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TMI Blog2024 (4) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to as 'Impugned Order') passed by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench, Court-II) in I.A. No. 358 of 2020 in CP (IB) 602 of 2018. By the impugned order, the Adjudicating Authority allowed the I.A. No. 358 of 2020 filed by the Resolution Professional - Respondent No. 2 approving the resolution plan of Respondent No. 5/Sudeep Dasani-Successful Resolution Applicant in respect of the Corporate Debtor-M/s Care Office Equipment Ltd. Aggrieved by this impugned order, the present appeal has been preferred by the Appellants. 2. The brief facts of the case which are relevant to be noticed for deciding this case are as follows:- The Corporate Debtor- M/s Care Office Equipment Ltd was admitted into Corporate Insolvency Resolution Process ('CIRP' in short) on 29.05.2019 following a Section 9 application filed by an operational creditor. The Resolution Professional ('RP' in short) constituted the Committee of Creditors ('CoC' in short). Form G was published and EOI invited on 14.08.2019. The CoC was reconstituted on 21.11.2019 comprising of four members namely, SBI (26.37%), Bank of India (56.82%), Canara Bank (16.50%) and American Express ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operation and implementation of the Impugned Order and for remanding IA No.358 of 2020 for consideration afresh. The Hon'ble Gujarat High Court disposed of the CA No. 26669 of 2022 by allowing the Appellant to approach this Tribunal to seek their remedies. The Appellant has preferred the present appeal against the Impugned Order passed by the Adjudicating Authority dated 20.12.2022. 3. Ms. Purti Gupta and Ms. Henna George the Learned Counsels appearing for the Appellants submitted that the Appellants had raised serious objections to the resolution plan of the SRA but their objections were completely overlooked by the Adjudicating Authority while approving the resolution plan without recording proper reasoning in the impugned order. This resulted in violation of the principles of natural justice. In support of their contentions, reliance has been placed on the judgment of the Hon'ble Apex Court in Kranti Associates Pvt Ltd Vs Masood Ahmed Khan (2010) 9 SCC 496 in which it has been held that reasons must be recorded by a court of law in support of its conclusion to serve the wider principle of natural justice and for reasons of transparency. 4. Submission was also pressed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acity as personal guarantors they had a critical stake in the resolution process of the Corporate Debtor. It was also pointed out that the RP had deliberately not provided them with copies of the valuation reports though they were entitled to receive the same. It was pressed strongly that the resolution plan has been approved at a highly undervalued and throw-away price due to anomalous valuation reports and yet the RP chose to ignore the same and did not seek the opinion of the third valuer though the circumstances so warranted. 8. The resolution plan as approved by the Adjudicating Authority is contrary to the provision of law and contrary to the scheme of Section 30(2)(e) of the IBC and hence the resolution plan is liable to be recalled in the interest of justice. 9. Rebutting the arguments made by the Appellants, Shri Krishnendu Datta, Learned Senior Counsel appeared for the SRA, Ms. Honey Satpal, Learned Counsel appeared for the RP and Shri Ashish Rana appeared for Respondents No. 6-8. Since their arguments and contentions overlapped, for reasons of convenience the same have been captured conjointly. It was contended that the impugned order at para 13 has recorded in details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under IBC. 12. Rebutting the imaginary assumption of the Appellants that the SRA did not intend to keep the Corporate Debtor as a going concern, it was submitted that Clause 7 of the resolution plan clearly stipulated the future business plan by the new management. It was also pointed out that SRA has successfully implemented the resolution plan and the objections of the Appellant on the capability of SRA to implement the plan does not hold good. It has also been pointed out that when Sudeep Dasani submitted the resolution plan on 20.01.2020 it was clearly mentioned that the plan was being submitted by Sudeep Dasani acting in joint concern. The CoC in the 6th meeting had asked Sudeep Dasani to submit the details of his associates which was complied with by him while submitting the revised resolution plan dated 19.02.2020. The RP during the CIRP also conducted requisite verification and necessary compliance under Section 29A of the IBC of all the persons acting in the joint concern. 13. It was emphatically asserted that the Adjudicating Authority had examined the contents of the resolution plan of the SRA which had been approved by the CoC on 26.02.2020 with 99.69% vote share. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.02.2020. Thus, the CoC did not have the full picture of the valuation reports at the time of considering these reports. The present is also a case of gross under-valuation since it did not consider the receivables and claims lodged against Dell which was itself valued at Rs.40.69 cr. The valuers have not given any reasons for treating the receivables from Dell at Rs. Nil and Rs.57.55 lakhs and not provided any reasons either as to why the recovery from Dell was not considered at all. Apprehension was expressed that recovery from Dell has been withheld with a view to make recovery in the future for the benefit of the SRA. 17. It is the counter contention of the Respondents that the RP had conducted the valuation exercise of the Corporate Debtor in terms of Regulations 27 and 35 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as 'CIRP Regulations') and hence the allegations of anomaly in the valuation reports as raised by the Appellant lack credulity. Further it is the CoC which had considered in details the valuation reports before deciding not to appoint the third valuer and hence the RP could not have interfered in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation reports to cause an undue gain or undue loss to itself or any other person and comply with the requirements under sub-section (2) of section 29." 19. Given this backdrop of relevant Regulations, we may now look at the Minutes of the CoC meetings where the valuation reports were considered. The 6th CoC meeting and the 7th CoC meeting have recorded the discussion on the valuation reports as follows: 6th CoC Meeting on 03.02.2020 "Item 5) Discussion on valuation Report of Stock: Resolution Professional placed all valuation reports before COC and discussed. It was decided by the COC to re-look the reports where there is a big differences in both set of valuers. Third set of valuers to be appointed to value the assets of the CD, if required." 