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TMI Blog2025 (5) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... he Resolution Plan of Evonith Holding Pte Limited ("EHPL") by the Committee of Creditors ("CoC") of Topworth Urja & Metals Limited ("Corporate Debtor") under the Corporate Insolvency Resolution Process ("CIRP"). Background: 2. This Tribunal vide order dated 12.08.2022, admitted the Corporate Debtor into Corporate Insolvency Resolution Process ("CIRP') under Section 7 of the Code, basis the petition filed by Bank of Baroda and Mr. Alok Saksena was appointed as the Interim Resolution Professional ("IRP") vide the same admission order. The Respondent No. 1 was appointed as Resolution Professional ("RP") of the Corporate debtor unanimously in the 2nd CoC meeting held on 20.02.2023 which was confirmed by this Tribunal vide order dated 10.04.2023. 2.1. On admission to CIRP, the IRP issued a public announcement dated 15.08.2022, in English newspaper namely The Financial Express (English & All India Edition), in Marathi newspaper namely Navrashtra (Marathi & Maharashtra Edition) and Hindi newspaper namely Navbharat (Hindi & Maharashtra Edition) informing the initiation of the CIRP of the Corporate Debtor and inviting claims from the creditors of the Corporate Debtor. 2.2. The IRP h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant submits that on 04.08.2023, the Applicant and Respondent Nos. 1 & 2 had scheduled a meeting for carrying out a bidding amongst the Resolution Application and all the PRA were to submit their bid and the bid with the highest offer was the benchmark. In case any other bidder wishes to improve its offer, they had to improve it by Rs. 5 Crores on Net Present Value ("NPV") basis over and above the benchmark. The applicant also participated in the bidding process of which 11 rounds were complete, however since there were pending negotiations and discussing another meeting was scheduled on 05.08.2023, however, the applicant couldn't participate in the meeting scheduled on 05.08.2023 due to a demise in the family and on his request, the next meeting was held on 09.08.2023, but the applicant couldn't improve its offer in the 13th bidding round due to demise in the family. There after, there were several meetings convened between the Applicant and Respondent Nos. 1 & 2 from 07.09.2023, to 26.09.2023 where they discussed regarding the compliances and the conditions set out in the Applicant's Resolution Plan. 3.1. It is further submitted by the Applicant that an Addendum to it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution Plan of Respondent No. 3 between 21.12.2023 and 05.01.2024. 3.6. The Applicant submits that for the value maximization of the Corporate debtor, the revised financial proposal was submitted to Respondent No. 1&2 on 05.02.2024. The revised financial proposal benefits to all stakeholders of the Corporate Debtor, including Respondent No. 2 that is also aligning with the objectives of the CIRP process. The applicant respectfully submits that in case the revised financial proposal is approved by Respondent No. 2, they sought to provide a better resolution to the Corporate debtor and stakeholders, thus the applicant prays that in the collective commercial wisdom of the members of the Respondent No.2 the Applicant's offer should be given an opportunity to be considered by Respondent No. 2. The applicant submits that severe prejudice would be caused to the Applicant and Respondent No. 2, who will fetch a better recovery of their dues, if the revised Resolution Plan of the Applicant is considered. 3.7. The Applicant further submits in the Additional affidavit filed on 15.04.2024, that the NPV offer of the Respondent No. 3 in the bidding process was Rs. 413.87 crores and that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areholders of IPPL. Moreover, the 3-year period as per Explanation II of Section 29A(c) of the Code, from the approval of resolution plans for UVSL (now known as EVSL) and UGML (now known as EML) expired on 05.05.2023, by which time IPPL was still an NPA. 3.12. Additionally, EML and EVSL have failed to resolve IPPL's NPA status since the approval of the consortium of NCRAL and Carval Investors LLP's resolution plan for revival of EVSL and EML on 06.05.2020, meaning Respondent No.3 is connected to a party declared as an NPA for over a year. Therefore, Respondent No.3 is ineligible as per Section 29A of the Code. 3.13. It is also settled law that Section 29A(c) not only disqualifies those in control at the time the account is declared NPA but also those who were in control of the corporate debtor shortly before the resolution plan submission and failed to resolve its debts of the Corporate debtor. Further, from reliable sources, the Applicant has learned that NCRAL delayed implementing its resolution plan for Crest Steel and Power Private Limited ("CSPPL") due to funding issues. To address this, NCRAL brought in Amalgam Steel as a partner, which shares management with the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CoC. In the 10th CoC meeting held on 21.07.2023, the CoC approved the Process Note for Negotiation Process, exercising its commercial wisdom. Pursuant to the same, Respondent No. 1 received revised resolution plans from 10 (ten) PRAs, including the resolution plan submitted by the Applicant. 