya Padmanabhan has primarily argued against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e frame given that nearly 2 years have elapsed and further delay would cause deterioration in the asset value. Since the CoC had already taken steps in furtherance of the impugned order dated 17.02.2022, it has been prayed that the CoC be allowed to continue with the CIRP from the stage of fresh issuance of Form G; consideration of proposal under Section 12-A of the Code and also determine eligibility of appellant, on independent footing, uninfluenced by the observations of the NCLAT. 35.1. In regard to the fresh proceedings during the pendency of these appeals (as noticed above), it has been submitted on behalf of SBI that after being given further opportunity, the promoter re-submitted the settlement proposal under Section 12-A IBC with deposit of upfront amount of Rs. 105 crore and a Bank Guarantee of Rs. 325 crore; and on being put to vote, this settlement proposal was approved by 100% voting share in the CoC which deserves to be taken forward. Learned SG has relied on the decisions of this Court in Vallal RCK v. Siva Industries and Holdings Ltd. and Ors.: 2022 SCC OnLine SC 717 and Brilliant Alloys (P) Ltd. v. S. Rajagopal and Ors.: (2022) 2 SCC 544. 36. Appearing for Ed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submit a resolution plan so as to act as alter ego of the trust Sri Balaji Vidyapeeth that had already been declared ineligible; and submission of plan by resolution applicant is barred by virtue of Section 88 of the Trusts Act? C3. Whether the resolution plan in question leads to violation of Section 166(4) of the Companies Act and hence, cannot be approved in terms of Section 30(2)(e) of the Code? D1. Whether the Appellate Tribunal has erred in holding that the resolution plan in question, which was placed before the Adjudicating Authority for approval, was void and non-est in law because in the ninth CoC meeting dated 22.01.2021, the resolution plan was sent back to the resolution applicant for further revision; and the revised resolution plan thereafter submitted by the resolution applicant on 25.01.2021 was directly filed before the Adjudicating Authority without being put to vote before CoC? D2. Whether the Appellate Tribunal has erred in making observations against increase of the fees of the resolution professional and assuming the possibility of its impact on his decision to submit the resolution plan before the Adjudicating Authority without approval of CoC? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther laws. These provisions read as follows: - Ins. by Act 26 of 2018, sec. 9 (w.r.e.f. 6-6-2018) Section 12A. Withdrawal of application admitted under section 7, 9 or 10. The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent. voting share of the committee of creditors, in such manner as may be specified. Section 21. Committee of creditors. -(1) The interim resolution professional shall after collation of all claims received against the corporate debtor and determination of the financial position of the corporate debtor, constitute a committee of creditors. (2) The committee of creditors shall comprise all financial creditors of the corporate debtor: Provided that a Subs. by Act 26 of 2018, sec. 15(i)(a), for related party to whom a corporate debtor owes a financial debt (w.r.e.f. 6-6-2018) [financial creditor or the authorised representative of the financial creditor referred to in sub-section (6) or sub-section (6A) or sub-section (5) of section 24, if it is a related party of the corporate debtor,] shall n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution professional) at his own cost to represent himself in the committee of creditors to the extent of his voting share; or (d) exercise his right to vote to the extent of his voting share with one or more financial creditors jointly or severally. Ins. by Act 26 of 2018, sec. 15(iv) (w.r.e.f. 6-6-2018) [(6A) Where a financial debt (a) is in the form of securities or deposits and the terms of the financial debt provide for appointment of a trustee or agent to act as authorised representative for all the financial creditors, such trustee or agent shall act on behalf of such financial creditors; (b) is owed to a class of creditors exceeding the number as may be specified, other than the creditors covered under clause (a) or sub-section (6), the interim resolution professional shall make an application to the Adjudicating Authority along with the list of all financial creditors, containing the name of an insolvency professional, other than the interim resolution professional, to act as their authorised representative who shall be appointed by the Adjudicating Authority prior to the first meeting of the committee of creditors; (c) is represented by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions (6) and (6A) of section 21 and sub-section (5)]; (b) members of the suspended Board of Directors or the partners of the corporate persons, as the case may be; (c) operational creditors or their representatives if the amount of their aggregate dues is not less than ten per cent of the debt. (4) The directors, partners and one representative of operational creditors, as referred to in sub-section (3), may attend the meetings of committee of creditors, but shall not have any right to vote in such meetings: Provided that the absence of any such director, partner or representative of operational creditors, as the case may be, shall not invalidate proceedings of such meeting. (5) Subs. by Act 26 of 2018, sec. 18 (ii), for Any creditor (w.r.e.f. 6-6-2018) [Subject to sub-sections (6), (6A) and (6B) of