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TMI Blog2023 (11) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.04.2023 passed by the Adjudicating Authority (National Company Law Tribunal, Chandigarh Bench) in IA No. 1394 of 2022 and IA No. 823 of 2020 in CP (IB) No.515 (CHD) of 2019. By the impugned order passed in IA No.823 of 2020 (hereinafter referred to as "First Impugned Order"), the Adjudicating Authority had approved the Resolution Plan of the Corporate Debtor. By the impugned order passed in IA No. 1394 of 2022 (hereinafter referred to as "Second Impugned Order"), the Adjudicating Authority dismissed this IA filed by the present Appellant seeking direction for rejection of the Resolution Plan and dismissal of IA 823/2020. Aggrieved by these impugned orders, the present appeal has been filed by Smt. Sita Chaudhary, the suspended director of the Corporate Debtor. 2. The background facts of the case which are necessary to be noticed for deciding this appeal are as outlined below : - * An Agreement was executed between Haryana Telecom Ltd.-Corporate Debtor and Parivartan Investment and Finance Company - Financial Creditor, whereby Corporate Debtor agreed to redeem the Debentures of the value of Rs. 5,00,00,000/-. * The Corporate Debtor re-issued the Non-Convertible Debentures ("N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicants had been undertaken. * After due deliberations, the CoC found the resolution plan submitted by Mr. Abhimanyu Singh Mehlawat as H-l, Resolution Plan of Pankaj Sachdeva as H-2 and the Resolution Plan submitted by One City Infrastructure Pvt. Ltd. as H-3. * In the 9th CoC meeting, the Resolution Professional apprised the CoC that H-l Resolution Applicant had filed Addendum to the Resolution Plan and increased the Plan from Rs. 20.10 crore to 25.14 crore as final offer. The Resolution Professional further apprised the CoC that Resolution Plans of H-1 and H-2 is legally compliant but Resolution Plan of H-3 is not legally compliant. * The resolution plan submitted by Mr. Abhimanyu Singh Mehlawat was approved by the CoC in its 9th meeting dated 31.10.2020 with 100% voting share. Mr. Abhimanyu Singh Mehlawat, the Successful Resolution Applicant ("SRA" in short) is present Respondent No. 2. * An Operational Creditor-Raj Babar filed an application bearing I.A. No. 344 of 2020 on 01.09.2020 challenging the constitution of the CoC and seeking removal of the Financial Creditor from the CoC on the ground of being a related party of the Corporate Debtor. I.A. No. 344/2020 was dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal may deem fit and proper in the interest of justice. 3. The Learned Counsel for the Appellant making his submissions contended that the Adjudicating Authority had dismissed the IA 1394/2022 without appreciating the fact that fraud and coercion was writ large in the proceedings in CP(IB) 515/2019. This is validated by the findings of undue influence, coercion and fraud on the part of Sunaina Singh and her associates over the Appellant as held by the Hon'ble Delhi High Court in its order dated 29.07.2022 in C.S.(OS) 589 of 2021. It was pointed out that the Appellant was unaware of the CIRP proceedings as she was not in control of her own faculties and was subjected to undue control of Sunaina Singh. Besides asserting that the initiation of CIRP proceedings were vitiated by fraud, it was submitted that Sunaina Singh in furtherance of her conspiracy orchestrated a debt and default by exercising undue influence upon the Appellant. She had got the waiver of interest for extended period of debentures revoked and thereafter got the revocation of the interest waiver unscrupulously accepted by the Corporate Debtor by exercising undue influence over the Appellant. When the revocation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d party, there was no error in the constitution of the CoC with Financial Creditor as the only member of the CoC. The same issue of Sunaina Singh being a related party of the Corporate Debtor and need for reconstitution of the CoC was raised by an Operational Creditor of the Corporate Debtor in IA 344/2020 which was considered by the Adjudicating Authority and rejected vide its order dated 05.03.2021. Thereafter, an unsuccessful resolution applicant had filed application bearing IA No. 728 of 2020 seeking similar reliefs which also stood dismissed and appeal preferred against this decision of the Adjudicating Authority before this Tribunal was also dismissed vide Order dated 14.07.2022. Thus, the issue of the Financial Creditor not being a related party of the Corporate Debtor having already attained finality, it was vehemently contended that since the instant Appeal raises similar grounds it deserves to be dismissed on this ground alone. 