4.3. It is further submitted by Respondent No. 1 that the negotiation process was conducted during the 12th CoC meeting held on 04.08.2023, which was further continued on 05.08.2023 and 09.08.2023. During the negotiation process, all PRAs were given a fair opportunity to revise their respective commercial offers by submitting Appendix I, in the form and manner approved by the CoC and forming part of the Process Note for Negotiation Process which were distributed among CoC members. At the end of each round of negotiation and submission, the financial proposal of each PRA was disclosed to the CoC members for the purpose of calculating the NPV of the total resolution plan amount. However, only the highest base bid price was disclosed to the PRAs, and at each stage, PRAs were given an opportunity to improve their commercial offer above the base bid price. 4.4. The Respondent No. 1 further subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 1 that it purely discretion of the CoC of the Corporate Debtor to accept the offer of the Applicant or not, which is based on financial sense of the CoC. The Applicant cannot pressure the CoC to consider the offer of the Applicant and not of the Respondent No. 3 by approaching this Tribunal. Also, the eligibility was determined based on report by the independent agency who conducted searches of the public domain and subscribed database, company registry websites, press and media sources. The agency carried out its due diligence in relation to all the PRAs and its connected parties. 4.7. The Respondent No.1 submits that the said agency in its report had also provided a list of the related partis of all the PRAs including the related parties of the Respondent No. 3 however, it does not reflect the name of IPPL as related or connected party to the Respondent No. 3. Moreover, Respondent No. 1 in the due diligence carried by himself did not find the Respondent No. 3 ineligible under Section 29A of the Code. 4.8. The Respondent No. 1 further submits that, the Applicant has failed to prove "control" over EML, EVSL or IPPL. The Applicant has only shown shareholding details but has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip with the alleged connected entities doesn't fall within the purview of Section 29A(c) which disqualifies Respondent No. 3 if it is classified as NPA at the time of submission extending to accounts managed, controlled or promoted by the Respondent No. 3 and also under Section 29A(j) that further disqualifies if the Respondent No. 3 is "connected person" who is ineligible under Section 29A(c). 5.2. It is further submitted by the Respondent No. 2 that Respondent No. 3 company is incorporated under the laws of Singapore and not a company within the definition under Companies Act, 2013, thus will not fall within the ambit of an "associate company". Therefore, IPPL cannot be said as a "connected person" under Section 29A of the Code. 5.3. The Respondent No. 2 submits that the duty of the RP is to examine the completeness of the plan and that it is compliance with the specific provisions of law and that it is the adjudicating authority that judicially examines the plan and hold whether the Resolution plan is compliant with all laws taking reference to Arcelormittal India (P.) Ltd. v. Satish Kumar Gupta (2019) 2 SCC 1/[2018] 98 taxmann.com 99/150 SCL 354 (SC). Thus Respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.4. The Respondent No. 3 submits that the IPPL was classified as NPA, and in the present case, the CIRP was initiated on 12.08.2022, hence it is evident that the one-year period has not lapsed therefore no disqualification can be attributed under the same. Thus, the threshold under Section 29A (c) is not met and thus the bar cannot apply. 6.5. The Respondent No. 3 reiterates that EML & EVSL aren't promoters or controlling authority of IPPL. It is submitted that UVSL and UGML had 26% and 10% shareholding in IPPL respectively which by virtue of acquisition of UVSL & UGML by the consortium of NCRAL and Carval came to the group, however, nor the Respondent No. 3, EVSL or EML exercise any control on IPPL, which is clarified through the multiple correspondences to IPPL by the consortium of NCRAL and Carval along with the Annual report of EML & EVSL that doesn't reflect them as promoters of IPPL. IPPL has no directors of EML & EVSL on board of IPPL. Hence, mere equity holding in absence of any corroborating evidence cannot lead to the conclusion that EML & EVSL possess promoter status in IPPL and attract ineligibility under Explanation II to Section 29A (c) of the Code. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their resolution under the Code. (ii) The Report relies on financial data from Respondent No. 3, Nithia Investment, and Wardha Steel but ignores that these records do not show IPPL as a related entity. (iii) Regarding common directorship, Mr. Saraf is not a director or associated with IPPL, rendering the Report's argument invalid. 