section 21, any creditor] who is a member of the committee of creditors may appoint an insolvency professional other than the resolution professional to represent such creditor in a meeting of the committee of creditors: Provided that the fees payable to such insolvency professional representing any individual creditor will be borne by such creditor. (6) Ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an undischarged insolvent; (b) is a wilful defaulter in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949 (10 of 1949); (c) Subs. by Act 26 of 2018, sec. 22(i)(A), for has an account, (w.r.e.f. 6-6-2018) [at the time of submission of the resolution plan has an account,] or an account of a corporate debtor under the management or control of such person or of whom such person is a promoter, classified as non-performing asset in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949 (10 of 1949) Ins. by Act 26 of 2018, sec. 22(i)(B) (w.r.e.f. 6-6-2018) [or the guidelines of a financial sector regulator issued under any other law for the time being in force,] and at least a period of one year has lapsed from the date of such classification till the date of commencement of the corporate insolvency resolution process of the corporate debtor: Provided that the person shall be eligible to submit a resolution plan if such person makes payment of all overdue amounts with interest thereon and charges relating to non-performing asset accounts before submission of res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a promoter or in the management or control of a corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place and in respect of which an order has been made by the Adjudicating Authority under this Code: Ins. by Act 26 of 2018, sec. 22(iv) (w.r.e.f. 6-6-2018) [Provided that this clause shall not apply if a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place prior to the acquisition of the corporate debtor by the resolution applicant pursuant to a resolution plan approved under this Code or pursuant to a scheme or plan approved by a financial sector regulator or a court, and such resolution applicant has not otherwise contributed to the preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction;] (h) has executed Subs. by Act 26 of 2018, sec. 22(v)(A), for an enforceable guarantee (w.r.e.f. 6-6-2018) [a guarantee] in favour of a creditor in respect of a corporate debtor against which an application for insolvency resolution made by such creditor has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompliant with the Financial Action Task Force Standards and is a signatory to the International Organisation of Securities Commissions Multilateral Memorandum of Understanding; (c) any investment vehicle, registered foreign institutional investor, registered foreign portfolio investor or a foreign venture capital investor, where the terms shall have the meaning assigned to them in regulation 2 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 made under the Foreign Exchange Management Act, 1999 (42 of 1999); (d) an asset reconstruction company registered with the Reserve Bank of India under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (e) an Alternate Investment Fund registered with the Securities and Exchange Board of India; (f) such categories of persons as may be notified by the Central Government.]] Section 30. Submission of resolution plan.-(1) A resolution applicant may submit a resolution plan Ins. by Act 26 of 2018, sec. 23(i) (w.r.e.f. 6-6-2018) [along with an affidavit stating that he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nagement of the affairs of the Corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. Ins. by Act 26 of 2018, sec. 23(ii)(B) (w.r.e.f. 6-6-2018) [Explanation.-- For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law.] (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2). Subs. by Act 8 of 2018, sec. 6, for sub-section (4) (w.r.e.f. 23-11-2017) [(4) The committee of creditors may approve a resolution plan by a vote of not less than Subs. by Act 26 of 2018, sec. 23(iii)(a) for seventy-five (w.r.e.f. 6-6-2018) [sixty-six] per cent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 31. Approval of resolution plan.- (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, Ins. By Act 26 of 2019, sec. 7 [w.e.f 16-8-2019, vide S.O. 2953(E), dated 16th August, 2019] [including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed,] guarantors and other stakeholders involved in the resolution plan: Ins. by Act 26 of 2018, sec. 24(a) (w.r.e.f. 6-6-2018) [Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.] (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in exercise of the powers by the resolution professional during the corporate insolvency resolution period; (iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board; (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (v) the resolution plan does not comply with any other criteria specified by the Board. [ Subs. by Act 26 of 2021, sec. 9, for sub-section (4) (w.r.e.f. 4-4-2021). Sub-section (4) before substitution, stood as under: (4) An appeal against a liquidation order passed under section 33 may be filed on grounds of material irregularity or fraud committed in relation to such a liquidation order. (4) An appeal against a liquidation order passed under section 33, or sub-section (4) of section 54L, or sub-section (4) of section 54N, may be filed on grounds of material irregularity or fraud committed in relation to such a liquidation order. (5) An appeal against an order for initiation of corporate insolvency resolution process passed under sub-section (2) of section 54-O, may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd such services are not available with the corporate debtor. (3) The interim resolution professional or the resolution professional, as the case may be, shall appoint a professional under this regulation on an arm s length basis following an objective and transparent process: Provided that the following persons shall not be appointed, namely: - (a) a relative of the resolution professional; (b) a related party of the corporate debtor; (c) an auditor of the corporate debtor at any time during the period of five years preceding the insolvency commencement date; (d) a partner or director of the insolvency professional entity of which the resolution professional is a partner or director. (4) The invoice for fee and other expenses incurred by a professional appointed under this regulation shall be raised in the name of the professional and be paid directly into the bank account of such professional.] Subs. by Notification No. IBBI/2019-20/GN/REG048, dated 25th July, 2019 for regulation 30A (w.e.f. 25-7-2019) [30A. Withdrawal of application. - (1) An application for withdrawal under section 12A may be made to the Adjudicating Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -regulation (2) shall be invoked, without prejudice to any other action permissible against the applicant under the Code.] Subs. by Notification No. IBBI/2017-18/GN/REG024, dated 6th February, 2018, for Regulation 35 (w.e.f. 6-2-2018) [35. Fair value and Liquidation value.- (1) Fair value and liquidation value shall be determined in the following manner:- (a) the two registered valuers appointed under regulation 27 shall submit to the resolution professional an estimate of the fair value and of the liquidation value computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the corporate debtor; (b) if in the opinion of the resolution professional, the two estimates of a value are significantly different, he may appoint another registered valuer who shall submit an estimate of the value computed in the same manner; and (c) the average of the two closest estimates of a value shall be considered the fair value or the liquidation value, as the case may be. (2) After the receipt of resolution plans in accordance with the Code and these regulations, the resolution professional shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective resolution applicant for expression of interest; and (d) not require payment of any fee or any non-refundable deposit for submission of expression of interest. Ins. by Notification No. IBBI/2021-22/GN/REG078, dated 30th September, 2021 (w.e.f. 30-9-2021) [(4A) Any modification in the invitation for expression of interest may be made in the manner as the initial invitation for expression of interest was made: Provided that such modification shall not be made more than once.] (5) A prospective resolution applicant, who meet the requirements of the invitation for expression of interest, may submit expression of interest within the time specified in the invitation under clause (b) of sub-regulation (3). (6) The expression of interest received after the time specified in the invitation under clause (b) of sub-regulation (3) shall be rejected. (7) An expression of interest shall be unconditional and be accompanied by- (a) an undertaking by the prospective resolution applicant that it meets the criteria specified by the committee under clause (h) of sub-section (2) of section 25; (b) relevant records in evidence of meeting the criteria un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final list of prospective resolution applicants within ten days of the last date for receipt of objections to the committee.] Subs. Notification No. IBBI/2017-18/GN/REG024, dated 6th February, 2018, for regulation 37 (w.e.f. 06.02.2018) [37. Resolution Plan.- A resolution plan shall provide for the measures, as may be necessary, for insolvency resolution of the corporate debtor for maximization of value of its assets, including but not limited to the following: - (a) transfer of all or part of the assets of the corporate debtor to one or more persons; (b) sale of all or part of the assets whether subject to any security interest or not; Ins. by Notification No. IBBI/2019-20/GN/REG052, dated 27th November, 2019 (w.e.f. 28-11-2019) [(ba) restructuring of the corporate debtor, by way of merger, amalgamation and demerger;] (c) the substantial acquisition of shares of the corporate debtor, or the merger or consolidation of the corporate debtor with one or more persons; Ins. by Notification No. IBBI/2018-19/GN/REG031, dated 3rd July, 2018 (w.e.f. 4-7-2018) [(ca) cancellation or delisting of any shares of the corporate debtor, if applicable;] (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 2022 (w.e.f. 14-06-2022) [(d) provides for the manner in which proceedings in respect of avoidance transactions, if any, under Chapter III or fraudulent or wrongful trading under Chapter VI of Part II of the Code, will be pursued after the approval of the resolution plan and the manner in which the proceeds, if any, from such proceedings shall be distributed: Provided that this clause shall not apply to any resolution plan that has been submitted to the Adjudicating Authority under sub-section (6) of section 30 on or before the date of commencement of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2022.] Subs. by Notification No. IBBI/2018-19/GN/REG031, dated 3rd July, 2018, for sub-regulation (3) (w.e.f. 4-7-2018) [(3) A resolution plan shall demonstrate that (a) it addresses the cause of default; (b) it is feasible and viable; (c) it has provisions for its effective implementation; (d) it has provisions for approvals required and the timeline for the same; and (e) the resolution applicant has the capability to implement the resolution plan.] 39. Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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.] Subs. by Notification No. IBBI/2020-21/GN/REG064, dated 7th August, 2020, for sub-regulation (3) (w.e.f. 7-8-2020). Prior to this substitution, Regulation 39(3) stood as under: (3) The committee shall evaluate the resolution plans received under sub-regulation (1) strictly as per the evaluation matrix to identify the best resolution plan and may approve it with such modifications as it deems fit: Provided that the committee shall record its deliberations on the feasibility and viability of the resolution plans. (3A) The committee shall, while approving the resolution plan under sub-section (4) of section (30), specify the amounts payable from resources under the resolution plan for the purposes under sub-regulation (1) of regulation 38. [(3) The committee shall- (a) evaluate the resolution plans received under sub-regulation (2) as per evaluation mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution process ongoing and commencing on or after the date of commencement of the Insolvency and Bankruptcy Board of India (Insolvency 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. Ins. b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the above, we may also refer to Section 164 of the Companies Act which sets forth various disqualifications for appointment of directors. It also provides that if a person fails to repay deposits accepted by the company of which he is a director, and failure to repay the due amount has continued for one year or more, he shall not be eligible for reappointment as director of that company or appointed in any other company for a period of five years from the date on which the said company fails to do so. Moreover, in view of the submissions made, a reference to Section 166(4) of the Companies Act shall also be apposite. The relevant parts of the aforementioned provisions would read as under: - Section 164. Disqualifications for appointment of director. *** *** *** (2) No person who is or has been a director of a company which (a) has not filed financial statements or annual returns for any continuous period of three financial years; or (b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximise their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee of creditors in the entire CIRP with reference to several past decisions. Rather than any other discussion, we deem it appropriate to reproduce the relevant passages therein as under: - Committee of Creditors: the protagonist of CIRP 97. While in their representative roles, the resolution professional and the resolution applicant are duty-bound to ensure that the resolution plan is prepared in conformity with the requirements of the Code and the CIRP Regulations and is properly presented for consideration, the central role in taking the decision as to whether a resolution plan be adopted or not, in the same form as presented to it or in a modified form; and as to whether the attempt for revival of corporate debtor be made or not, ultimately rests with the pivotal body, comprising of the financial creditors of the corporate debtor and termed as Committee of Creditors . As noticed from the provisions above quoted, the final decision on a resolution plan is taken by the Committee of Creditors; and, for approval, a resolution plan is required to be voted in favour by not less than 66% of the voting share of the financial creditors, as per Section 30(4) of the Code. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of the Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of CoC has been given paramount status without any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed above, explained the assignments of different role players in this process. In that context, this Court again explained the primacy endowed on the commercial wisdom of the Committee of Creditors and reasons therefor, with a further detailed reference to the aforesaid report of the Bankruptcy Law Reforms Committee of November 2015. Apart from the passage from the said report that was noticed in K. Sashidhar (reproduced hereinabove), the Court noticed various other passages from this report in Essar Steel; and one part thereof, which further underscores the rationale for only financial creditors handling the process of resolution, could be usefully reproduced as under (part of para 56 at pp. 578-79 of SCC): 56. 5.3.1. Steps at the start of the IRP *** 4. Creation of the creditors committee The creditors committee will have the power to decide the final solution by majority vote in the negotiations. The majority vote requires more than or equal to 75% of the creditors committee by weight of the total financial liabilities. The majority vote will also involve a cram down option on any dissenting creditors once the majority vote is obtained. The Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Committee of Creditors may approve a resolution plan by a vote of not less than 66% of the voting share of the financial creditors, after considering its feasibility and viability, and various other requirements as may be prescribed by the Regulations. *** *** *** 64. Thus, what is left to the majority decision of the Committee of Creditors is the feasibility and viability of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, payment being provided to a certain type of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of existence of a valid and actual valuation report and sharing of all the relevant facts pertaining to the valuation with the members of CoC leading to violation of Regulations 27 and 35 of the CIRP Regulations. We are unable to agree. 