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TMI Blog2021 (8) TMI 1400X X X X Extracts X X X X X X X X Extracts X X X X ..... ority 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 Colleague Member, I am dismissing the Appeal for reasons which I am proceeding to record in brief as follows. 2. Very briefly stated, the record shows, that the Appellant with Respondent No. 3 was prospective Resolution Applicant and the Resolution Plan tendered by the Appellant and Respondent No. 3- 'G P Global Energy Pvt. Ltd.' were from time to time placed before the Committee of Creditors (CoC) and CoC d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 10.02.2020, the respondent No. 3 was declared as H1 bidder and the same was put to voting by the COC member, as is reflected from the minute of 17th COC meeting (Annexure-A). Thus the resolution plan of the applicant was/ is non-compliant of CIRP Regulation on the date of voting by COC member. 23. It is also matter of record that resolution plan of R-3 was approved by a vote of approximatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 due process of bidding and evaluation by the CoC as regards the feasibility and viability of the Resolution Plan. Such midway exit condition is not only contrary to the Code but now is a settled law held by Hon'ble Supreme Court in M/s Maharashtra Seamless Limited v. Padmanabhan Venkatesh & Ors. (Civil Appeal No. 4242 of 2019). The Hon'ble Supreme Court in the said case has inter alia held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicating 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 could be understood by the application dated December 05, 2019 filed by the Respondent No. 3 with the Hon'ble Tribunal, New Delhi in the matter of Allied Strips Limited wherein Respondent No. 3 has, on page 7, paragraph 16, explicitly stated that Respondent No. 3 is committed to pay the balance amount regardless of the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 claiming that the Respondent No. 3 was ineligible and Resolution Plan of Respondent No. 3 could not have been placed before the CoC. Regulation 38 (1-B) reads as under:- "38. Mandatory contents of the resolution plan.- ..........(1-B) A resolution plan shall includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 have to act within given sphere as has been found by the Hon'ble Supreme Court in the matter of "Pratap Technocrats (P) Ltd. & Ors. vs. Monitoring Committee of Reliance Infratel Limited & Anr."- [Civil Appeal No. 676 of 2021- Judgment dated 10th Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore 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 (IB) No. 157/NCLT/AHM/2018, whereby the Adjudicating Authority has rejected the Application under Section 60(5) and 235A of the Insolvency and Bankruptcy Code, 2016 (in short 'I&B Code'). The original status of the Parties in the Company Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid 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 Resolution Plan during 16th COC meetings held on 29th January 2020, i.e. almost three months after submitting the 1st Resolution Plan. Till the 16th COC meeting, the Appellant had submitted seven Resolution Plans, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 Rs. 8100 lakhs, and Respondent No. 3's offer was Rs. 8 411 lakhs. However, after the conclusion of the 16th COC meeting, the revised financial proposal of the Appellant was Rs. 8400 lakhs, and that of Respondent No. 3 was Rs. 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 the matter of 'Allied Strips Ltd', wherein Respondent No. 3 was declared as Successful Resolution Applicant. 17. After receiving the complaint from the Appellant through its mail of 1st February 2020, Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements 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 Rs. 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 2020. However, on the last date of the voting, few members of the COC, constituting the majority of the voting shares of the COC members, reques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 adjudicating Authority at any time in the past.] (2) A resolution plan shall provide: (a) the term of the Plan and its implementation schedule; (b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Plan B 1 55 60 No Plan is approved, as neither of the Plans received requisite votes. The committee shall vote again on Plan B, which received the higher votes, subject to the timelines under the Code. 2 70 75 Plan B is approved, as it received higher votes, which is not less than requisite votes. 3 75 75 The committee shall approve either P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the case may be, shall file the Forms, along with the enclosures thereto, on an electronic platform of the Board, as per the timelines stipulated against each Form, in the table below- TABLE Form No. Period covered and Scope To be filed by Timeline (1) (2) (3) (4) CIRP 5 From Issue of RFRP till completion of CIRP: This includes updated list of claimants; updated CoC; details of the resolution applicants; details of resolution plans received; details of approval or rejection of resolution plans by CoC; application filed with AA for approval of resolution plan; details of resolution plan appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 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 such person or of whom such person is a promoter, classified as nonperforming asset and such account was acquired pursuant to a prior resolution plan approved under this Code, then, the provisions of this clause shall not apply to such resolution applicant for a period of three years from the date of approval of such resolution plan by the Adjudicating Authority under this Code;] [(d) has been convicted for any offence punishable with imprisonment- (i) for two years or more under any Act specified under the Twelfth Schedule; or (ii) for seven years or more under any other law for the time being in force: Provided that this clause shall not apply to a person after the expiry of a period of two years from the date of his release from imprisonment: Provided further that this clause shall not apply in relation to a connected person referred to in clause (iii) of Explanation I;] (e) is disqualified to act as a director under the Compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 77[or completion of such transactions as may be prescribed,] prior to the insolvency commencement date;] [Explanation II.