TMI Blog2023 (8) TMI 1290X X X X Extracts X X X X X X X X Extracts X X X X ..... olution plan before it and reasons for seeking its fresh directions. And on its part, the Adjudicating Authority allowed the CoC the opportunity to deliberate upon the resolution plan thereby not infringing on the commercial wisdom of the CoC. The 19th CoC meeting clearly notes that multiple opportunities given to the Appellant to submit resolution proposal went futile. No viable resolution plans had been received from the PRAs in last two years. It is pertinent to note that the Appellant even at this stage did not make a murmur of protest of being denied a fair opportunity or level playing field in the CIRP process. Present is a case where the Appellant having been given multiple opportunities to submit a Section 12-A proposal and having consistently failed to do so, there does not appear to be any sufficient ground for the Appellant to claim that prejudice has been caused to their interest in allowing Respondent No.3 to submit their resolution plan - It is also noticed that PRAs had also been afforded reasonable opportunity to submit plans after having issued Form G thrice. The principle of fairness and equity have been reasonably met well - the decision of the CoC to enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to as ( First Impugned Order and Second Impugned Order ) passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench Court-II) in IA No.1826/2022 and 1415/2023 of CP(IB) No. 1474/MB/C-II/2019]. By the first impugned order, the Adjudicating Authority allowed placing of the resolution plan of the Corporate Debtor for consideration by the Committee of Creditors while the second impugned order approved the said resolution plan submitted by Metro Realty Group (previously known as M/s Turbhe Properties LLP), present Respondent No.3. Being aggrieved thereby, the present appeals have been preferred by the present Appellant-Mr. Anil Kumar, Suspended Director, SK Elite Industries. 2. The factual matrix of the case and the salient decisions taken in the meetings of the Committee of Creditors ( CoC in short) meetings leading to the impugned orders which are necessary to be noted are as follows: - SK Elite Industries-Corporate Debtor was brought under Corporate Insolvency Resolution Process ( CIRP in short) on 07.05.2021. CIRP was commenced and claims were invited. Following claims received by the Interim Resolution Professional, the CoC/Respondent No.2 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Resolution Professional filed IA No. 1826/2022 before the Adjudicating Authority seeking initiation of liquidation of the Corporate Debtor. In the 16th CoC meeting held on 31.12.2022, a proposal received from the Appellant for purchase of premises was considered by CoC but not found satisfactory. The Resolution Professional also informed CoC that a proposal had been received from Metro Realty Group-Respondent No.3 on which legal opinion was being solicited. The CoC also decided to withdraw the liquidation application. The 17th CoC meeting held on 25.01.2023 after going through the commercials of the Resolution Plan of Respondent No.3, decided to consider the resolution plan subject to approval and directions from the Adjudicating Authority in view of the pendency of IA No. 1826/2022 for liquidation of the Corporate Debtor. The Respondent No.3 was found to meet the eligibility criteria which had been agreed upon in the 2nd CoC meeting. The CoC also decided not to go ahead with the Section 12A proposal of the Appellant. The Resolution Professional accordingly filed IA No. 820/2023 before the Adjudicating Authority seeking withdrawal of liquidation applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity had failed to take notice that there were serious procedural irregularities on the part of the Resolution Professional in the conduct of CIRP. It was submitted that the resolution plan of the Respondent No.3 was not submitted in pursuance to Form G. Thus, by dispensing with the publication of Form G by the Resolution Professional, the entire resolution process was vitiated. It was also pointed out that by considering the resolution plan of the Respondent No.3 in the absence of fresh Form G, other interested parties were denied a fair opportunity thereby prejudicing their rights and interests. The approval of the resolution plan of Respondent No.3 was akin to the case of a Private Sale which is only permissible in case of liquidation of a Corporate Debtor and hence deserves to be set aside. Commercial wisdom of CoC cannot condone a material irregularity in the conduct of the CIRP process. The Appellant also contended that the Resolution Professional denied access to the other competing resolution plan submitted by others. It was also mentioned that the Adjudicating Authority should have determined whether the requirement of Section 30(2) had been met before approving the said p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Resolution Professional was justifiable since sharing the resolution plans would be a breach of confidentiality under the Code. Holding the conduct of the Appellant mala- fide, it was argued that he was endeavouring to derail the resolution process and push the Corporate Debtor into liquidation. 