41.1. It has rightly been contended on behalf of the appellants that the members of CoC were provided with fair value and liquidation value after obtaining a confidentiality undertaking. We have reproduced hereinbefore all the material parts of the minutes of the meetings of CoC and it is at once clear that the members of CoC were fully satisfied with and endorsed the process of valuation and even re-evaluation as undertaken by the resolution professional. Particularly, the minutes of second, fourth, sixth and seventh CoC meetings stand testimony to the fact that the requirements of Regulation were scrupulously followed and complied with and there had not been any doubt in CoC as regards the process of valuation as also supplying of fair and liquidation value to the members of CoC. The detailed findings of the Adjudicating Authority in this regard (reproduced in paragraph 15.1.1. hereinabove) make it clear that the Adjudicating Authority indep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 EOIs were received. It has also rightly been contended on behalf of the resolution professional that all the requisite steps having been reasonably taken, the process that had reached an advanced stage could not have been annulled on such technicalities. 42.2. An argument has been advanced on behalf of the appellant- resolution applicant that this issue relating to publication of Form G was dealt with by NCLAT in the earlier order dated 05.05.2021 and that decision would operate as res judicata. In the relevant part of the said order dated 05.05.2021, the NCLAT even while dealing with the questions raised against time enlargement granted by NCLT, took note of various features related with the CIRP in question and in that regard, also observed that it was the commercial decision of CoC not to seek extension of time for submission of resolution plans and to issue directions to the resolution professional to expedite the process on the resolution plans already submitted. The NCLAT had observed as under: - 23. On perusal of the minutes of the CoC, it appears that the RP apprised the CoC about the legal options available either to seek an extension of the timeline for submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a matter of consideration of the registrar of companies. Unless a categorical finding was recorded in the competent forum as regards any such default and unless specific order disqualifying the resolution applicant as director because of such default came into existence, it could not have been taken by way of any process of assumption that the appellant-resolution applicant was disqualified to act as a director and thereby, was ineligible to submit a resolution plan. It has rightly been pointed out that when DIN status of the appellant was active compliant , he could not have been treated as ineligible. 43.2. Again, it has been too far-stretched on the part of the Appellate Tribunal to refer to the Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014 and then to make a declaration as if the resolution applicant was disqualified in terms of Section 164(2)(b) of the Companies Act. Although, we do not agree with the submissions on behalf of appellant that such an issue of eligibility could not have been raised before NCLAT for the first time because the question of eligibility of the resolution applicant goes to the root of the matter but, we do agree with the othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Trusts Act, submission of individual resolution plan by the appellant cannot be countenanced for any implementation of the said individual resolution plan would nevertheless be hit by the provisions contained in the Trusts Act. We may elaborate a little. 44.3. The suggestion on the part of the resolution applicant to assert his independent standing detached from the said ineligible applicant Sri Balaji Vidyapeeth carries its own shortcoming when examined in the context of the assertions made by him in clauses 3.5 and 3.10 of his resolution plan which have been extracted by the Appellate Tribunal and we are impelled to re-extract them for ready reference as under: - 3.5. Sri Balaji Vidyapeeth: Mr. M.K. Rajagopalan is the founder and managing trustee of Sri Balaji Vidyapeeth 3.10. Financial Snapshot The entities under the leadership of Mr. M.K. Rajagopalan have been growing rapidly while ensuring quality of service to nation and public at large .. There entities have achieved turnover of Rs. 417.94 Crores in FY 2016- 2017; Rs. 500.03 Crores in FY 2017-2018; Rs. 679.23 Crores in FY 2018-2019 and Rs.860.59 Crores (estimated) for FY 2019-2020. The above growth i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time being in force. Observations and findings of the Appellate Tribunal in paragraphs 106 to 112 of the impugned order dated 17.02.2022 (reproduced hereinabove in paragraph 19.4.2.) deserve to be and are approved. Point C3 Effect of Section 166(4) Companies Act 45. For what has been discussed hereinabove, the submission of resolution plan by the appellant-resolution applicant was directly hit by Section 88 of the Trusts Act and could not have been approved. In this view of the matter, no other aspect appears requiring consideration as regards the question of eligibility of the resolution applicant. However, we have formulated point C3 for determination in view of the submissions made in this case as regards another feature of ineligibility