6.8. The Report incorrectly states that Respondent No. 3 is a related party of IPPL, and the NPA designation of IPPL disqualifies Respondent No. 3 under Section 29A. 6.9. The Report's claim that IPPL's power plant setup for EVSL and EML implies management control over IPPL is baseless. IPPL was established as a captive power company by the previous common promoter of IPPL and Uttam Galva Metallics Limited, and the commercial arrangement between EVSL and IPPL was made to support EVSL and EML's operations under the Code. This arrangement is contractual and does not make them related entities. Furthermore, the Report's reliance on the IPPL's Admission Order to attribute IPPL's default to EVSL is incorrect, as the order only reflects submissions and does not determine EVSL's responsibility for IPPL's NPA. Findings: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cash/Bank balances during the 4th round of Negotiation process. Hence, the Applicant was granted sufficient time and opportunities as were available to other Resolution Applicants and there was no discrimination qua Applicant in relation to last date for submission of revised bid. Admittedly, the Applicant didn't furnish the revised bid within such stipulated time. Instead, the Applicant claims to have submitted the superior offer after the closure of process of negotiation and evaluation of final bids received upto 13th round. This Bench does not find any bias against the Applicant or request for extension in time for furnishing revised bid having been made by the Applicant. We are of considered view that the CIRP is a time bound process and it has to be concluded at certain point of time. In the garb of value maximisation, the process could not be carried for an infinite time. It is not in dispute that the financial bids placed by each of Resolution Applicant were evaluated in terms of approved evaluation matrix and the financial bid of the Applicant was not superior to the bid of Respondent No. 3. The Applicant cannot be allowed to counter the bid of Respondent No. 3 after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2022; the account of IPPL was classified as NPA on 12.01.2022; the last date for submission of Resolution Plan was 29.05.2023 and last date for submission of revised Resolution Plan was 27.7.2023; and the Resolution Plan would have been submitted by Respondent No. 3 prior to this date only. Applying the ratio of decision in case of Avantha Holdings Ltd. (supra), the period of one year from the date of classification of account of IPPL as NPA i.e. 12.01.2022 has not elapsed on the commencement of CIRP in case of Corporate Debtor i.e. 12.08.2022, accordingly, it cannot be said that Respondent No. 3, even if IPPL is said to be under the management or control of Respondent No. 3 or of whom Respondent No. 3 can be said to be a promoter, was not qualified in terms of Section 29A(c). Further, Explanation II to Section 29A(c) only makes the provisions contained in clause (c) inapplicable if the conditions specified therein are satisfied. In other words, even if protection granted in terms of Explanation II is not available to the Respondent No. 3, the main provision itself is not applicable to Respondent No. 3 in view of period of 1 years not elapsing between the date of classification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fluence and includes a joint venture company. Explanation: For the purpose of this clause: 1. the expression "significant influence" means control of at least 20% of total voting power, or control of or participation in business decisions under an agreement; 2. the expression "joint venture" means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement; 8.2. The Respondent No. 2 has argued that the Respondent No. 3 can not said to be associate company of IPPL as the word "Company" is defined under Section 2(20) of Companies Act, 2013 to mean "a company incorporated under this Act or under any previous company law", and since Respondent No. 3 is not incorporated under the Companies Act, 2013 or any previous company law. However, we do not agree with this proposition, as the word 'Company" used in section 2(6) of the Companies Act, 2013 is a generic word and is not be understood in terms of definition contained in Section 2(20) of the Companies Act, 2013. Agreeing to submission of Respondent No. 2 would lead to an unintended conclusion where a Company incorporated under the Companies Act, 2013 shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " and "officer" in Sections 2(53), 2(54) and 2(59) respectively of the Companies Act, 2013, the persons mentioned therein. 46. The expression "Control" is defined in Section 2(27) of the Companies Act, 2013 a follows: (27) "control" shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any ether manner, 47. The expression control" is therefore defined in two parts. The first part refers to de jure control, which includes the right as appoint a majority of the director of a company. The second part refers to de facto control. So long as a person or persons acting in concert, directly or indirectly can positively influence, in any manner, management or policy decisions, they could be said to be "in control A management decision is a decision to be taken as to how the corporate body is to be run in its day to day affairs. A policy decision would be a decision that would be beyond running day to day affairs, ie., long ..... X X X X Extracts X X X X X X X X Extracts X X X X
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