TMI Blog2023 (9) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... ide a timeline. Section 12 of the Code, contemplate completion of CIRP within 180 days, subject to further extension. Section 12, further provides that CIRP shall be completed within a period of 330 days from the insolvency commencement date. It is noticed that timeline prescribed under Regulation 40A for submission of Resolution Plan to CoC take additional 30 days and 135 days are provided for submission of Resolution Plan. Till the submission of Plan and by 165 days, the Plan is required to be considered by the CoC. The question of obtaining approval from the CCI only arises when Resolution Plan submitted contains a combination and require approval from the CCI. After submission of Plan, the Resolution Applicant applies for approval of combination from the CCI. It is not in his hand that as to when CCI will grant the approval. The CCI has to act as per statutory provisions of the Competition Act and it has been given 210 days to take a decision - It cannot be held that since provision is there, approval by CCI has to be obtained prior to approval of Plan by the Adjudicating Authority - it is noticed that the judgments of this Tribunal where it has been laid down that approval by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lass Industries Limited commenced vide order dated 21.10.2021 on an Application filed by DBS Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code ). (ii) On 25.03.2022, the Resolution Professional ( RP ) issued the Invitation for Expression of Interest. RFRP contained provision that there was mandatory requirement of Competition Commission of India ( CCI ) approval, prior to approval of a Resolution Plan by the Committee of Creditors ( CoC ). (iii) Two Resolution Applicants namely - Independent Sugar Corporation Ltd. as well as AGI Greenpac Ltd. submitted their Resolution Plans in April 2022. (iv) Independent Sugar Corporation Ltd., a Resolution Applicant sought a clarification from the RP with regard approval of CCI as well as the timelines for obtaining such approval as the RFRP had contradictory clauses. The RP vide email dated 25.08.2022 issued a clarification that in light of the available jurisprudence, the RFRP granted relaxation to the Resolution Applicants to procure the CCI approval post the approval of the Resolution Plan by the CoC, but prior to filing of the Resolution Plan before the Adjudicating Authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... radesh. The Appellant after coming to know about the three Resolution Plans submitted in the CIRP of Hindustan National Glass Industries Limited, filed an Application before the Adjudicating Authority praying that aforesaid three Resolution Plans be withdrawn as any such acquisition would run counter to the provisions of the Competition Act, 2022 (hereinafter referred to as the Competition Act ). The Application filed by the U.P. Glass Manufacturers Syndicate was rejected on 21.09.2022. The Adjudicating Authority observed that at this stage the Resolution Plans are under consideration of the CoC and no decision could be arrived at in respect of the Resolution Plans. The U.P. Glass Manufacturers Syndicate also filed an Application before the CCI, objecting to the Combination Application submitted by the AGI Greenpac Ltd. A letter of objection was also filed by the U.P. Glass Manufacturers Syndicate before the CCI. The Appellant has also filed an Intervention Application before the NCLT, Kolkata seeking intervention, which Application was rejected by the Adjudicating Authority on 16.01.2023, against which order Company Appeal (AT) (Insolvency) No. 214 of 2023 was filed by the U.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant(s). We have heard Shri Mukul Rohatgi, learned Senior Counsel and Shri Arun Kathpalia appearing for Successful Resolution Applicant. We have also heard Shri Abhinav Vashisht, learned Senior Counsel on behalf of CoC. We have heard Shri Vikram Nankani, learned Senior Counsel appearing for RP. 9. Shri Abhimanyu Bhandari, learned Counsel for the Appellant submits that the Resolution Plan of the AGI Greenpac Ltd. ( AGI ) ought to have been rejected, since AGI has failed to obtain mandatory approval of the CCI before the approval of Plan by the CoC. It is submitted that approval by CCI after the approval of the Resolution Plan by the CoC is a violation of the RFRP and instructions of the RP. It is submitted that requirement to get CCI approval under proviso to 31(4) is mandatory and not directory and the same is required to be availed before the approval of the Plan by the CoC. It is submitted that judgment relied by the Adjudicating Authority in the impugned order of the Arcelor Mittal India Pvt. Ltd. vs. Guhathakurta, Resolution Professional of EPC Construction, to come to the conclusion that conditions mentioned in Section 31, sub-section (4) has been complied with, is er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directory . The issue did not arise in the Arcelor Mittal as the Appeal was dismissed on the basis of subsequent development. Other judgments have only followed the Arcelor Mittal case. 11. Shri Rana Mukherjee, learned Senior Counsel appearing for H.N.G. Karamchari Union submits that provisions of Section 31, sub-section (4) is mandatory and not directory . The learned Senior Counsel relied on judgment of this Tribunal in Bank of Maharashtra vs. Videocon Industries Ltd. and submits that there being difference of opinion in the judgment of Bank of Maharashtra vs. Videocon Industries Ltd. and Arcelor Mittal, the matter needs to be referred to a larger Bench. It is submitted that any contrary interpretation of the said proviso would distort the meaning with which the legislature intended the proviso. 