TMI Blog2021 (8) TMI 1400X X X X Extracts X X X X X X X X Extracts X X X X ..... es the ineligibility in clear terms by stating that the Resolution Applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any other Resolution Plan approved by the Adjudicating Authority at any time in the past. - Therefore, delay in implementation of the Resolution Plan cannot be considered as a ground for ineligibility of the Resolution Applicant. It is clear that the COC deliberated Respondent No. 3's eligibility and thereafter, considering the statement of Respondent No. 3, took a conscious commercial decision in accepting its Resolution Plan. Moreover, judicial notice may be taken of the prevailing situation the entire world is facing on account of the Covid 19 pandemic. Therefore, if there is some delay in implementing the Plan, it cannot be considered a failure in implementing the Resolution Plan, thereby making the Resolution Applicant ineligible for submission of the Resolution Plan under Regulation 38 (1B) of the CIRP Regulations. In the instant case, the COC has approved the Resolution Plan, pending adjudication before the Adjudicating Authority u/s 31 of the Insolvency and Bankruptcy Code 2016. Afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vocate for R-2., Mr Virendra Ganda, Sr Advocate with Mr Raghav Kakkar, Mr Anand Sengar and Mr Ayandeb Mitra, Advocates for R-3. ORDER Separate Judgments are being passed with reasons recorded. For reasons recorded by us separately, following operative order we pass:- The Appeal is dismissed. No order as to costs. Interim order dated 29th July, 2020 will thus not survive. Adjudicating Authority is requested to urgently decide Application pending under Section 31 of the IBC. Justice A.I.S. Cheema, The Officiating Chairperson V.P. Singh, Member (Technical) Judgment Per A.I.S. Cheema, J. I have had the privilege of going through the judgment being passed by my Learned Colleague Hon ble Shri V.P. Singh, Member (Technical). The Hon ble Member (Technical) has painstakingly referred to the respective cases put up by the parties and the concerned statutory provisions. Thus, I am not reproducing the same. From para 29 onwards till the operative order, the Learned Member (Technical) has recorded reasons in support of the order dismissing the Appeal. I am also of the view that the present Appeal deserves to be dismissed. However, with respect to my Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing of the instant application. 21. Thirdly, It is also matter of record that, on the instance of RP and COC, revised resolution plan was submitted during the 16th COC meeting held on 29.01.2020 after almost three month after submitting the l Resolution Plan for Corporate Debtor, further, till 16th COC meetings the applicant submitted 7 (seven) Resolution Plan and on each occasion the plan was found deficient of compliance under rule 38 of CIRP regulation, though, the applicant was duly communicated by RP and member of COC to remove the deficient and submit in compliances of Regulation 38. Not only that, plan which was submitted on Jan 29, 2020 was also conditional/ contingent in nature and the applicant had indicated in their resolution plan about exit midway, even if, the applicant would have been declared as a successful Resolution Applicant after following the due process of biding and evaluation by the COC. 22. Fourthly, the revise resolution plan so submitted by the applicant on 09.02.2020 was also conditional in nature and the amount so offered was lesser than the amount so offered by the respondent No. 3, thus in the 17th COC meeting, which was held on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he date of filing, but is also devoid of merit and hence dismissed. No cost. 5. I find the reasoning well founded. Before us, the Respondent No. 1- Resolution Professional has filed Affidavit in reply to the Appeal and given various details on oath regarding the manner in which the CIRP progressed and as to how the various Resolution Plans, one after the other tendered by the Appellant were considered and were continuously found to be wanting and conditional. It would be appropriate to reproduce some of the paragraphs from the Affidavit. The Resolution Professional made the averments on the basis of CIRP record and developments in the meetings. The concerned paragraphs from the Affidavit dated 11th August, 2020 which need reference are:- 10. It is pertinent to note that even after the aforesaid assistance and several reminders to the Appellant, the Resolution Plan submitted by Appellant during the 16th CoC meeting, conducted on January 29, 2020, was conditional/ contingent in nature wherein the Appellant had indicated in their Resolution Plan about their exit midway even if the Appellant would have been declared as a Successful Resolution Applicant after following the du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired under Regulation 39 (1B) of the CIRP Regulations, the Respondent No. 3 has provided a detailed note on page nos. 13 to 15 of their Resolution Plan to the effect stating that neither Respondent No. 3 or any of its related parties have failed to implement or contributed to the failure of implementation of any other resolution plan approved by the Adjudicating Authority at any time in the past. The Respondent No. 3 had mentioned that they had sought extension of time for final payment from CoC and NCLT for reasons beyond their control. They also elaborated on the factors leading to delay in making final payment. I crave leave to refer and rely upon the Resolution Plan of Respondent No. 3 as and when produced. xxx xxx xxx 18. The Resolution Professional has sought information/ clarifications from Respondent No. 3. Respondent No. 3 provided further information with respect to their payment progress in the matter of Allied Strips Limited and based on such information provided by Respondent No. 3, the RP and the CoC understood that Respondent No. 3 has agreed to make the balance payments, in the matter of Allied Strips Limited, by February 29, 2020 and the same coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the Appellant has incorrectly alleged, in point 9 cc) Grounds in the Appeal, that the COC has not been given any time or opportunity to consider the plan of the Appellant. (Emphasis supplied) 6. Going through such affidavit of the Respondent No. 1- Resolution Professional, it is clear that the Appellant had multiple opportunities and the Resolution Plans filed one after the other were considered and which were found to be conditional. The CoC in 16th meeting read with the 17th meeting and voting thereon approved the Resolution Plan of Respondent No. 3. The grievance raised by the Appellant with regard to ineligibility of Respondent No. 3 were also considered by the CoC with regard to the Allied Strips Limited which was pointed out and CoC still took a conscious decision to accept the Resolution Plan of Respondent No. 3. 7. The Appellant in making various grievances to claim that the Respondent No. 3 in the matter of Allied Strips Limited and in another matter relating to Tirupati Infrastructure Private Limited where the Respondent No. 3 was Successful Resolution Applicant has delayed the Resolutions by seeking time for implementation. Appellant is claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Appellant s failure before CoC is apparent and well laid out when Affidavit of Resolution Professional is seen. The Resolution Plan of Respondent No. 3 approved by CoC is already pending before the Adjudicating Authority for consideration. While issuing notice in the present Appeal, this Court had passed interim order that the Adjudicating Authority may conduct hearing in IA 346/2020 but it shall not pass any order. As such, the orders on the Resolution Plan approved by the CoC are still pending before the Adjudicating Authority. Counsel for Respondent No. 2- CoC now taking wavering stand before us in Appeal is not issue for me to decide. The same does not give strength to the Appeal of the Appellant who makes out no case for us to interfere. Whatever decision CoC has taken with regard to the Resolution Plan of Respondent No. 3 will be the matter of consideration before the Adjudicating Authority in the Application pending for approval of the Resolution Plan. I do not wish to make obiter dicta statements and stress Adjudicating Authority while dealing with the Resolution Plan for approval. The Adjudicating Authority as well as this Tribunal with regard to approved Resolution Plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been contravened. That matter is not before us and only because the Appellant makes averments with regard to Resolution Plan in the matter of Allied Strips Limited , I cannot make any comments with regard to other proceedings which are not before us. 12. Observations made by me in this Judgment will not come in the way of Adjudicating Authority while dealing with Resolution Plan pending for approval before Adjudicating Authority. Similarly, they will not come in the way of adjudication of matters relating to other Resolution Plans in which Respondent No. 3 is said to be Successful Resolution Applicant. 13. For the above reasons, I pass the following order:- The Appeal is dismissed. No order as to costs. Interim order dated 29th July, 2020 will thus not survive. Adjudicating Authority is requested to urgently decide Application pending under Section 31 of the IBC. [Justice A.I.S. Cheema], The Officiating Chairperson JUDGMENT PER [PER; V.P. SINGH, MEMBER (T)] This Appeal emanates from the Impugned Order dated 3rd July 2020 passed by the Adjudicating Authority/National Company Law Tribunal, Ahmedabad Bench, Ahmedabad in IA No. 116 of 2020 filed in CP (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credibility as the Resolution Applicant in two matters, namely, Allied Strips Ltd and Tirupati Infra Projects Private Limited. Respondent No. 3 was declared Successful Resolution Applicant in the CIRP of the above said two Companies, but Respondent No. 3 has failed to fulfil its commitment leaving the Corporate Debtor and all other Stakeholders in the lurch. 