2018 (7) TMI 1839 - AT - Insolvency and Bankruptcy

Resolution Applicant challenged - initiation of Corporate Insolvency Resolution Process - Held that - It was not open to the Resolution Professional to prepare the third Information Memorandum though it was open to him to bring the fact to the notice of the Committee of Creditors . However, for such reason, we are not going to declare the third Information Memorandum as bad, as the facts were brought to the notice of the Resolution Applicants , including the Appellant and the 8th Respondent regarding dues of IHCL and Emfar which was the reason for preparation of third modified Information Memorandum. It is true that the Adjudicating Authority has jurisdiction to call for further Resolution Plan but such order can be passed for the reasons to be recorded and not arbitrary without any reason. In the present case all procedures having followed and in absence of any infirmity, we hold that the Adjudicating Authority had no jurisdiction to give another opportunity to the 8th respondent or even to the Appellant. In view of the discussion as made above, the impugned order dated 7th May, 2018 cannot be upheld and we accordingly set aside the impugned order. The Resolution Plan of the Appellant having been approved by the Committee of Creditors with 98.05% voting shares and it having been found viable and feasible and as it meets the requirements as referred to in sub-section (2) of Section 30, we direct the Adjudicating Authority to approve the Resolution Plan submitted by the Appellant, as approved by the Committee of Creditors and pass appropriate order. For such order no further hearing is required to be given except the information to the parties as the matter has been finally decided by this Appellate Tribunal.

Summary

Issues Involved:
1. Jurisdiction of the Adjudicating Authority to allow submission of revised resolution plans.
2. Validity of the third modified Information Memorandum.
3. Approval and viability of the Appellant's resolution plan by the Committee of Creditors (CoC).

Issue-wise Detailed Analysis:

1. Jurisdiction of the Adjudicating Authority to allow submission of revised resolution plans:
The Appellant challenged the order dated 7th May 2018, where the Adjudicating Authority directed the Resolution Professional (RP) to receive modified offers from both the Appellant and the 8th Respondent. The Adjudicating Authority had accepted the Appellant as the successful Resolution Applicant (H-1) but allowed the 8th Respondent to submit a revised offer. The Tribunal found that the Adjudicating Authority issued directions without recording any reason, which is essential for such orders. The Tribunal held that the Adjudicating Authority had no jurisdiction to give another opportunity to the 8th respondent or even to the Appellant, especially when all procedures had been followed without any infirmity.

2. Validity of the third modified Information Memorandum:
The third modified Information Memorandum was issued by the RP without instructions from the CoC after the final decision on 5th April 2018. This memorandum included claims from IHCL and Emfar based on data records. The Tribunal noted that while the RP should have brought the reason for the revised memorandum to the notice of the CoC, it did not declare the third Information Memorandum as bad. This is because the facts regarding dues of IHCL and Emfar were communicated to the Resolution Applicants, including the Appellant and the 8th Respondent, and were considered in their plans.

3. Approval and viability of the Appellant's resolution plan by the Committee of Creditors (CoC):
The Appellant's resolution plan was declared the best, viable, and feasible by the CoC on 25th April 2018, based on upfront payment and scoring matrix. The Appellant's plan offered ?111.11 Crores, which was higher than the 8th Respondent's offer of ?103.50 Crores. The CoC's e-voting on 28th and 29th April 2018 resulted in a 98.05% voting share in favor of the Appellant's plan, while the 8th Respondent's plan received 0% votes. The Tribunal emphasized that the RP is required to examine each resolution plan for compliance with Section 30(2) and present it to the CoC for approval under Section 30(3). Once the plans are clear and placed before the CoC, the RP cannot issue another revised Information Memorandum without CoC's approval.

Conclusion:
The Tribunal set aside the impugned order dated 7th May 2018, directing the Adjudicating Authority to approve the Appellant's resolution plan as approved by the CoC with 98.05% voting shares. The Tribunal concluded that the Adjudicating Authority's order to allow further revised plans was without jurisdiction and arbitrary. The appeal was allowed, and no further hearing was deemed necessary as the matter was finally decided by the Tribunal.