12. Learned Counsel appearing for Soneko Marketing Pvt. Ltd. also contended that interpreting the proviso as being directory would be contrary not only to the plain language, but also by the law laid down by the Hon ble Supreme Court. The proviso is drafted to carve out an exception to the main provision. 13. Shri Abhinav Vashisht, learned Senior Counsel appearing for the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission of India has to be obtained prior to the approval of resolution plan by the Adjudicating Authority; The above Clause-(d) refers to Clause 24 of the Bill, which is to the following effect: Clause 24 of the Bill seeks to amend section 31 of the Code to provide that the Adjudicating Authority shall, before passing an order for approval of resolution plan satisfy that the resolution plan has provisions for its effective implementation and that the resolution applicant shall obtain the necessary approvals required within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority or within such period as provided for in such law, whichever is later and where it contains a provisions for combination the approval of the Competition Commission of India shall be obtained prior to the approval of the resolution plan by the committee of creditor. 15. Clause 24 of the Bill clearly mentions that the Bill seeks to amend Section 31 of the Code. Sub-clause (d) of Financial Memorandum indicates that what was intended is that approval of CCI has to be obtained prior to the approval of Resolution Plan by the Adjudicating Authority. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Plan was filed by the RP in November 2022, at that stage an IA was filed by the Independent Sugar Corporation Ltd., objecting to the approval, which IA came to be rejected by the impugned order dated 28.04.2023. The Adjudicating Authority in the impugned order in paragraph 13.6, after hearing the parties laid down following: 13.6. A perusal of paragraph 2 of this communication of CCI dated 15-03-2023 shows that CCI approved the combination of the successful Resolution Applicant and the Corporate Debtor and hence, we are of the considered opinion that there is approval by the CCI as required under section 31(4) of the Code and therefore the objection to it as such is hereby rejected. 19. The Adjudicating Authority expressed the opinion that approval by the CCI on 15.03.2023 is approval as required under Section 31(4), hence, the objection raised to it has been rejected. By the same order dated 28.04.2023, the Adjudicating Authority directed that Application filed for approval of Resolution Plan be listed for hearing and fixed the date 09.06.2023. This Tribunal, in view of the entertainment of the Appeal(s) and continued hearing, has passed an interim order directing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later: Provided that where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors. 21. Section 31, sub-section (4) came to be inserted by Insolvency and Bankruptcy Code Second Amendment Act, 2018 with effect from 6th June, 2018 by Bill No.127 of 2018 and was introduced in the Parliament. Clause 24 of the Bill is as follows: 24. In section 31 of the principal Act, (a) in sub-section (1), the following proviso shall be inserted, namely: 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. ; (b) after sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so is, thus, clear exception to sub-section (4) of Section 31 and is an independent provision regarding to the combination, which requires approval under the CCI. The bone of contention of the parties are as to whether the requirement in proviso that approval of the CCI has to be mandatorily obtained prior to the approval of Resolution Plan by the CoC. 23. We may first notice the three judgments of this Tribunal where the proviso to sub-section (4) of Section 31 came for consideration. The first judgment is Arcelor Mittal India Pvt. Ltd. vs. Guhathakurta, Resolution Professional of EPC Construction - (2019) SCC OnLine NCLAT 920. An argument was raised in the above case that approval by the CCI has to be prior to the approval of the CoC. In paragraph 2 of the judgment following was contended: 2. Learned counsel for the Appellant submitted that approval of plan is in contravention of the mandatory requirement under the