7. Advancing other rival contentions, it was added that it is settled law that the primary objective of IBC is resolution and revival of the Corporate Debtor and liquidation must be resorted to at last. It was therefore within the ambit of commercial wisdom of CoC to explore resolution of the Corporate Debtor even after it had resolved to liquidate the Corporate Debtor. In the present case, the Resolution Professional had acted in a transparent manner of placing the resolution plan of the Respondent No.3 before the CoC for its consideration. Further the resolution plan of the Respondent No.3 was considered and deliberated by the CoC only after receipt of the consent of the Adjudicating Authority since a liquidation proposal was pending before it. Further, by considering the resolution plan of the Respondent No.3, the Resolution Professional and the CoC were furthering the objectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of committee of creditors, having regard to the complexity and scale of operations of the business of the corporate debtor and such other conditions as may be specified by the Board, to submit a resolution plan or plans. 30. Submission of resolution plan. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53 .. (c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan; (d) the implementati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iteria specified by the Board. CIRP Regulation: 36A. Invitation for expression of interest. (1) The resolution professional shall publish brief particulars of the invitation for expression of interest in Form G of the Schedule-I at the earliest, not later than sixtieth day from the insolvency commencement date, from interested and eligible prospective resolution applicants to submit resolution plans. 11. It would also be relevant and constructive to note the overarching objectives of the IBC as adumbrated in the Preamble which reads as follows: An Act to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership persons and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto. (Emphasis supplied) The same aspirations have also been reflected in the Statement of Obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecome vitiated, what resulted out of such vitiated procedure cannot be termed as fair and just. 15. For better appreciation of the issue at hand, we may focus on the minutes of the CoC meetings. We notice from the minutes that Form G was published thrice. Thereafter, EoIs were received from 3 PRAs. However, resolution plans were received from only 2 PRAs. These plans came to be deliberated by the CoC from the 8th CoC meeting onwards until the 15th CoC meeting and adequate opportunity was given to PRAs to make their plans IBC compliant as well as satisfactory. As regards the Appellant, interest was expressed in the 9th CoC to submit a Section 12-A settlement proposal and was allowed repeated opportunities. However, until the 15th CoC meeting, no concrete proposal was received. 16. The CoC in the 15th CoC after detailed discussion recorded that the Appellant having failed to come up with a concrete and better offer and the offers of the PRAs being far below the expectations of the CoC , it decided to go for the liquidation of the Corporate Debtor. At this stage, it would be in order to reproduce relevant excerpts of the 15th CoC meeting:- 15th CoC-dated 05.05.2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered. Left with no choice, the CoC in the exercise of its commercial wisdom, directed the Resolution Professional to file a liquidation application. We do not find any material on record which show that either the PRAs or the Appellant raised any voice of protest of having been denied an opportunity to participate in the resolution process. 18. While the liquidation application was pending before the Adjudicating Authority, the 16th CoC meeting records that a proposal was again received from the Appellant and another one from Respondent No.3 of which we are cognizant that this proposal was not in pursuance to Form G publication. The Appellant s proposal was considered by the CoC and allowed more time to revise as it was not found to be satisfactory. As regards the proposal of Respondent No.3, the Resolution Professional initiated the process of taking a legal opinion besides apprising the CoC of the need to obtain appropriate directions from the Adjudicating Authority before placing the plan for the consideration of the CoC. We must note here that even at this stage, the Appellant was yet again allowed a chance. 