of the resolution applicant and it appears appropriate to deal with this aspect of the matter too. 45.1. The status of the appellant-resolution applicant as Managing Director of another company MGM Healthcare Private Limited is not of any dispute. Rather, the particulars of this company and projections for taking this company forward had been stated extensively by the resolution applicant in his profile submitted with the resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but is denoting a well-considered decision by the protagonist of CIRP i.e., CoC. As observed by this Court in K. Sashidhar (supra), the financial creditors forming CoC act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision. This Court also observed in K. Sashidhar that 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. These observations read with the observations in Essar Steel (supra) with reference to the reasons stated in the report of Bankruptcy Law Reforms Committee of November 2015, make it clear that commercial wisdom of CoC is assigned primacy in CIRP for it represents collective business decision, which is arrived at after thorough examination of the proposed resolution plan and assessment made with involvement of experts by the body of persons who are most vitally interested in rapid and efficient decision making. It follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and secondly, that in the tenth meeting, the CoC had granted the deemed post facto approval to the revised plan and not objected to any of its portions even in the later affidavits. The resolution professional would also contend that the resolution applicant was only required to provide for redistribution to ensure that dissenting financial creditors were given their share. It has also been submitted that in the modified resolution plan the allocation for the unsecured dissenting financial creditors was revised from Rs. 29 crore to Rs. 49.13 crore. 48.1. On the submissions as made, at the first blush it might appear as if revision of the plan after ninth CoC meeting had been a matter of formality and consequential to the approval already given by the CoC. However, on a close look at the scheme of IBC, this irregularity of not placing the revised plan after ninth meeting before the CoC and directly placing it before Adjudicating Authority cannot be ignored as a mere technicality. As noticed hereinabove, each and every aspect relating to the resolution plan, and more particularly its financial layout, has to be considered by the CoC before it could be said to have arrived at a con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... majority of voting share in the CoC. In any case, prior to this meeting, the plan had already been presented to the Adjudicating Authority. That plan could not have been approved thereafter by the CoC. 49. We would hasten to observe that the requirement of CIRP Regulations, particularly of placing the resolution plan in its final form before the CoC, has to be scrupulously complied with. No alteration or modification in the process could be countenanced. We say so for the specific reason concerning law that if the process as adopted in the present matter is approved, the very scheme of the Code and CIRP regulations would be left open-ended and would be capable of inviting arbitrariness at any level. The minor procedural aspects which we have held to be not of material bearing hereinbefore and this aspect pertaining to approval of financial resolution plan by CoC stand at entirely different footing. The irregularity in the process of approval by CoC and filing before Adjudicating Authority are not the matters of such formal nature that deviation in that regard could be ignored or condoned. As stated above, when commercial wisdom of CoC is assigned primacy, it presupposes a consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the resolution plan for payment to the related parties. According to the learned counsel, the need is, essentially, to ensure that the plan provides for payment to financial creditors (including dissenting financial creditors) entitled to vote. Thus, the plan in question cannot be said to be standing in contravention of any mandatory requirements. Per contra, the learned counsel appearing for the related party would submit that even when related party is to be treated as a separate class in terms of the principles laid down by this Court in Phoenix ARC (supra), so as to be excluded from CoC, there is no reason that they be treated as separate class when it comes to payment of dues under the resolution plan. It is submitted that failure to provide for discharge of debt of the related party is in violation of Section 30(2)(b), (e) and (f) of the Code. The submissions made on behalf of the related party and the observations of the Appellate Tribunal are difficult to be accepted. 