proviso to Section 31(4) of the Insolvency and Bankruptcy Code, 2016 ( I B Code for short), as amended, requiring Resolution Applicants to obtain approval of the Competition Commission of India prior to approval by the Committee of Creditors . This Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in such law but not later than one year. However, this requirement of obtaining the necessary approval pursuant to approval of the Resolution Plan by the Adjudicating Authority has been subjected to one exception carved out in the form of proviso to sub-section (4) which enjoins upon the Resolution Applicant to obtain approval in regard to provision for combination, while such provision has been made in the Resolution Plan, prior to approval of such Resolution Plan by the Committee of Creditors. A cursory look at the provision engrafted in sub-section (4) of Section 31 of the I B Code reveals that while with regard to an ordinary Resolution Plan, the Resolution Applicant is required to obtain necessary approval required under any extant law within one year from the date of such approval by Adjudicating Authority only after such Resolution Plan has been approved by the Adjudicating Authority, however, a Resolution Plan containing the provision for combination is required to obtain approval of the Competition Commission of India prior to the approval of such Resolution Plan by the Committee of Creditors. It is manifestly clear that a Resolution Plan containing provision for com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code , cannot be sustained and the Appellant cannot be heard to say that the approved Resolution Plan of APSEZ being in contravention of law leaves no option but to send the Corporate Debtor into liquidation. 17. All objections raised qua the action of the Resolution Professional during Corporate Insolvency Resolution Process, approval of Resolution Plan of APSEZ by the Committee of Creditors and its subsequent approval by the Adjudicating Authority being unfounded are hereby repelled. There is no merit in this appeal and the same is dismissed. No order as to costs. 26. Against the judgment of this Tribunal in Vishal Vijay Kalantri, a Civil Appeal No.2228 of 2021 was filed in the Hon ble Supreme Court, which was dismissed on 06.08.2021 by following order: This is an appeal filed under Section 62 of the Insolvency and Bankruptcy Code, 2016 against the judgment dated 24.07.2020 passed by the National Company Law Appellate Tribunal New Delhi in Company Appeal (AT) (Insolvency) No.466 of 2020. Having considered the facts and circumstances on record, especially paragraphs 9, 10 and 17 of the judgment under appeal, we see no reason to interfere. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, however, a provision of law prescribes that a certain act has to be done in a particular manner by a person in order to acquire a right and it is coupled with another provision which confers an immunity on another when such act is not done in that manner, the former has to be regarded as a mandatory one. A procedural rule ordinarily should not be construed as mandatory if the defect in the act done in pursuance of it can be cured by permitting appropriate rectification to be carried out at a subsequent stage unless by according such permission to rectify the error later on, another rule would be contravened. Whenever a statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to a specific consequence, it would be difficult to hold that the requirement is not mandatory and the specified consequence should not follow. 29. The Hon ble Supreme Court in large number of cases, thereafter has laid down that consideration of statute will depend on the purport and object for which the same has been used. We may refer to another judgment of the Hon ble Supreme Court in (1983) 2 SCC 473 M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000 as security for the costs of the petition, and the second is that such deposit shall be made in the High Court in accordance with the rules of the High Court. The requirement regarding the making of a security deposit of Rs 2000 in the High Court is mandatory, the non-compliance of which must entail dismissal in limine of the election petition under sub-section (1) of Section 86 of the Act. But the requirement of its deposit in the High Court in accordance with the rules of the High Court is clearly directory. As Maxwell on the Interpretation of Statutes, 12th Edn., at p. 314 puts it: An absolute enactment must be obeyed or fulfilled exactly, but it is sufficient if a directory enactment be obeyed or fulfilled substantially. The rule of construction is well settled and we need not burden the judgment with many citations. 