TMI Blog2022 (7) TMI 1480X X X X Extracts X X X X X X X X Extracts X X X X ..... ial on record that CIRP has not exercised due diligence as a reasonable man and intentionally made such misrepresentation. But, no such material is place that misrepresentation was made intentionally, consequently failed to establish none of the ingredients to constitute misrepresentation or fraudulent misrepresentation - In the present facts of the case, there is absolutely no allegation that the Resolution Professional made any representation with fraudulent intention or with an intent to deceive the resolution applicants i.e. appellants herein. In the absence of such allegation and proof of it, by producing prima facie material, it is difficult for this Court to accept the contention of the Appellants, that the appellants have submitted the resolution plan based on such fraudulent misrepresentation made by Resolution Professional. Viewed from any angle, the Resolution Professional prima facie did make no misrepresentation or false representation, much less, fraudulent misrepresentation as alleged by the Appellants. In any view of the matter, based on fact situation, more particularly about the calculation of production capacity by specific formula extracted above and for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany Law Tribunal, Rules 2016 ('NCLT Rules') and Regulation No. 39 (9) of Corporate Insolvency Resolution Process ('CIRP') regulations for issue of appropriate direction against the Respondent to implement the resolution plan including the direction for deposit of balance amount, allotment of debentures, giving of guarantees by Respondent Nos. 2 to 4 etc. as approved by the Adjudicating Authority vide order dated 27.02.2019 made by the Adjudicating Authority in I.A. No. 224 of 2018 and as confirmed by the Hon'ble NCLAT New Delhi by its order dated 19.12.2019 passed in Comp. App. (Ins.) No. 354 of 2019 and allied appeals. The Petitioner also sought an alternative relief to recommence the period of CIRP, for such period as may be deemed appropriate by the Adjudicating Authority and permit the Applicant to engage the services of Resolution Professional for the purposes of bringing about resolution of the Corporate Debtor and to achieve the object of going concern and for other consequential reliefs. 4. The Tribunal granted relief as claimed by the Petitioner directing implementation of resolution plan dated 27.02.2019. I.A. No. 231 of 2020 5. I.A. No. 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitions, including objections, by order dated 27.02.2019. Thus, the Corporate Debtor was merged into applicant No. 1 company i.e. the first Appellant herein. As per the approved plan submitted by the Applicants/Appellants, the applicant is required to make payment as per plan in the specified manner at different intervals as agreed by Committee of Creditors, but the Appellants paid an amount of Rs. 30.50 crores as on the date of disposing the applications. 12. The contention of the appellants is that, they have also spent Rs. 3.67 crores as CIRP cost. It is further alleged that, despite complying with its obligation, applicant has not been given possession of the office premises and the same is continued to be in possession of Rainbow Papers Ltd. No data, books of accounts and other records of Rainbow Papers Ltd. were handed over till today. 13. The Resolution Professional as well as Committee of Creditors have also not shared the forensic audit report which would disclose the performance of Corporate Debtor. 14. It is also contended that Information Memorandum in Annexure-B of the application contains column for disclosure of the list of ongoing cases, but CIRP did not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) No. 653 of 2020 dated 30.09.2020 19. The respondents opposed the appeals on various grounds. The Resolution Professional contended that the joint lenders meeting of Rainbow Paper Ltd. was held on 01.08.2017 accepted, the liability of Corporate Debtor as estimated by the applicant and that Information Memorandum was issued after exercising of due diligence by visiting the plant of Rainbow Papers Ltd. and only after visiting, after compliance of statutory procedure, the Information Memorandum was issued. On the basis of Information Memorandum, the appellants submitted the resolution plan and approved by the Committee of Creditors, later accepted by the Adjudicating Authority by order dated 27.02.2019 in I.A. No. 224 of 2018. 20. After hearing the arguments of both the counsel, the Adjudicating Authority having come to the conclusion that the Appellants herein GITCO appointed by the Appellants did not calculate the capacity as per the formula for calculation of production capacity, calculated the capacity based on the report of GITCO and came to a conclusion that the capacity is equivalent to the production capacity as stated in Information Memorandum. As such the Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er contended that the question of merger does not arise as the Appellants did not prefer any appeal before the Appellate Authority on the ground of misrepresentation or fraudulent misrepresentation made by Resolution Professional but filed appeal on different ground and the other aggrieved parties also preferred appeals before the Appellate Tribunal and Hon'ble Supreme Court, but the order was confirmed with certain modifications. Such order is not deemed to have been merged with the order and thereby, dismissal of the application of these Appellants on the ground of merger of the judgment of the Appellate Court into the judgment of Adjudicating Authority is erroneous and thereby, the approach of the Adjudicating Authority is illegal and placed reliance on the judgments of the Hon'ble Supreme Court in State of Madras vs. Madurai Mills Co. Ltd. AIR 1967 SC 681; Kunhayammed vs. State of Kerala (2000) 6 SCC 359 and Khoday Distilleries Ltd. Vs. Shri Mahadeswara Sahakara Sakkare Karkhane Ltd. (2019) 4 SCC 376 26. Yet, another contention of the