54. The lengthy discussion of Appellate Tribunal in regard to the related party (the parts whereof have been reproduced in paragraph 19.7 hereinabove) depict rather unsure and irreconcilable observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter 55. The discussion foregoing, particularly with answers to points C2, C3 and D1 is decisive of the matter so far as approval of the resolution plan in question is concerned. As noticed, for want of eligibility of the resolution applicant and for want for approval of the finally revised resolution plan by CoC meeting, the resolution plan in question is required to be rejected and the process as adopted in seeking approval of the Adjudicating Authority is required to be disapproved. However, the other segment of consideration in this case, carrying the peculiarities of its own, relates to the settlement offer of the promoter and operation of the provisions of Section 12-A of the Code. 56. A comprehensive look at the factual aspects and the orders previously passed in the matter make it clear that right from the inception of CIRP in question, the promoter and erstwhile director had made several attempts to invoke the operation of Section 12-A of the Code. At the very initial stage, while admitted the petition made by TFCI, the NCLT observed in its order dated 05.05.2020 that the attempts on the part of corporate debtor by way OTS settlement proposal had only been to gain ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lted at. In any case, an application for withdrawal in terms of Section 12-A of the Code could have been made only if CoC approved the proposal with 90% voting share. When the creditors with substantial voting share were against any such proposal, any consideration was clearly ruled out and there could not have been any valid application for withdrawal. 58. Thus, the Appellate Tribunal has erred in holding that the settlement offer of the promoter in terms of Section 12-A was not placed for consideration of CoC. Approval of resolution plan in question could not have been reversed on this count. However, as noticed hereinbefore, approval of the resolution plan in question could not have been endorsed by the Appellate Tribunal because of other substantial reasons. Point G Impact and effect of subsequent events 59. The discussion aforesaid would have been decisive of the matter but there had been several subsequent events in this matter, particularly of fresh invitation for EOI and then, approval of the settlement offer of the promoter by the CoC in its nineteenth meeting held on 12.10.2022 by 100% majority of the voting share. Thus, the question is about the impact and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that stage, again, when the mandatory 330 days period was about to end, the CoC members unanimously voted to seek extension of CIRP timelines. Then, on 12.10.2022, the discussion on the settlement proposal of the promoter took place, it was put to vote and was approved by the CoC with 100% of the total voting powers. 62. The aforesaid proceedings continued with the matter remaining pending in this Court. The question is, what ought to be the way forward? At the first blush, it may appear that when the settlement proposal has now been approved by the CoC with 100% voting powers in their commercial wisdom, the process thereunder may be allowed to continue as such. However, a blanket approval by this Court at this stage is fraught with other complications. 63. Section 12-A was introduced in the Code later and in accordance with the Insolvency Law Report, March, 2018. This provision was introduced to provide for a mechanism for withdrawal upon settlement which was missing in IBC as originally promulgated. Regulation 30-A was also introduced to the CIRP Regulations. It was further amended with effect from 25.07.2019, providing for withdrawal of CIRP even after issuance of expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the resolution plans were to be put to vote, i.e., on 21.01.2021. This time again, the settlement proposals came up from the promoter only on 19.09.2022 after receiving of seven resolution plans from the prospective resolution applicants. 66. We are not expanding further on the matter because when we find that the settlement proposal of the promoter, after approval of CoC, for invoking the provisions of Section 12-A of the Code, is pending before the Adjudicating Authority, in our view, it shall be in the fitness of things that all the relevant aspects of the matter are left open for consideration of the Adjudicating Authority, including those relating to the justification for invoking Section 12-A after issuance of fresh invitation for EOI and after receiving resolution plans. In other words, we would leave all the relevant aspects open for consideration of the Adjudicating Authority in accordance with law while keeping in view the observations of this Court. Summation 67. For what has been discussed hereinabove, disapproval of the resolution plan in question by the Appellate Tribunal (NCLAT) in the impugned order dated 17.02.2022 is not to be interfered with but, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of related party in the resolution plan as also regarding the settlement offer of the promotor; and the process in that relation cannot be said to be suffering from any illegality. 69. So far the subsequent events concerning invitation of fresh EOIs and approval of the fresh settlement proposal of the promoter by the CoC are concerned, all the relevant aspects are kept open for consideration of the Adjudicating Authority. Conclusion 70. In view of the above, these appeals are disposed of in the following terms: - 1. The impugned judgment and order dated 17.02.2022 is not interfered with only insofar the Appellate Tribunal has not approved the resolution plan in question for the reasons which have been affirmed by us in points C2, C3 and D1 hereinbefore. Other findings, observations and directions of the Appellate Tribunal are set aside. 2. The question of dealing with fresh settlement proposal of the promoter, as approved by the CoC in its nineteenth meeting dated 12.10.2022 after receiving fresh resolution plans, is left open for consideration of the Adjudicating Authority, who shall be expected to deal with this aspect of the matter while keeping in view the law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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