6. It was also submitted that the Appellant's prayer for setting aside the order of the Adjudicating Authority dated 12.04.2023 in IA 823 of 2020 approving the Resolution Plan submitted by the SRA lack proper foundation. The same can be set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... significant events and related dates which are going to have a bearing on the determination of the above questions. Sunaina Singh resigned as Director of the Corporate Debtor on 25.03.2019. The CIRP of the Corporate Debtor commenced on 07.02.2020 and the CoC was constituted on 29.02.2020. The resolution plan submitted by SRA - Abhimanyu Singh Mehlawat was approved by the CoC in its 9th meeting dated 31.10.2020. The IA No. 344/2020 challenging the constitution of the CoC and seeking removal of the Financial Creditor from the CoC on the ground of being a related party of the Corporate Debtor was dismissed by the Adjudicating Authority on 05.03.2021. IA No. 728 of 2020 seeking reconstitution of CoC on account of Financial Creditor being a related party of the Corporate Debtor was disposed by the Adjudicating Authority on 02.11.2021 and appeal preferred thereto was dismissed by this Tribunal on 14.07.2022. The Hon'ble Delhi High Court on 29.07.2022 passed an interim order on civil suit - C.S.(OS) 589 of 2021 filed by the Appellant for declaration, permanent and mandatory injunction, rendition of account and cancellation of the gift deed which order is presently under challenge. IA 823 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.03.2021 and 02.11.2021 dismissing I.A. No. 344 of 2020 and I.A. No. 728 of 2020 by holding that the Financial Creditor is not a related party of the Corporate Debtor is well-reasoned. That the Adjudicating Authority had made cogent findings stands validated by the fact that this Tribunal in its orders dated 14.07.2022 in Company Appeal (AT) (Ins.) 1065 of 2021 had affirmed these findings. Hence the issue having already attained finality, the instant appeal deserves to be dismissed. It was also contended that the reliance placed by the Appellant on the Hon'ble Delhi Court order dated 29.07.2022 is misconceived as the said order was passed in a totally different context and in totally different set of facts and circumstances. Moreover, the said order being relied upon by the Appellant is interim in nature and relates to a matter wherein neither the Corporate Debtor nor the Financial Creditor were a party. 12. At this juncture, it may be useful for us to have a look at how this Tribunal had dealt with the allegation of Financial Creditor being a related party of the Corporate Debtor as raised by the Appellant in Company Appeal (AT) (Ins.) 1065 of 2021. It may be constructive to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of non-convertible debentures and the fact that Smt. Sunaina Singh was a Director of the Corporate Debtor when non-convertible debentures were issued by the Corporate Debtor and held by Financial Creditor i.e. 13.01.2016, in view of the law laid down by the Hon'ble Supreme Court in 'Phoenix ARC Pvt. Ltd.' (supra) are not relevant criteria to hold Financial Creditor as related party to the Corporate Debtor. Only exception which has been laid down in Para 103 of the judgment of Hon'ble Supreme Court in 'Phoenix ARC Pvt. Ltd.', as extracted above and noted by us is that where the Financial Creditor divests itself of its shareholding or ceases to become a related party in a business capacity with the sole intention of participating the CoC and sabotage the CIRP, by diluting the vote share of other creditors or otherwise, it would be in keeping with the object and purpose of the first proviso to Section 21(2), to consider the former related party. When we look into the Application I.A. No. 728 of 2020 and even rejoinder filed in the said Application, there is no averment that one of the Director of the Financial Creditor, Smt. Sunaina Singh ceases to become a related party in a busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 5(24) or/and Section 21(2). In view of our finding that the applicant failed to show that the third respondent/financial creditor is a related party to the corporate debtor, there is no need of delving upon the various decisions cited by both sides." 18. The Adjudicating Authority has also elaborately noticed the judgment of Hon'ble Supreme Court in 'Phoenix ARC Pvt. Ltd.' and made following observations in Para 14:- "14. The Hon'ble Apex Court held that, in a given case, if it is established that the related party financial creditor divests itself of its shareholding or ceases to become a related party in a business capacity with the sole intention of participating in the COC and to sabotage the CIRP, by diluting the vote share of other creditors or otherwise, can be debarred from the COC, though the said financial creditor was not a related party as on the date of filing of the CP. But in the present case, since the applicant failed to establish any such intention on the part of the third respondent, the decision of the Hon'ble Apex Court is also not applicable." 19. Although order dated 02.11.2021 rejecting the I.A. No. 728 of 2020 is not an elaborate order, the elab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from transferring and siphoning off the assets of the family assets of late Devinder Singh Chaudhary, i.e. the husband of the applicant. The details of the shareholding pattern and these companies, which were under dispute before the Hon'ble High Court, mentioned on pages 71 to 13, have been perused. We note that the name of the corporate debtor, i.e. Haryana Telecom Limited, does not feature anywhere in the said order of the Hon'ble Delhi High Court even though the list of defendants contains the names of as many as seven companies in which late Shri. Davinder Singh Chaudhary had substantial shareholdings. It is also noted that the applicant has got very negligible shareholding in the corporate debtor. 