appellants is that, on account of fraudulent misrepresentation, entire transaction is vitiated since the Resolution Professional did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisputedly issued the Information Memorandum calling for expression of interest dated 21.2.2018, disclosing the profile of Corporate Debtor in Annexure I, the same is extracted hereunder: A Company Profile document provided by the company is shown as Annexure - 1. As per the total installed capacity of India of 22.15 Million MTs of Paper, the installed capacity of the Corporate Debtor (herein after also termed as Company) is 0.359 Million MTs equivalent to 1.6% of the Country's production capacity. Important information related to the Corporate Debtor are provided herein below: 32. Though Annexure -1 is referred it was not filed. After 18 months from the date of approval of resolution plan by the Adjudicating Authority and after disposal of appeals filed by both Appellate Tribunal and the Hon'ble Supreme Court, the Appellant herein resorted to second round of litigation, filed petition on the ground that the CIRP made a false representation as to production capacity of the Corporate Debtor and on the basis of report of GITCO, the appellants herein filed the petition making serious allegation of fraudulent misrepresentation against the Resolution premises and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution applicants/appellants herein submitted their resolution plan and approved by COC and adjudicating authority, however, they got appointed GITCO for the purposes mentioned in the earlier paragraphs. The inspection was done unilaterally without the presence of CIRP or his representatives. However, the adjudicating authority calculated the production capacity based on GITCO report as follows: 37. We found that the production capacity of the industry is minimum, the same is shown as under:- Assumption 1- Considering the daily capacity as shown in the GITCO Report Assumption 2 Calculation of daily production capacity by factoring in to the production calculation formula the gsm, speed, machine hours, Machine deckle as per the basis shown in the GITCO study report of every individual machines Assumption 3 Calculation of daily production capacity by factoring in to the production calculation formula the gsm, speed, machine hours, Machine deckle as per the basis shown in the GITCO study report of every individual machine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20-130 120 100 Page no. 57 4 4 4 7 4.46 40-100 850 750 Page no. 37 180 48 650 22.5 4.46 188 48 850 24 4.46 246 8 4.46 45-100 1100 800 Page no. 42 225 80 700 22.5 4.66 35.2 80 1100 24 4.46 530 9 4.46 40-120 Page no. 59 250 250 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. Learned counsel for the Appellants in the written submission contended that the Appellants submitted resolution plan based on the information furnished by CIRP, submitted a resolution plan and addendum, at Clause (G), wherein, it is specifically stated that the resolution applicant submitted his resolution plan. However, I find no such clause in the addendum, but at Page No. 206 a specific mention is made as under: total amount of outstanding dues to secure financial creditors of Rainbow Papers Ltd. as per Information Memorandum being Rs. 1437.11 crores (claimed received and admitted Rs. 1437.11 crores) as per the table . 41. The above extracted paragraph it is not relating to production capacity of the industry. 42. From the above, it is clear that, based on the Information Memorandum, the amount due to the financial creditors is arrived at, therefore, the contention of the Appellants that they submitted resolution plan based on the details as to production capacity of the industry is without any substance. 43. Another contention of the Appellants is that, pending tax proceedings are not disclosed in the Information Memorandum by CIRP, in fact, the CIRP disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence, is, in itself, equivalent to speech. Section 18. Misrepresentation defined- 'Misrepresentation' means and includes- (1) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true; (2) any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice or to the prejudice of anyone claiming under him; (3) causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement. 47. In the instant case, representation was made by the Resolution Professional in Information Memorandum inviting expression of interest. To constitute fraudulent misrepresentation, there must be material on record that CIRP has not exercised due diligence as a reasonable man and intentionally made such misrepresentation. But, no such material is place that misrepresentation was made intentionall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to confidentiality. (b) to protect any intellectual property of Corporate Debtor it may have access to (c) not to share relevant information with 3rd party unless (a) (b) of the section. 53. In the explanation annexed to Section 29, the word 'relevant information' is explained. It means the information required by the resolution applicant to make the resolution plan for the Corporate Debtor which shall include financial position of the Corporate Debtor. All information relating to dispute against the Corporate Debtor on any other matter pertaining to the Corporate Debtor as may be specified. Therefore, the word relevant information' referred in Section 29 (1) of IBC is only an information required by the resolution applicant i.e. appellants herein to make resolution plan for the Corporate Debtor. Here, the Resolution Professional disclosed the information based on the report of MITCON available and he is not an expert to make an assessment of the production capacity of the industry, therefore, he only disclosed those details regarding production capacity based on earlier report submitted by MITCON, such information is relevant for the purpose of maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enning observed in a language without equivocation that no judgment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud, for, fraud unravels everything. Therefore, we have no doubt that the remedy to move for recalling the order on the basis of the newly discovered facts amounting to fraud of high degree, cannot be foreclosed in such a situation. No court or tribunal can be regarded as powerless to recall its own order if it is convinced that the order was wangled through fraud or misrepresentation of such a dimension as would affect the very basis of the claim. 