TMI Blog2024 (2) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... sentatives, who were present during the meeting had mentioned that they had not assailed the termination of Lease Agreement till the start of the CIRP date. Also, that the Resolution Professional was unable to take any action in as much as the Termination of the Lease Agreement was more than 10 months before the CIRP and BRDCL had informed of not changing its decision through its letter dated 15.03.2023. Merely because there were No Assets and no option for revival of the Corporate Debtor an unanimous 100% decision was taken by the Committee of Creditors in its commercial wisdom to liquidate the Corporate Debtor. The commercial wisdom of the Committee of Creditors is to be respected subject to the limited judicial review, that was available to the Adjudicating Authority / Tribunal. Also that the commercial wisdom of Committee of Creditors is beyond the ambit of challenge, pertaining to the decision taken for liquidation of the Corporate Debtor being essentially a business decision based upon the commercial wisdom and keeping in view the ingredients of Section 33(2) of the I B Code, 2016 and the explanation thereto. In law, when the Resolution Plan is in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BC)/46/KOB/2022 passed by the Adjudicating Authority/NCLT, Kochi Bench. 2. Earlier, while passing the impugned order in IA (IBC)/462/DOB/2023 in CP(IBC)/46/KOB/2022 the Adjudicating Authority/Kochi Bank among other things at paragraph no. 3 to 5:- 3. The Hon ble Supreme Court in the matter of K.Shashidhar Versus Indian Overseas Bank Ors. In Civil Appeal No. 10673 of 2018 has held that the commercial decision of CoC is non-justifiable. In this case, it is seen that CoC with a 100% majority has passed the resolution seeking liquidation of the Corporate Debtor. 4.Moreover, Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 mandates that the Adjudicating Authority shall pass an order of liquidation where no resolution plan is received before the expiry of the CIRP. Sub-Section (2) thereof requires the Adjudicating Authority to pass the liquidation order where the Resolution Professional intimates to the Adjudicating Authority the decision of the Committee of Creditors approved by not less than 66% of the voting share to liquidate the Corporate Debtor. 5. We have heard the Learned Counsel for the applicant and perused the materials available on record. On 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an opinion was formed by the Committee of Creditors , just because of termination of Lease , by Bekal/Govt. of Kerala Undertaking. 9. Indeed, it is projected on the side of the Appellants, that nothing would have been lost, if such a decision was backed by an evaluation and assessment , after issuing an Expression of Interest . In fact, that exercise, would have cost less than the fee paid , to the Resolution Professional and that would have really brought before the Committee of Creditors , on record, what is the view of man in Business ? 10. On behalf of the Appellants it is pointed out that the view taken by the Resolution Professional and the Committee of Creditors are premptive , arbitrary , casual , and disregards the value created and value potential in store. Furthermore, the Asset maximisation , cannot be achieved by putting the Corporate Debtor to Liquidation , according to the whims and fancies of the Resolution Professional and the Committee of Creditors . 11. The Learned Practicing Company Secretary for the Appellants refers to the decision of the Hon ble Supreme Court in K. Rajkumar v. Nagarajan and Ors., reported in 2022 4 Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equested to consider their interest in submitting a Resolution Plan . 16. The Learned Practicing Company Secretary appearing for the Appellants refers to the decision of the Hon ble Supreme Court in Hari Babu Thota v. Shree Aashraya Infra-con Limited reported in 2023 SCC online SC 1642 wherein at paragraph 16 is observed as under:- 16. Under the heading exemption of Micro, Small and Medium Enterprises from Section 29-A the discussion begins. It is referred to the ILC report of March, 2018 and its finding that Micro, Small and Medium Enterprises form the foundation of the economy and are key drivers of employment, production, economic growth, entrepreneurship, and financial inclusion. The ILC report 2018 exempted these industries from Section 29-A (c) and (h) and the rationale for the same was contained in para 27.4 of the report which reads as under: 27.4 Regarding the first issue, the Code is clear that default of INR one lakh or above triggers the right of a financial creditor or an operational creditor to file for insolvency. Thus, the financial creditor or operational creditors of MSMEs may take it to insolvency under the Code. However, given that MSMEs are the bed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Regulation 39(1A)(b), the CoC retain its jurisdiction to negotiate with one or other Resolution Applicants, or other Resolution Applicants, or to annul the Resolution Process and embark on to re-issue RFRP. Regulation 39(1A) cannot be read as a fetter on the powers of the CoC to discuss and deliberate and take further steps of negotiations with the Resolution Applicants, which resolutions are received after completion of challenge mechanism. 