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TMI Blog2025 (5) TMI 1220X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent No.2- 'OCL Iron and Steel Limited' (Successful Resolution Applicant) as well as rejecting IA No.5176 of 2024 filed by the Respondent No.5- 'Gateway Investment Management Services Limited' (Unsuccessful Resolution Applicant). 2. Brief facts of the case necessary to be noticed for deciding the Appeal are:- 2.1. The Corporate Debtor- 'Helios Photo Voltaic Ltd.' was subjected to Corporate Insolvency Resolution Process (CIRP) by order dated 11.01.202024 on an application filed by Respondent No.3- 'National Asset Reconstruction Company Ltd.'. Appellant being Secured Financial Creditor of the Corporate Debtor filed its claim in response to the public announcement, Appellant was included as member of the Committee of Creditors (CoC) with voting share of 18.69%. The other two CoC members were National Asset Reconstruction Company Limited (Respondent No.3) had 73.36% vote shares and third member, International Finance Corporation (Respondent No.4) having vote share of 7.95%. CoC finalised the Request for Resolution Plan (RFRP) in the CoC meeting. RFRP was issued by the Resolution Professional with the approval of the CoC under which last date for submission of the Resolution Pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for consideration on 31.01.2025, Counsel for the Appellant prays leave to file Additional Affidavit. Time was allowed to file Additional Affidavit. All the parties have appeared on 31.01.2025 when the Appeal was heard. On 07.02.2025, time was allowed to file reply to Additional Affidavit before the next date. Reply to the Additional Affidavit has been filed. Appeal was again taken on 19.03.2025 when Learned Counsel for the Respondent No.1 submitted that the composite reply to the Additional Affidavit has already been filed. Respondent Nos.2 and 3 submitted that they have also filed reply to the Additional Affidavit of the Appellant and they relied on the composite reply filed by Respondent No.1. Appeal was heard on 26.03.2025 and 28.03.2025 when orders were reserved. 3. Shri Krishnendu Datta, Learned Senior Counsel appearing for the Appellant in support of the Appeal contends that the Appellant being Secured Financial Creditor is an aggrieved person who is interested in the value maximisation of the Corporate Debtor. Counsel for the Appellant referring to the grounds raised in the Additional Affidavit submits that the proposed acquisition of the Corporate Debtor through Composite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t NPV has enhanced its offer vide email dated 07.10.2024 to Rs.120,00,00,000/- which was not accepted by the CoC in its meeting held on 14.10.2024. Respondent No.3 being the largest member of the CoC with 73.36% vote did not agree to accept the revised offer of Rs.120,00,00,000/- although commercial wisdom of the CoC is non-justiciable but in the facts of the present case, it cannot be said that CoC has exercised its commercial wisdom. CoC failed to maximise the value of the Corporate Debtor. It is submitted that in view of the aforesaid grounds the Resolution Plan deserves to be rejected and the Adjudicating Authority committed error in approving the Resolution Plan. 4. Counsel for the Resolution Professional refuting the submissions of the Counsel for the Appellant submits that the entire CIRP process was conducted in accordance with the IBC and CIRP Regulations. Resolution Plans which were filed on 06.06.2024 were required to undergo a Challenge Process which was conducted on 29.07.2024. After the Challenge Process, all the Resolution Applicants were required to submit their final Resolution Plan by 05.08.2024. All Resolution Applicants included Respondent Nos.2 and 5 submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Counsel for the Appellant submits that the Adjudicating Authority has rightly approved the decision of the CoC approving the Resolution Plan with requisite majority. CoC in its commercial wisdom decided to approve the Resolution Plan submitted by Respondent No.2 which has secured highest marks on the evaluation matrix. The Respondent No.5 who had given Rs.101 Crore had proposed to give 25% of the amount within 45 days and rest 75% within 364 days. The revised offer given by e-mail dated 05.09.2024 could not have been considered since the voting had already commenced on the Resolution Plan and as per Process Document, no Applicant was entitled to modify its offer. It is further submitted that the provisions of the SARFAESI Act, 2002 or the RBI (Asset Reconstruction Companies) Directions 2024 does not prohibit ARCs from assigning its debt to a non-ARC entity. It is submitted that the judgment of the Hon'ble Supreme Court in Independent Sugar Corporation Ltd. (supra) is not applicable in the present case. In the present case, no prior approval of the CCI was required under Section 5. It is submitted that by virtue of Notification issued by Central Government on 07.03.2024 any m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lessor is in addition to the payments to be made to the financial creditors under the Resolution Plan of SRA. The above mechanism does not violate any provision of the Code. It is submitted that the Appellant who is Dissenting Financial Creditor is taking steps to obstruct the implementation of the Resolution Plan. 7. We have considered the submissions of the Counsel for the parties and perused the record. 8. The Appellant was part of the CoC having 18.69% vote shares, Appellant participated in the process of the CoC. The RFRP and the Evaluation Matrix was approved by the CoC with 81.31% vote share. Resolution Plan was approved on 12.09.2024. After receiving the final Resolution Plans by the Resolution Applicants by 05.08.2024, marks were computed as per Evaluation Matrix. CoC decided to put the plans on vote, as a result of the voting, CoC approved the Resolution Plan with 73.38% vote share. Appellant did not vote for approval of the Resolution Plan and has now filed this Appeal challenging the approval of the Resolution Plan. As per Section 30(4), the CoC is to approve the Resolution Plan by vote not less than 66% voting share of the Financial Creditors after considering i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later: Provided that where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors." 12. Majority judgments of the Hon'ble Supreme Court in the above case in paragraph 150 laid down following:- "150. In the present case, for reasons discussed above, the statutory provision and legislative intent unequivocally affirm the mandatory nature of the proviso to Section 31(4) of the IBC. For a Resolution Plan containing a combination, the CCI's approval to the Resolution Plan, in our opinion, must be obtained before and consequently, the CoC's examination and approval should be only after the CCI's decision. This interpretation respects the original legislative intent, and deviation from the same would not only undermin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposed merger falls, as reduced by any depreciation, and the value of assets shall include the brand value, value of goodwill, or value of copyright, patent, permitted use, collective mark, registered proprietor, registered trade mark, registered user, homonymous geographical indication, geographical indications, design or layout- design or similar other commercial rights, if any, referred to in sub-section (5) of section 3." 