-For the purposes of this section, "financial entity" shall mean the following entities which meet such criteria or conditions as the Central Government may, in consultation with the financial sector regulator, notify in this behalf, namely- (a) a scheduled bank; (b) any entity regulated by a foreign central bank or a securities market regulator or other financial sector regulator of a jurisdiction outside India which jurisdiction is compliant with the Financial Action Task Force Standards and is a signatory to the International Organisation of Securities Commissions Multilateral Memorandum of Understanding; (c) any investment vehicle, registered foreign institutional investor, registered foreign portfolio investor or a foreign venture capital in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent) Act, 2019, the provisions of this clause shall also apply to the corporate insolvency resolution process of a corporate debtor- (i) where a resolution plan has not been approved or rejected by the Adjudicating Authority; (ii) where an appeal has been preferred under Section 61 or Section 62 or such an appeal is not time barred under any provision of law for the time being in force; or (iii) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;] (c) provides for the management of the affairs of the corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. [Explanation.-For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority. 31. Approval of resolution plan.- (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, 87[including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed,] guarantors and other stakeholders involved in the resolution plan: [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.] (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the Bank of Baroda, and therefore payments could not be made. The Appellant further contends that the failure to secure financing of the Resolution Plan highlights the incapacity of Respondent No. 3 in fulfilling its promise. It is further claimed that R- 3 suppressed material information about the non-implementation of its Plan of Tirupati Infrastructure Private Limited. 33. It is pertinent to mention that delay in implementation of Resolution Plan cannot be considered the same as failure in implementing the Plan. The ineligibility as specified under Regulation 38 (1B) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 establishes 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." 34. Therefore, delay in implementation of the Resolution Plan cannot be considered as a ground for ineligibility of the Resolution Applicant. 35. It is also important to point out Resolution Professional, in its reply, has stated that Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the proposed acquisition by respondent number 3. b. The Appellant had been participating in the corporate insolvency resolution process of the corporate debtor, and further, the COC of the corporate debtor received the revised resolution plan of the Appellant on 18th February 2020, having an enhanced value, which was also better than that offered by respondent number 3. However, since the voting process for the resolution plan of the corporate debtor had already commenced, COC was unable to consider the revised resolution plan submitted by the Appellant. Further, it is hereby acknowledged that the revised resolution plan submitted by the Appellant was within the prescribed insolvency resolution period of 270 days. However, the COC hereby submits that since corporate insolvency resolution process was scheduled to be completed on 19th February, 2020, the COC did not have sufficient opportunity to consider that the specific details of the revised resolution plan submitted by the Appellant. The Appellant has been before the Adjudicating Authority prior to the Respondent number 3 being approved by the corporate debtor. c. The COC submits that should this Hon'ble Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors, after considering its feasibility and viability, the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in Subsection (1) of Section 53, including the priority in value of the security interest of a secured creditor and such other requirements as may be prescribed by the Board. In addition, proviso to Sub-section (4) of Section 30 provides that COC shall not approve the Resolution Plan where the Resolution Applicant is ineligible under Section 29 A of the Code. 41. It is pertinent to mention that the third proviso to Sub-section (4 ) to Section 30 further provides that nothing in the second proviso shall be construed as an extension of the period under the proviso to Sub-section (3) of Section 12. The Corporate Insolvency Resolution Process shall be completed within the period specified in the said section. Further, second proviso to Subsection (4) provides that where the Resolution Applicant referred to in the first proviso is ineligible under Sub-clause (c) of Section 29 A, the Resolution Applicant shall be allowed by the COC such period, not exceeding 30 days, to make payment of overdue amounts under the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-limits specified where no other resolution plan is available with him. It is clear that at this stage again no application before the adjudicating Authority could be entertained as there is no vested right or fundamental right in the resolution applicant to have its resolution plan approved, and as no adjudication has yet taken place." (Emphasis supplied) 46. Based on the above case law, it is clear that the Unsuccessful Resolution Applicant has no vested right or fundamental right to have its Resolution Plan approved since no adjudication has yet taken place. 47. The submission of Mr S.K. Jha, on behalf of the COC, is without any approval of the Committee of Creditors. Any individual member cannot submit any proposal for and on behalf of the Committee of Creditors without its approval. Therefore, submission by Mr S K Jha, in the capacity of an authorised representative of COC, cannot be treated as valid for want of approval by the Committee of Creditors. In the instant case after approval of the Resolution Plan, COC is a non-existent body. Therefore, any submission on behalf of COC in the capacity of an authorised representative cannot be treated as valid submission of COC. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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