20. It is well established that an enactment in form mandatory might in substance be directory and that the use of the word shall does not conclude the matter. The general rule of interpretation is well-known and it is but an aid for ascertaining the true intention of the legislature which is the determining factor, and that must ultimately depend o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In paragraph 45, following has been laid down: 45. However, no straitjacket formula can be laid down except that the observance of time schedule contemplated by Order 8 Rule 1 shall be the rule and departure therefrom an exception, made for satisfactory reasons only. We hold that Order 8 Rule 1, though couched in mandatory form, is directory being a provision in the domain of processual law. 31. We may also notice another judgement of the Hon ble Supreme Court in AIR 1917 PC 142 Montreal Street Railway Company vs. Normandin, where statutory provision, which cast a duty on the Public Authority, on which public in general has no control has been referred in the judgment as directory, in paragraph 6, following has been laid down: 6. ..The question whether provisions in a statute are directory or imperative has very frequently arisen in this country, but it has been said that no general rule can be laid down, and that in every case the object of the statutes must be looked at. The cases on the subject will be found collected in Maxwell on Statutes, 5th. ed. p. 596 and following pages. When the provisions of a statute relate to the performance of a public duty and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifying the matters in which either generally, or in any particular class of case or in particular circumstances, it shall not be necessary for a Public Service Commission to be consulted . The words quoted above give a clear indication of the intention of the Constitution makers that they did envisage certain cases or classes of cases in which the Commission need not be consulted. If the provisions of Article 320 were of a mandatory character, the Constitution would not have left it to the discretion of the Head of the Executive Government to undo those provisions by making regulations to the contrary. If it had been intended by the makers of the Constitution that consultation with the Commission should be mandatory, the proviso would not have been there, or, at any rate, in the terms in which it stands. That does not amount to saying that it is open to the Executive Government, completely to ignore the existence of the Commission or to pick and choose cases in which it may or may not be consulted. Once, relevant regulations have been made, they are meant to be followed in letter and in spirit and it goes without saying that consultation with the Commission on all disciplinary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, it has been the practice to hold such provisions to be directory only, the neglect of them, though punishable, not affecting the validity of the acts done. The principle laid down in this case was adopted be the Federal Court in the case of Biswanath Khemka v. King- Emperor [(1945) FCR 99] . In that case, the Federal Court had to consider the effect of non-compliance with the provisions of Section 256 of the Government of India Act, 1935, requiring consultation between public authorities before the conferment of magisterial powers or of enhanced magisterial powers, etc. The Court repelled the contention that the provisions of Section 256, aforesaid, were mandatory. It was further held that non-compliance with that section would not render the appointment otherwise regularly and validly made, invalid or inoperative. That decision is particularly important as the words of the section then before their Lordships of the Federal Court, were very emphatic and of a prohibitory character. 11. An examination of the terms of Article 320 shows that the word shall appears in almost every paragraph and every clause or sub-clause of that article. If it were held that the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso noticed that CIRP Regulations also provide a timeline. Section 12 of the Code, contemplate completion of CIRP within 180 days, subject to further extension. Section 12, further provides that CIRP shall be completed within a period of 330 days from the insolvency commencement date. We have noticed that timeline prescribed under Regulation 40A for submission of Resolution Plan to CoC take additional 30 days and 135 days are provided for submission of Resolution Plan. Till the submission of Plan and by 165 days, the Plan is required to be considered by the CoC. The question of obtaining approval from the CCI only arises when Resolution Plan submitted contains a combination and require approval from the CCI. After submission of Plan, the Resolution Applicant applies for approval of combination from the CCI. It is not in his hand that as to when CCI will grant the approval. The CCI has to act as per statutory provisions of the Competition Act and it has been given 210 days to take a decision. If, we hold that prior approval of the CCI is mandatory prior to the approval of Plan by the CoC, it will lead to incongruous result, the CIRP cannot be frozen or cannot be put at halt because ..... X X X X Extracts X X X X X X X X Extracts X X X X
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