11. We note that in the present case, the CIRP was initiated on 07.02.2023, and the applicant being suspended director was in complete knowledge of the facts right from the beginning. Resolution proceedings in the case of the corporate debtor under the IBC are in progress. Despite the same, the present application is being filed when the Resolution Plan is placed before this Authority for approval. The reference to Ms. Sunaina Singh, Director of the financial creditor in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Corporate Debtor commenced on 07.02.2020, we are satisfied with the above findings in the second impugned order that Sunaina Singh was not a related party of the Corporate Debtor having resigned much before the filing of section 7 application. Though Sunaina Singh was a Director of the Corporate Debtor at earlier point of time but as on the date of filing of Section 7 application or on the date of admission of CIRP, she was not the Director of the Corporate Debtor since she had admittedly resigned as a Director from the Corporate Debtor on 25.03.2019. We are also convinced that the Adjudicating Authority while passing the second impugned order was fully abreast of the findings of the Hon'ble Delhi Court and has recorded detailed findings as to why these findings are distinguishable and inapplicable in determining the issue of Financial Creditor being a related party of the Corporate Debtor. 19. In answering the questions outlined at para 6(i) and (ii) above, in our considered opinion, there is no force in the contention of the Appellant that the findings of the Hon'ble Delhi High Court in the context of related party allegation have been missed out by the Adjudicating Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipate in each and every meeting held by the CoC including right to discuss all the resolution plans presented in such meetings. In the present case too, pursuant to the constitution of CoC, notice of meetings of the CoC were duly sent to the Appellant. Despite service of notices upon the Appellant, it is clear that the Appellant chose neither to attend the meetings of the CoC and participate in the deliberations therein but never raised any objection on the CIRP process in spite of having knowledge of the ongoing CIRP. 22. It has been contended by the Appellant that the commercial wisdom of the CoC was compromised as the Sunaina Singh the director of the sole financial creditor had vested interest in the Resolution Plan of the Respondent No. 2. It is also contended that Sunaina Singh had resigned from the Corporate Debtor with the intention to participate in the CoC as the sole Financial Creditor so as to control the entire CIRP process and usurp the assets of the Corporate Debtor. Hence it is the plea of the Appellant that there is a need to reject the resolution plan as approved by the Adjudicating Authority vide the first impugned order. 23. The rival submissions made is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31 read with Section 30 of IBC. In terms of Section 31 of IBC, the scope of enquiry by the Adjudicating Authority is confined to scrutinizing whether Section 30(4) has been complied with or not. In the present case, the CoC after considering the viability and feasibility of the resolution plan has approved the same with 100% vote share thereby fairly and squarely meeting the conditionalities laid down in Section 30(4) of the IBC. In the present case, the Resolution Professional after approval of the plan by the CoC filed an application before the Adjudicating Authority seeking approval of the Resolution Plan under Section 31 of the IBC. After detailed deliberations on feasibility and viability of Resolution Plan, the Adjudicating Authority has clearly recorded in the first impugned order that on examination of the resolution plan it has found that no provision of law appears to have been contravened and that there is compliance to Regulations 38 and 39 of CIRP Regulations, 2016. 27. The Appellant has also prayed for rejecting the resolution plan of the SRA on the ground that the SRA is a related party having a business relationship with the husband of the Director of the sole Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution of the corporate debtor and in the instant case the resolution plan of the SRA having already been approved by the CoC and the Adjudicating Authority, it cannot now be open to interference on the ground that the CoC was not properly constituted. When the Appellant did not challenge the CIRP admission and constitution of CoC at the right point of time, it cannot raise the matter belatedly and make it a ground for rejection of the duly approved resolution plan. When the CoC has approved a Resolution Plan by 100% voting share after considering its feasibility and viability, such decision of CoC is a commercial decision and it is settled law that commercial wisdom of CoC in approving the Resolution Plan is not to be interfered in the exercise of jurisdiction of judicial review either by the Adjudicating Authority or by this Tribunal in the exercise of its appellate powers. We are of the view that the Adjudicating Authority did not commit any error in approving the resolution plan and therefore concur in the first impugned order of the Adjudicating Authority approving the resolution plan. 30. In view of the foregoing discussions and conclusions, we do not find any error in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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