7th CoC Meeting on 13.02.2020 "4) Discussion during meeting: * Resolution Professional placed all valuation reports before COC and discussed." ( Emphasis supplied ) 20. These discussions and deliberations were further clarified and corroborated by submission of an affidavit before the Adjudicating Authority on 01.09.2022 by the CoC on the directions of the Adjudicating Authority on 26.08.2022 which is as reproduced be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppointed only if there was gulf of a difference in the stock valuation figures estimated by the two appointed valuers, while the 7th CoC meeting after noticing the valuation reports of the two valuers decided against the appointment of the third valuer. This position was later confirmed by the CoC in their affidavit dated 01.09.2022 filed before the Adjudicating Authority. 22. It is an admitted position that the valuation report was not initially given to the Appellants by the RP on the ground that as per CIRP Regulation 35(2) such valuation reports constituted confidential documents which is required to be presented only to CoC members and the Adjudicating Authority. However, it is also an undisputed fact that the Appellant was provided with the valuation report on the directions of the Adjudicating Authority in its order dated 30.03.2022 in IA No. 434 of 2020 to provide the same subject to confidentiality undertaking as placed at page 1432-1442 of Appeal Paper Book ('APB' in short). This compliance has been noticed by the Adjudicating Authority in its order dated 26.08.2022 as placed at pages 1384-1385 of APB. Having already received the valuation reports, the Appellants cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontinue with the financial creditors. It was emphasised that this provision in the resolution plan cannot be faulted as it is in consonance with the ratio laid down in the judgement of the Hon'ble Supreme Court in Lalit Kumar Jain Vs UOI and Ors. (2021) 9 SCC 321. 27. When we look at the judgement of this Tribunal in KV Jayprakash vs SBI in CA (AT)(Ins) No. 362 of 2022, we notice that the facts of the case are clearly distinguishable in that it dealt with applicability of moratorium under IBC acting as a bar to proceed against the personal guarantor during liquidation process. More significantly, we find that this judgement has extensively relied on the judgement of the Hon'ble Apex Court in Lalit Kumar Jain Vs UOI and Ors (2021) 9 SCC 321 which is as extracted hereunder: "76. Thus, the view taken by the Hon'ble Apex Court is that the approval of a resolution plan does not ipso facto discharge a personal guarantor of a corporate debtor of her or his liabilities under the contract of guarantee and it will not discharge or release the Principal Debtor from the debt owed by it to its creditor by an involuntary process i.e. by operation of law, or due to liquidation or insolvency pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of law or due to insolvency proceedings or liquidation does not absolve the guarantor of his liability which arises out of an independent contract. There is no specific bar under the IBC that a creditor cannot claim its remaining debt from the guarantor which has not been recovered from the Corporate Debtor. Further, the resolution plan at Clause 12 which is nomenclated as 'Terms of the Resolution Plan' deals in Part-III thereof with "Extinguishment of Claims/Rights" which stipulates that the guarantors shall not exercise any subrogation rights in respect of the guarantee. Thus, to answer the second issue, we are of the considered opinion that when the CoC in its wisdom has approved the resolution plan which provided for the continued rights of the Financial Creditor against the personal guarantor and did away with the subrogation rights of the personal guarantors, the contention of the Appellant that the liability of the personal guarantors should stand extinguished, not being in sync with the commercial wisdom of the CoC, is clearly devoid of merit. 30. This brings us to the third major allegation raised by the Appellants that the SRA did not intend to keep the Corporate Debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociates as co-applicants, there was nothing irregular in the submission of resolution plan by the SRA along with associates. All that the RP was required to do in such circumstances was to check the eligibility of the associates and this prescriptive requirement of Section 29A of IBC was complied with by the RP. To field our response to the third issue raised by the Appellant, we therefore hold that there is no irregularity in the conclusion of the Adjudicating Authority that the RP had carried out the verification exercise in terms of Section 29A of the IBC. 31. This brings us to the last issue for our consideration as to whether the resolution plan was within the contours of Section 30(2) of the IBC in that it did not contravene the provisions of any law for the time being in force and that no material irregularity was committed by the RP in the CIRP process. 32. The question, which needs to be answered is as to whether the Resolution Plan submitted, which was approved by the Adjudicating Authority, is in compliance of provisions of Section 30(2) of IBC. It is brought out by the SRA that when the RP moved IA 358 of 2020 before the Adjudicating Authority for approval of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied, approve the Resolution Plan." 34. The extent of judicial review of resolution plan approved by the CoC in its commercial wisdom is very limited. The Hon'ble Supreme Court in Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta and Ors. (2020) 8 SCC 531 and in K. Sashidhar v. Indian Overseas Bank (2019) 12 SCC 150 and in a catena of other judgments has laid down that commercial wisdom of the CoC has to be given paramount importance and limited jurisdiction has been provided to interfere in the approval of the plan by the Adjudicating Authority or the Appellate Tribunal, which is to be exercised only when the Plan is not in compliance with statutory provisions of Section 30(2) of IBC. The law is thus well settled that commercial wisdom of the CoC approving the Plan cannot be interfered and it can be interfered only when there is statutory non-compliance, i.e., noncompliance of Section 30(2). The Adjudicating Authority has duly analysed the contents of the resolution plan of the SRA which has been approved by the CoC on 26.02.2020 with 99.69% vote share. Furthermore, in the present case, no grounds have been made that resolution plan approved by the CoC and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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