2019 (5) TMI 1817 - Tri - Insolvency and Bankruptcy

Validity of Restaurant Sale partial assignment of the Brand - forensic audit of the affairs of the Corporate Debtor including the Restaurant Sale - partial assignment of the Brand to examine whether the Restaurant Sale and partial assignment of the Brand are undervalued or preferential - HELD THAT - In pursuant to the initiation of CIRP in respect of the Corporate Debtor, IRP/RP has initiated steps in accordance with law and conducted 7th COC meetings and finally 3 (three) Resolution Plans were received in pursuant to the expression of interest as sought for, namely M/s.Akashika Foods Private Limited ( Akashika ), Mr.Kamal Agarwal, and M/s.MTR Foods Private Limited collectively called as Final PRAs . Accordingly, the RP evaluated the plan and on instructions from the CoC, sent his evaluation report and the resolution plans to BDO, an Internationally reputed agency for obtaining an independent report of the bids received viz. a viz. the evaluation matrix put forth in the RFRP document, both on quantitative and qualitative parameters. The Resolution Professional has also gave sufficient time to all the Resolution Applicants for personal instructions of the CoC Members. And facts shows that all the 3 (three) Resolution Applicants have participated in the consolidation and finalized of Resolution Plan. It is settled position of law that IRP/RP alone will conduct CIRP of Corporate Debtor with supervision and guidance of COC at the helm of affairs subject to overall jurisdiction of Adjudicating Authority under the provisions of Code. As rightly claimed by the Respondents, relying on the law as cited supra, the Adjudicating Authority hardly has jurisdiction to entertain Interim Application(s) while CIRP is on, which is to be completed in a time bound manner. After the CIRP is over, it is for the Adjudicating Authority to scrutinize the entire process of CIRP before approving/rejecting the Resolution plan finally decided by the CIRP. Therefore, the Adjudicating Authority has examined the final Resolution plan as approved by the COC and after satisfying various parameters as laid down under the Code and the Rules made thereunder, has approved the Resolution plan - the allegations made and the information sought for by the applicant are baseless and not tenable and the applications themselves are not all maintainable. Application dismissed.

Issues Involved:
1. Allegations of fraudulent, preferential, or undervalued transactions.
2. Request for forensic audit of the Corporate Debtor's affairs.
3. Demand for provisional financial statements and other statutory information.
4. Request for regular status updates on the CIRP.
5. Extension of the submission deadline for resolution plans.
6. Request for a change of Resolution Professional.
7. Challenge to the inclusion of Akhika Foods Pvt Ltd in the list of prospective Resolution Applicants.

Issue-wise Detailed Analysis:

1. Allegations of Fraudulent, Preferential, or Undervalued Transactions:
The applicant, MTR Foods Private Limited, alleged that the Corporate Debtor sold its subsidiary, Maiyas Restaurants Private Limited, to its promoter shortly before the commencement of the CIRP. This sale included a partial assignment of the brand "Maiyas," which was claimed to be undervalued and preferential. The applicant argued that these actions were prejudicial to the interests of bona fide resolution applicants and creditors. However, the Resolution Professional and the Committee of Creditors (CoC) examined these transactions and found no irregularities. The CoC accepted the Resolution Professional's conclusion that these transactions did not merit being classified as preferential under the Insolvency and Bankruptcy Code (IBC).

2. Request for Forensic Audit:
The applicant sought a forensic audit of the Corporate Debtor's affairs, including the restaurant sale and brand assignment. The Resolution Professional, however, had already scrutinized these transactions and consulted legal experts, concluding that they were in order. The CoC, which included major creditors like Karnataka Bank Ltd. with a 96.01% voting share, supported the Resolution Professional's findings.

3. Demand for Provisional Financial Statements and Other Statutory Information:
The applicant requested the provisional financial statements and other statutory information as required by Regulation 36(2)(c) of the CIRP Regulations. The Resolution Professional provided all necessary information to all prospective resolution applicants, including the applicant. The tribunal found that the applicant was not singled out or discriminated against in the provision of information.

4. Request for Regular Status Updates on the CIRP:
The applicant sought regular status updates on the CIRP. The Resolution Professional conducted the CIRP in accordance with the law, holding seven CoC meetings and evaluating three resolution plans. The tribunal found no merit in the applicant's request for additional updates, as the Resolution Professional had already provided sufficient information.

5. Extension of the Submission Deadline for Resolution Plans:
The applicant requested an extension of the deadline for submitting resolution plans. The tribunal noted that the Resolution Professional had given sufficient time to all resolution applicants and that the CoC had unanimously approved the resolution plan submitted by Akhika Foods Pvt Ltd. The tribunal found no basis for extending the deadline.

6. Request for a Change of Resolution Professional:
The applicant sought a change of the Resolution Professional, alleging irregularities and biases. The tribunal found that the Resolution Professional had conducted the CIRP transparently and in accordance with the law. The CoC, which supervised the Resolution Professional's actions, did not raise any objections. The tribunal rejected the applicant's request for a change of Resolution Professional.

7. Challenge to the Inclusion of Akhika Foods Pvt Ltd in the List of Prospective Resolution Applicants:
The applicant challenged the inclusion of Akhika Foods Pvt Ltd as a prospective resolution applicant, claiming it was illegal and void. The tribunal found that the Resolution Professional and the CoC had followed due process in evaluating and approving the resolution plans. Akhika Foods Pvt Ltd was declared the highest bidder and its resolution plan was unanimously approved by the CoC.

Conclusion:
The tribunal rejected the applicant's allegations and requests, finding them baseless and without merit. The tribunal emphasized that the Resolution Professional and the CoC had conducted the CIRP in accordance with the law and that the applicant had no locus standi to interfere in the process. Both IA No. 98/2019 and IA No. 222/2019 were dismissed with no order as to costs.

← Previous Next →