9. The Appellant further contends that CIRP has expired on 18th February 2020. Therefore, unless appropriate orders are passed, the Appellant will be deprived of its remedy in law and a chance for the COC to consider its Resolution Plan, pending adjudication before the Adjudicating Authority. Respondent No 1's contention 10. Respondent No. 1/Resolution Professional submits that the Appellant was already informed that the Resolution Plan submitted on 21st October 2019 was non-compliant with the Insolvency and Bankruptcy Code 2016 as it was conditional/contingent. 11. After that, the Applicant/Appellant was requested to provide the revised Resolution Plan in compliance with the Code and Regulations thereunder to complete the CIRP in a time-bound manner. However, the Applicant/Appellant submitted the revised Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eat the very objective of the Code, as regards revival of the Corporate Debtor and maximisation of value but also lead the Corporate Debtor in the lurch and a helpless situation as at that stage, there would be no new Resolution Applicant and that the Corporate Debtor would then be forced into liquidation without any of its faults but only due to the callous approach of the Resolution Applicant backing out of this commitment midway. 14. Both the prospective Resolution Applicants participated in all the bidding rounds, but Respondent No. 3 was declared as the H1 bidder. 15. It is further submitted that before the start of the 16th COC meeting, the financial proposal of the Appellant was ₹ 8100 lakhs, and Respondent No. 3's offer was ₹ 8 411 lakhs. However, after the conclusion of the 16th COC meeting, the revised financial proposal of the Appellant was ₹ 8400 lakhs, and that of Respondent No. 3 was ₹ 9811 lakhs. Considering the same, the COC declared Respondent No. 3 as the H1 bidder. 16. The Resolution Professional and the members of the COC were aware and apprised that Respondent No. 3 has sought additional time in making certain payments in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant submitted only a few hours before the start of the 17th meeting. Such a Resolution Plan of the Appellant was also contingent/conditional (contrary to the requirements of the bid document /RFRP). The Resolution Plan amount was also less than Respondent No. 3. Due to these reasons, the COC then decided to submit the final Resolution Plan submitted by Respondent No. 3 to vote and approve. 23. The Appellant had submitted a revised Resolution Plan on 9th February 2020, immediately before the 17th meeting of COC, which was held on 10th February 2020, to consider COC, wherein the Appellant in the Resolution Plan amount to ₹ 90.39 crores. The COC at the 17th meeting has perused the Appellant's revised Resolution Plan and observed that the revised Resolution Plan so submitted is also conditional. The amount so offered a lesser than the amounts provided by Respondent No. 3. Thus, after the 17th COC meetings, the COC declared Respondent No. 3 as the H1 bidder. The resolution plan submitted by Respondent No. 3 was put to voting by the COC members. 24. The e-voting on the Resolution Plan submitted by Respondent No. 3 was decided to be kept open until 6 PM on 17th February ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t are incorrect, and there is no violation of Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for the Corporate Persons) Regulations 2016. 28. We have heard the argument of the learned Counsel for the parties and perused the record. 29. STATUTORY PROVISIONS 38. Mandatory contents of the resolution plan. [(1) The amount payable under a resolution plan (a) to the operational creditors shall be paid in priority over financial creditors; and (b) to the financial creditors, who have a right to vote under sub-section (2) of Section 21 and did not vote in favour of the resolution plan, shall be paid in priority over financial creditors who voted in favour of the Plan.] [(1-A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor.] [(1-B) A resolution plan shall include a statement giving details if the resolution applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any other resolution plan approved by the adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deliberations on the feasibility and viability of each resolution plan; and (c) vote on all such resolution plans simultaneously. (3-A) Where only one resolution plan is put to vote, it shall be considered approved if it receives requisite votes. (3-B) Where two or more resolution plans are put to vote