58. The same principle is reiterated in United India Insurance Co. Ltd. vs. Rajendra Singh; Roshan Deen vs. Preeti Lal; Indian National Congress vs. Institute of Social Welfare; Indian Bank vs. Satyam Fibres (India) Pvt. Ltd.; Deepa Gourang Murdeshwar Katre vs. Principal, V.A.V. College of Arts; Revandas Ranchhodhbhai Rathod vs. Jyotiben Wd/o Rameshbhai Madhusudan Thakar; Bindeshwari Pd. Chaudhary V. Debendra Pd. Singh (referred supra). 59. We are not disputing the power of the Tribunal to recall its own order. The Tribunal held that it is not vested with the power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income-tax- Officer. It was held by the High Court that the order of the Income-tax- Officer granting registration to the respondent must be deemed to be merged in the appellate order and that the revisional power of the Commissioner of Income-tax cannot, therefore, be exercised in respect of it. The view taken by the High Court was overruled by this Court for the reason that the order of the Income-tax officer granting registration cannot be deemed to have merged in the order of the Appellate Commissioner in an appeal taken against the composite order of assessment. Similarly, in The State of Uttar Pradesh V. Mohammed Nooh (2), it was held by this Court that the principle of merger cannot apply in the case of an order of dismissal of a public servant which was made by the departmental Tribunal on the 20th April, 1948 and against which the appeal was dismissed by the Appellate Authority on the 7th May, 1949, and the revisional application was rejected on the 22nd April, 1950. In the circumstances of the present case, it cannot be said that there was a merger of the order of assessment made by the Deputy Commercial Tax Officer dated the 28th November, 1952 with the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific formula extracted above and for the failure of these appellants to inspect the premises before making expression of interest for submitting resolution plan indicates that the appellants are not diligent in submitting the resolution plan. 66. In Ebix Singapore Private Limited vs. Committee of Creditors of Educomp Solutions Ltd. and Anr and Kundan Care Products Ltd. vs. Amit Gupta etc Civil Appeal No.3560 of 2020 dated 28.07.2021, the Supreme Court considered the duties of Resolution Professional in para 185 with reference to Section 29 of IBC, BLRC report and the duties of Resolution Professional, held as follows: 1. The RP must provide the most updated information about the entity as accurately as is reasonably possible to this range of solution providers. In order to do this, the RP has to be able to verify claims to liabilities as well as the assets disclosed by the entity. The RP has the power to appoint whatever outside resources that she may require in order to carry out this task, including accounting and consulting services. 2. The information collected on the entity is used to compile an information memorandum, which is signed off by the debtor and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Professional must be careful to clarify when its information is not comprehensive and what facts may cause change. 69. The word 'relevant information' is required under Section 29 to formulate its resolution plan. When once the Resolution Professional disclosed relevant material in Information Memorandum based on MITCON Report which is equivalent to the information collected by GITCO, which the Appellants relied on is sufficient to conclude that the Resolution Professional did make no misrepresentation or fraudulent misrepresentation, therefore, when the appellants failed to make necessary investigation in the matter and proceeded to submit its resolution plan, this the act of the Resolution Professional cannot be held to be the fraudulent misrepresentation. On the other hand, it appears that this application was filed after 18 months from the date of approval of resolution plan with an intention to delay the proceedings and to avoid resolution plan submitted by resolution applicants/appellants. If the contention of the Appellants is accepted at this belated stage and permitted the Tribunal to recall such orders after approval of the resolution plan by order of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovident Fund' and Miscellaneous Provision Act 1952' immediately, as it does not include as an asset of the 'Corporate Debtor'. The impugned order dated 27th February, 2019 approving the 'Resolution Plan' stands modified to the extent above. 75. Aggrieved by the order, an Appeal was preferred under Section 62 of the Code before the Apex Court in Civil Appeal and the same was dismissed holding as follows:- we find no ground to interfere with the impugned order passed by the/Tribunal the appeal is, accordingly, dismissed. 76. In view of the concurrent findings recorded by the Appellate Tribunal and Supreme Court, the Appellants have no other option except to implement the resolution plan submitted by the resolution applicants/appellants and approved by the Tribunal in I.A. No. 224 of 2018, consequently the Appellants are under obligation to discharge the liability, i.e. the amount due to the applicants. 77. The Tribunal rightly issue direction for payment of dues and the finding recorded by Tribunal does not call for interference of this Appellate Tribunal, while exercising the power under section 61 of IBC. Hence, the finding recorded by NCLT ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
