2019 (7) TMI 1634 - Tri - Insolvency and Bankruptcy

Rejection of Resolution Plan - section 33 of the IB Code, 2016 - HELD THAT - In the present case, it is observed that the COC has rejected the 5 th Revised Resolution Plan considering both on technical and commercial aspects. The Hon'ble Supreme Court in K. Shashidhar v. IOB 2019 (2) TMI 1043 - SUPREME COURT as also in Swiss Ribbons v. Union of India 2019 (1) TMI 1508 - SUPREME COURT has categorically held that the commercial wisdom of the COC cannot be questioned or intervened either by the Adjudicating Authority. Once the COC has exercised its commercial wisdom in rejecting the Revised Resolution Plan submitted by the Resolution Applicant and has taken such decision after much discussion and deliberation, it is not open for the Adjudicating Authority to intervene and impose its wisdom or supplement the wisdom of the COC. If the COC has come to a conclusion that the Resolution Plan submitted by the Resolution Applicant i.s commercially not viable and does not fulfill the eligibility criteria and consequently issued direction to the Resolution Professional to file an Application before the Adjudicating Authority for passing an order of liquidation, the Adjudicating Authority is bound to pass an order of liquidation unless it is shown that the decision of the COC in seeking liquidation is arbitrary and contrary to the extant provisions of the Insolvency and Bankruptcy Code and the Regulations made thereunder. On a combined reading of Sections 12, 31 and 33 of the Code, it is clear that if the Adjudicating Authority does not receive a Resolution Plan approved by the COC within 180 days or 270 days, as the case may be, or where the COC resolves to refer the Corporate Debtor into liquidation, the Adjudicating Authority shall accordingly pass an order liquidating the assets of the Corporate Debtor - the application along with prayer of order of Liquidation has prayed to pass an order restraining the invocation of any bank guarantees which have been extended by the Corporate Debtor. However this Adjudicating Authority is not inclined to grant any such prayer as the same would affect the rights and interest of the various stake holders of Corporate Debtor. Liquidation ordered.

Issues Involved:
1. Correction of Errors in the Tribunal's Order.
2. Application for Liquidation of the Corporate Debtor.
3. Rejection of Resolution Plan by the Committee of Creditors (COC).
4. Intervention Application by the Unsuccessful Resolution Applicant.

Issue-wise Detailed Analysis:

1. Correction of Errors in the Tribunal's Order:
The Tribunal addressed a memo filed by the Resolution Professional (RP) seeking corrections in the order dated 26.07.2019. The errors identified were:
- Inserting the phrase "as going concern" after the company's name in Para 25(i).
- Correcting the name of the RP from Mr. R. Ramakrishna Gupta to Mr. Sutanu Sinha in Para 25(viii).

The Tribunal acknowledged these errors and made the necessary corrections, stating that the rest of the contents of the original order remain unchanged. This Corrigendum Order is to be read along with the original Order.

2. Application for Liquidation of the Corporate Debtor:
The RP filed an application under Section 33 of the Insolvency and Bankruptcy Code (IBC), 2016, seeking:
- An order for the liquidation of the Corporate Debtor.
- Restraining the invocation of any bank guarantees extended by the Corporate Debtor.
- Allowing the RP to continue as the liquidator with the same fee structure and support team.

The Tribunal noted that the Corporate Debtor's CIRP was initiated by the State Bank of India and admitted on 23.02.2018. Despite multiple attempts to invite Resolution Plans, no valid plan was submitted within the stipulated time. Consequently, the RP sought liquidation.

3. Rejection of Resolution Plan by the Committee of Creditors (COC):
The COC rejected the Resolution Plan submitted by the Original/Reconstituted Consortium due to:
- Deviation from the EOI criteria.
- Non-submission of the Earnest Money Deposit (EMD).
- Non-compliance with the minimum qualification criteria.
- Commercial unacceptability of the plan.

The Tribunal emphasized that the commercial wisdom of the COC cannot be questioned or intervened by the Adjudicating Authority. The Supreme Court in K. Shashidhar v. IOB and Swiss Ribbons v. Union of India has upheld this principle. Consequently, the Tribunal dismissed the intervention application (IA No. 680/2018) filed by the unsuccessful Resolution Applicant challenging the COC's decision.

4. Intervention Application by the Unsuccessful Resolution Applicant:
The unsuccessful Resolution Applicant filed an intervention application (IA No. 680/2018) seeking to:
- Intervene in the liquidation proceedings.
- Set aside the COC's decision to reject the Resolution Plan and resolve to liquidate the Corporate Debtor.
- Declare the consortium eligible for submitting the Resolution Plan.
- Direct the COC to reconsider the 5th Resolution Plan submitted on 16.11.2018.

The applicant argued that the COC's rejection was arbitrary and not in line with the objectives of the IBC, which prioritize resolution over liquidation. The applicant also claimed that the EMD was eventually paid, and the eligibility criteria were met.

Despite these arguments, the Tribunal upheld the COC's decision, stating that the COC's commercial wisdom is paramount and cannot be overridden by the Adjudicating Authority. The Tribunal noted that the COC's decision was taken after much discussion and deliberation and was not arbitrary.

Final Order:
The Tribunal ordered the liquidation of the Corporate Debtor under Section 33 of the IBC, 2016. The RP, Mr. Sutanu Sinha, was appointed as the Liquidator. The moratorium under Section 14 ceased, and all legal proceedings against the Corporate Debtor were stayed, except those initiated by the Liquidator. The Tribunal also directed the Liquidator to issue a public announcement and comply with the necessary regulations. The application for liquidation (IA No. 544/2018) was thus disposed of.

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