simultaneously, the resolution plan, which receives the highest votes, but not less than requisite votes, shall be considered as approved: Provided that where two or more resolution plans receive equal votes, but not less than requisite votes, the committee shall approve any one of them, as per the tie-breaker formula announced before voting: Provided further that where none of the resolution plans receives requisite votes, the committee shall again vote on the resolution plan that received the highest votes, subject to the timelines under the Code. Illustration. The committee is voting on two resolution plans, namely, A and B, simultaneously. The voting outcome is as under: Voting outcome % of votes in favour of Status of approval Plan A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. [(9) A creditor, who is aggrieved by non-implementation of a resolution plan approved under sub-section (1) of Section 31, may apply to the adjudicating Authority for directions.] 40. Extension of the corporate insolvency resolution process period. (1) The committee may instruct the resolution professional to make an application to the Adjudicating Authority under Section 12 to extend the insolvency resolution process period. (2) The resolution professional shall, on receiving an instruction from the committee under this regulation, make an application to the Adjudicating Authority for such extension. [40-B. Filing of Forms. (1) The insolvency professional, interim resolution professional or resolution professional, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 resolution plan: 67 [Provided further that nothing in this clause shall apply to a resolution applicant where such Applicant is a financial entity and is not a related party to the corporate debtor. Explanation I. For the purposes of this proviso, the expression related party shall not include a financial entity, regulated by a financial sector regulator, if it is a financial creditor of the corporate debtor and is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares 68 [or completion of such transactions as may be prescribed,] prior to the insolvency commencement date. Explanation II. For the purposes of this clause, where a resolution applicant has an account, or an account of a corporate debtor under the management or control of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been invoked by the creditor and remains unpaid in full or part]; (i) 74[ is] subject to any disability, corresponding to clauses (a) to (h), under any law in a jurisdiction outside India; or (j) has a connected person not eligible under clauses (a) to (i). Explanation[I]. For the purposes of this clause, the expression connected person means (i) any person who is the promoter or in the management or control of the resolution applicant; or (ii) any person who shall be the promoter or in management or control of the business of the corporate debtor during the implementation of the resolution plan; or (iii) the holding company, subsidiary company, associate company or related party of a person referred to in clauses (i) and (ii): [Provided that nothing in clause (iii) of Explanation I shall apply to a resolution applicant where such Applicant is a financial entity and is not a related party of the corporate debtor: Provided further that the expression related party shall not include a financial entity, regulated by a financial sector regulator, if it is a financial creditor of the corporate debtor and is a related pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied 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 subsection (1) of Section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of Section 53 in the event of a liquidation of the corporate debtor. Explanation 1. For the removal of doubts, it is hereby clarified that a distribution in accordance with the provisions of this clause shall be fair and equitable to such creditors. Explanation 2. For the purposes of this clause, it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with the proviso to clause (c) of Section 29-A: Provided also that nothing in the second proviso shall be construed as extension of period for the purposes of the proviso to sub-section (3) of Section 12, and the corporate insolvency resolution process shall be completed within the period specified in that sub-section.] [Provided also that the eligibility criteria in Section 29-A as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (Ord. 6 of 2018) shall apply to the resolution applicant who has not submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018.] (5) The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the Applicant is considered: Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor. (6) The resolution professional shall submit the reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that CIRP commenced against the Corporate Debtor 'GPT Steel Industries Limited' on 2nd May 2019. During CIRP, the Appellant first submitted its Resolution Plan and EMD of rupees one crore on 1st October 2019. 