14. Section 6 of the Competition Act, 2002 deals with 'regulation of combinations' which contemplated approval by the CCI for such merger and amalgamation amounting to combination. Counsel for the Appellant contended that the assets of the SRA as well as the Corporate Debtor after merger are more than prescribed threshold which are more than Rs.2500 Crore assets in India, hence, meets the threshold of combination under Section 5 of the Competition Act. Thus, mandatory approval from the CCI was required prior approval of the plan by the CoC. Counsel appearing for the Respondent refuting the submission submits that the above Section 5 of the Competition Act is not attracted in the facts of the present case and it is covered by exemption issued by MCA by Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced by any depreciation, and the value of assets shall include the brand value, value of goodwill, or value of copyright, patent, permitted use, collective mark, registered proprietor, registered trade mark, registered user, homonymous geographical indications, geographical indications, design or layout- design or similar other commercial rights, if any, referred to in sub-section (5) of section 3. The turnover of the said portion or division or business shall be as certified by the statutory auditor on the basis of the last available audited accounts of the company. [F. No. 05/7/2013-CS] MANOJ PANDEY, Addl. Secy." 15. In the Consolidated Reply filed by the Resolution Professional, balance sheets of the Corporate Debtor as on 31.03.2023 and 31.03.2024 have been referred to and brought on record. As per the balance sheets of the Corporate Debtor who is being acquired under the Resolution Plan, the value of the Corporate Debtor is Rs.70.76 Crore and the turnover is Rs.13.72 Crores. The value of the Corporate Debtor as above is clearly covered by exemption provided in Notification dated 07.03.2024 as extracted above. We thus, are of the view that Section 5 of the Competition Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers the RBI, for the purposes of sub-section (1), determine the policy and issue necessary directions. RBI has issued Master Directions 2024 which is relied by the Appellant. Copy of the said Master Directions 2024 has been brought on the record by the Appellant by means of Additional-Affidavit. Counsel for the Appellant has referred to Master Directions 2024 issued on 24.04.2024 which has brought on record as Annexure 2 of the Additional Affidavit. Clause 8 of the Master Directions 2024 deals with 'activities of ARCs' which is as follows:- "8. Activities of ARCs 8.1 An ARC shall commence/ undertake only securitisation and asset reconstruction activities and functions provided under Section 10 of the Act. 8.2 In terms of the provision of Section 10(2) of the Act, ARCs have been permitted to undertake those activities as Resolution Applicants under Insolvency and Bankruptcy Code, 2016 (IBC) which are not specifically allowed under the Act. This permission shall be subject to the following conditions : i. The ARC has a minimum NOF of Rs.1,000 crore. ii. The ARC shall have a Board-approved policy regarding taking up the role of Resolution Applicant which may, inter alia, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period co-terminus with other secured lenders." 19. When we look into the above, clause 10.1 empowers every ARC to formulate a plan for realisation of assets which may provide for one or other measures referred to in Clause 10.1. Sub-clause (v) of Clause 10.1 deals with settlement of dues payable by the borrower. Settlement of dues is a wide phrase which encompasses in itself any manner of settlement of dues. Settlement of dues can include part payment of upfront or by any other mode or manner. Clause 10.2 provides that ARC shall formulate the policy for realisation of financial assets under which the period for realisation shall not exceed five years from the date of acquisition of the financial asset concerned whereas under Clause 10.3 the Board of the ARC may increase the period for realisation of financial assets so that the total period for realisation shall not exceed eight years. However, Clause 10.4 contains further exemption that where resolutions plan has been finalised and which extends beyond the maximum resolution period allowed for ARCs. Under clause 10.4, the ARC may accept a resolution period co-terminus with other secured lenders. Thus, Clause 10.4 contemplates e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant is that the debt owed to Respondent No.4- 'International Finance Corporation' cannot be assigned to an entity in India without specific approval by the RBI. The CoC as well as the SRA had submitted that approval of the RBI, if required for assignment of debt of Respondent No.4 is to be obtained within one year from approval of the Resolution Plan. As per provision of Section 31(4) of the IBC, the SRA can obtain approval from RBI after approval of the Resolution Plan once the assignment has been approved. We, thus, do not find any error in the above part of the Resolution Plan which proposes assignment of debt of Respondent No.4 to the Resolution Applicant. Approval, if any, can be obtained within one year from the RBI as per Section 31(4), hence, on the said ground approval of Resolution Plan cannot be faulted. 22. The next ground urged by the Appellant is that under the Resolution Plan, SRA has dealt with Noida Project Land which is not the asset of the Corporate Debtor. The Noida Project Land along with building structure was obtained by sub-lease deed dated 18.01.2008 and lease deed dated 23.06.2008 from Moser Baer India Ltd. (MBIL). MBIL went into liquidation under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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