19. It is represented on behalf of the Appellants that in the 4th CoC meeting that took place on 11.7.2023 and the 7th CoC meeting held on 21.09.2023, the Forensic Audit had not revealed the commission of any Fraud on the part of the promoters and further Rs. 215 crores, was earlier invested in this project by the promoters . 20. According to the Appellants the State Bank of India was settled and they withdrew the Section 7 Application filed under the I B Code, 2016. Also, that Dhanalaxmi Bank had approved the One Time Settlement and further the Union Bank of India, is considering the One Time Settlement and on 2.1.2024 Rs. 1,25,00,000/- was given to Union Bank of India . 21. In so far as the Termination of the Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... homas V. Mr. Madhugiri Venkatarayappa Sudarshan and Anr. Wherein at paragraph 48 it is observed as under:- Para 48 One cannot remain oblivious of the candid fact that the I B Code, 2016, does not envisage that the Adjudicating Authority / Tribunal, ought to provide a Hearing to the Promoter / Corporate Debtor of the Company, at the time of passing of an Order for Liquidation . 26. The Learned Practicing Company Secretary appearing for the Appellants comes out with an argument that when Resolution Plans are under consideration, whether to accept a Resolution Plan or not is a business decision, falling within the exclusive ambit of the Committee of Creditors and it is only when no Resolution Plan is found to be worthy of an approval, the Committee of Creditors may approve the liquidation. Indeed, the failure to issue the Expression of Interest is a step before the exercise of commercial wisdom, to approve or reject the Resolution Plans in the table. 27. The Learned Practicing Company Secretary appearing for the Appellants while summing up points out that the whole process was vitiated, compromise and material irregularity and is writ large as per the records an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the renewal of the lease agreement. However the Beckal Tourism, who has been owner of the lease property, has rejected the proposal of renewal by the company RP reiterated that no major changes in CIRP process, unless express of interest from the parent company and still no fresh communication of the Beckal Tourism has been received regarding the continuation of running with the lease property, which was the main and only asset of the company. 33. According to the Respondent No. 3 and 4 in the 7th Committee of Creditors meeting it was unanimously resolved by the Committee of Creditors to initiate the Liquidation Proceedings in respect of the Corporate Debtor and further that Mr. CA Rajmohan was resolved to be appointed as the Liquidator in the said meeting. 34. On behalf of R3 and R4, it is brought to the notice of this Tribunal that (IBC)/462/DOB/2023 in CP(IBC)/46/KOB/2022 was filed by the Resolution Professional before the Adjudicating Authority/Tribunal for an initiation of Liquidation against the Corporate Debtor. Moreover, the Corporate Debtor had no Assets and the Committee of Creditors had unanimously resolved, while exercising its commercial wisdom, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that 1st Appellant, who has a 44% stake in the Corporate Debtor had expressed interest for submission of a Resolution Plan but since Section 7 petition was pending against the first Appellant and also taking note of the fact that the Dhanalaxmi Bank had classified the 1st Appellant as an NPA in its Books of Accounts, the requirements of Section 29A of the I B Code were not complied with. 41. Moreover, there were genuine endeavours to revive the Corporate Debtor by seeking to assail the termination of the Lease Agreement but the representatives, of the Corporate Debtor who have present during the meeting had stated that they had not challenged the termination of the Lease Agreement till the commencement of Corporate Insolvency Resolution Process. Also, that the Resolution Professional had reiterated that he was unable to take any action as the termination of the Lease Agreement, which was more than 10 months before the CIRP and also that BRDCL had informed of not changing its decision, as per letter dated 15.03.2023. 42. It is represented on behalf of R3 and R4 that there were no assets and no option was there for revival of the Corporate Debtor a unanimous decision 100% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the stated processes within the timelines prescribed by the IBC. It has been held that there is an intrinsic assumption, that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. A reference in this respect could be make to the judgements of this Court in the cases of K.Sashidhar v. Indian Overseas Bank and Others, Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Others, Maharashtra Padmanabhan Venkatesh Seamless Limited v. and Others, Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Anr., and Jaypee Kensington Boulevard Apartments Welfare Association and Ors. v. NBCC (India) Ltd. and Ors. 46. The Learned Counsel for