31. After that, on 1st February 2020 Appellant wrote a letter to the RP informing him about disqualification and lack of credibility of R-3, alleging that R-3 had defaulted in implementing other Resolution Plans. Moreover, the Appellant has filed a copy of the order passed by the Adjudicating Authority in the case of Allied Strips. Since CIRP expired on 19th February 2020, the Appellant filed an Appeal against the order dated 18th April 2020 for the failure of Adjudicating Authority to exercise jurisdiction. By its order dated 19th February 2020, this Appellate Tribunal directed the Adjudicating Authority to pass a reasoned order first deciding the Application of the Appellant by considering the same in the right earnest and then approving or rejecting the Resolution Plan. 32. The Appellant contends that Respondent No. 3 has failed to fulfil its commitments in the matter of Allied strips. It has accepted that it has been unable to get the requisite funding from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuation the entire world is facing on account of the Covid 19 pandemic. Therefore, if there is some delay in implementing the Plan, it cannot be considered a failure in implementing the Resolution Plan, thereby making the Resolution Applicant ineligible for submission of the Resolution Plan under Regulation 38 (1B) of the CIRP Regulations. 37. The learned Counsel for the Appellant emphasised the reply and written submissions of Respondent No. 2, i.e. Committee of Creditors. 38. Respondent No. 2, in its reply and written submission, has stated that; a. The respondent number 3 belongs to the GP global group with Gulf petroleum FZC ( parent company ), an entity incorporated under the laws of UAE, being the parent company of the respondent number 3. The COC submits that it is a well-known fact that the parent company of respondent number 3 are under severe financial stress. Further, it has been widely reported that the covert 19 pandemics has adversely affected respondent number 3 and the parent company. It is essential to highlight that the parent company has extended a corporate guarantee which serves as one of the primary sources of funding for the proposed acquisition b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. After approval of the Resolution Plan by the COC Affidavit is filed on behalf of the COC wherein it is stated that since the Corporate Insolvency Resolution Process was scheduled to be completed on 19th February 2020, the COC did not have sufficient opportunity to consider the specific details of the revised Resolution Plan submitted by the Appellant. Therefore, if further additional time for completion of the Corporate Insolvency Resolution Process of the Corporate Debtor is provided, then the COC would be in a position to review both the Resolution Plans submitted by the Appellant and Respondent No. 3 and under its commercial wisdom, then finalise the Resolution Plan that would serve to maximise the commercial interests of the Corporate Debtor. 40. It is essential to mention that the validity of the actions of the CoC depends on the approval by the requisite percentage of voting share in support of that action. Section 28 of the Insolvency and Bankruptcy Code 2016 provides the required percentage of vote share for approval by the Committee of Creditors. For example, approval of Resolution Plan under Section 30 (4) mandates 66% of the voting share of the Financial Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OC, has filed the Affidavit dated 6th October 2020 on behalf of COC stating that if further additional time for completion of Corporate Insolvency Resolution Process of the Corporate Debtor is given, then COC would be in a position to review both the Resolution Plan submitted by the Appellant and Respondent No. 3. In its commercial wisdom, it would finalise the Resolution Plan that would serve to maximise the commercial interest of the Corporate Debtor. 45. Hon'ble Supreme Court in case of Arcelormittal India (P) Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1 : 2018 SCC OnLine SC 1733 at page 87 has held; 82. Take the next stage under Section 30. A Resolution Professional has presented a resolution plan to the Committee of Creditors for its approval, but the Committee of Creditors does not approve such Plan after considering its feasibility and viability, as the requisite vote of not less than 66% of the voting share of the financial creditors is not obtained. As has been mentioned hereinabove, the first proviso to Section 30(4) furnishes the answer, which is that all that can happen at this stage is to require the Resolution Professional to invite a fresh resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X
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