19. During the 17th CoC meeting held on 25.01.2023 it is noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent No.2 before the CoC i.e. Respondent No.1 for their consideration The interim application IA.No. 1826/2022 filed by the applicant for initiating liquidation of the Corporate Debtor shall be kept in abeyance. (Emphasis supplied) 21. It may not be out of place to mention here that the Adjudicating Authority, while passing the first impugned order dated 06.03.2023, took notice of all developments since filing of liquidation application including the fact that the CoC desired to shelve its earlier decision to liquidate the Corporate Debtor so as to take up for consideration the resolution plan of the Respondent No.3. The CoC through the Resolution Professional has taken abundant precaution to keep the Adjudicating Authority duly apprised of the developments since the filing of the liquidation application. Thus, there is no lack of transparency on the part of the Resolution Professional or the CoC in updating the Adjudicating Authority of the new resolution plan before it and reasons for seeking its fresh directions. And on its part, the Adjudicating Authority allowed the CoC the opportunity to deliberate upon the resolution plan thereby not infringing on the comme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat COC has given ample opportunities to the Promoters to submit the Resolution Plan. However, the promoter has failed to do so till date. It is further pertinent to note that despite various opportunities given to the Promoters in the past two years, no viable plan has been received from the Promoters or any other Resolution Applicant. It was discussed that liquidation is not in the interest of any stakeholder including the Promoters as the public money is involved. Hence, the Resolution Plan received from Mr. Atul Richard Rawat should be considered as directed by the Hon'ble NCLT. In this situation the Promoters and the COC should co-operate in the interest of the Resolution of the Corporate Debtor. (Emphasis supplied) 23. The 19th CoC meeting clearly notes that multiple opportunities given to the Appellant to submit resolution proposal went futile. No viable resolution plans had been received from the PRAs in last two years. It is pertinent to note that the Appellant even at this stage did not make a murmur of protest of being denied a fair opportunity or level playing field in the CIRP process. On the contrary, the Appellant had supported the consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsistently failed to do so, there does not appear to be any sufficient ground for the Appellant to claim that prejudice has been caused to their interest in allowing Respondent No.3 to submit their resolution plan. We have also noticed that PRAs had also been afforded reasonable opportunity to submit plans after having issued Form G thrice. The principle of fairness and equity have been reasonably met well. Since, no settlement offer from the Appellant or resolution plan from PRAs was available before the CoC and the extended CIRP period was also coming to an end, in the given circumstances, the decision of the CoC to entertain the resolution plan from Respondent No.3 without publication of Form G cannot be viewed to be such a grave procedural non-compliance that the integrity of the entire resolution process was undermined. Quite apart from the fact that no consequence of non- compliance to CIRP Regulation 36A has been provided for in the statutory construct of IBC, we are cognizant of the fact that the Resolution Professional did not rush in for consideration of the resolution plan but did so only after apprising the CoC and taking the approval of the Adjudicating Authority. Addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which meets the conditions laid down in Section 30(2) and is approved by the CoC can be submitted to the Adjudicating Authority for its approval. 31. And it is here that primacy of the commercial wisdom of the CoC comes into play. The Adjudicating Authority must work within the framework of IBC which broadly aims at timely resolution of the Corporate Debtor for realising the maximum value while respecting the commercial wisdom of the CoC. The supremacy of commercial wisdom of the CoC has been reaffirmed time and again by the Hon ble Supreme Court. 32. Adverting attention to the judgment of the Hon ble Supreme Court in CA No. 3665-3666 of 2020- Ngaitlang Dhar v. Panna Pragati Infrastructure Private Limited, this Tribunal in Jindal Stainless Ltd. Vs. Mr. Shailendra Ajmera, RP of Mittal Corp Ltd. Ors. 2023 SCC OnLIne NCLAT 44 has adequately clarified this position which is to the effect: 24. The Hon ble Supreme Court has also emphasized on the completion of the process within the timeline prescribed by the IBC. In para 31, following has been held: - 31. It is trite law that commercial wisdom of the CoC has been given paramount status without any judicial interven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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