R3, R4 relies on the decision in Ramakrishna Forges Ltd. V. Ravindra Loonkar, Resolution of ACIL Ltd. Anr., reported in 2023 SCC online SC 1490 wherein at paragraph 30 it is observed as under:- At this juncture, it also cannot be lost sight of that it is for the FC(s) who c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved to liquidate the Corporate Debtor and, therefore, the instant Appeal is to be dismissed. Discussions 53. Before the Adjudicating Authority, the Resolution Professional / Petitioner had filed IA(IBC)462/KOB/2023 in CP(IBC)/46/KOB/2022 (under Section 33(1)(a) and 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of NCLT Rules, 2016,2013). Seeking to order liquidation of the Corporate Debtor, based on the unanimous decision of the Committee of Creditors with 100% voting rights in the 7th meeting that took place on 21.10.2023. 54. According to the Resolution Professional of Green Gateway Leisure Ltd. / Petitioner (in IA(IBC)462/KOB/2023 in CP(IBC)/46/KOB/2022) the Corporate Debtor was admitted into CIRP through an order of an Adjudicating Authority / Tribunal on 25.01.2023 in CP(IBC)/46/KOB/2022). Admittedly, the Adjudicating Authority/Tribunal was pleased to extend the Corporate Insolvency Resolution Process from 26.7.2022 to 25.10.2023(for a period of 90 days). 55. The Resolution Professional in his IA(IBC)462/KOB/2023 in CP(IBC)/46/KOB/2022) was appointed as the Resolution Professional of Green Gateway Leisure Ltd. / Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company for Liquidation . 61. Be it noted, that the Liquidation process gets initiated as per Section 33 of the I B Code, 2016, either (i) No Resolution Plan was submitted within the time prescribed under Section 12 of the I B Code, 2016 or a Resolution Plan was rejected by the Adjudicating Authority/Tribunal (ii) where the Resolution Professional, prior to the affirmation of the Resolution Plan, intimates the Adjudicating Authority / Tribunal of the decision of the Committee of Creditors to liquidate the Corporate Debtor or (iii) where the Resolution Plan, approved by the Adjudicating Authority/Tribunal was violated by the concerned Corporate Debtor. 62. It must be borne in mind that any person other than the Corporate Debtor whose interest are prejudicially affected by such a violation, may apply to the Adjudicating Authority / Tribunal who may then, pass an Order of Liquidation , based on such Application , as per the decision of the Hon ble Supreme Court in the matter of Arcelormittal India Pvt. Ltd. v. Satish Kumar Gupta reported in AIR 2018 SC 5646. 63. At this stage, it is worthwhile to refer to the 7th Committee of Creditors meeting that took place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ou in Form B as stated above. We have made extensive enquiries during revenue recovery proceedings for recovery of the dues to BRDC, for proceeding against other assets of the Corporate Debtor but have not been able to identify any such assets. In case, if individual s personal guarantee collateral security having been furnished for availing the loan by the Corporate Debtor, it is requested that the dues amounting to Rs. 17,17, 60,711/- as arrears of lease rent etc. may also be recovered from such securities, as it is govt. dues and calls for priority etc. 66. Merely because there were No Assets and no option for revival of the Corporate Debtor an unanimous 100% decision was taken by the Committee of Creditors in its commercial wisdom to liquidate the Corporate Debtor. 67. It is not out of place for this Tribunal to make a pertinent mention that the commercial wisdom can be exercised only when all the relevant information is available before the Committee of Creditors and is duly discussed / deliberated by all its members, who have a direct and substantial interest in the survival of the Corporate Debtor and in the whole Corporate Insolvency Resolution Process . Also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 1.3.2021). 72. More importantly in the decision in the Pravin Kumar Nand Kumar V. VSL Securities (P) Ltd. (vide CA 1 of 2020 dated 09.06.2020 NCLAT, New Delhi) (unreported decision) it is held that the decision of the Committee of Creditors recommending Liquidation of the Corporate Debtor after proper evaluation of the Assets and Liabilities of the Corporate Debtor, with no Resolution Plan forthcoming, would be a business decision which come within the purview of the commercial wisdom of Committee of Creditors and was not amenable to Judicial Review. 73. As far as the present case is concerned, commercial decision taken by the Committee of Creditors was in fulfilment of the relevant provisions of the I B Code, 2016 and Regulations, especially in the teeth of Regulation 40D of the IBBI Corporate Persons Regulations, 2016. 74. The I B Code, 2016 does not any way spell out any such opportunity being provided to the Appellants (Promoters/Shareholders), at the time of passing of the Liquidation order and they don t have any semblance of any legal right or vested right to oppose the Liquidation order before the Adjudicating Authority/Tribunal in the considere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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