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2019 (11) TMI 1681 - Tri - Insolvency and BankruptcyRejection of Resolution plan - seeking to issue a direction to the Resolution Professional and Committee of Creditors (CoC) to reconsider their decision, by which the Resolution Plan filed by the Applicants was rejected - Section 60 (5) read with Rule 11 of National Company Law Tribunal Rules, 2016 - HELD THAT - On perusal of the Minutes of the CoCs dated 18.09.2018 by which the Resolution Plan of the Applicants has been rejected, it appears that the Resolution Plan has been rejected inter-alia on the ground that Applicants are barred under Section 29A of the I B Code, 2016, as one of the members of the CoCs had objected the acceptance and discussion of the Resolution Plan submitted by Promoters / Directors of the Corporate Debtor by observing that the Applicants are disqualified under Section 29A of the I B Code, 2016. It appears that the said member of the CoCs has been sitting over appeal of the Order dated 31.08.2018 passed by this Authority, wherein it has been held that the Corporate Debtor is MSME. This amounts to non-compliance with the Order of this Authority and utter disregard for Court orders and the law. Therefore, a strong displeasure is expressed by this Authority against the said member. Rejection of the Resolution Plan on the ground that Demand Draft for ₹ 10 Lakhs as stipulated in the Expression of Interest (Eol) was not submitted and exemption has been sought - HELD THAT - Since, there is a provision for seeking exemption for deposit of the said money, so this ground was insufficient for rejection of Resolution Plan. Rejection on the ground that Applicants are willful defaulters being identified by Central Bank of India and State Bank of India, as they had not appeared for the personal interview, and that stage is over and RBI Publication is pending - HELD THAT - The Resolution Applicant Mr. Ajay Agarwal has explained that he is neither a Promoter nor a Shareholder of M/s. Ankit Ispat Pvt. Ltd, whose account had been declared as NPA, and merely a nominee Director and do not have any managerial power or control over day-to-day affairs of the said Company. In view of it, the CoCs have reject the Resolution Plan on flimsy ground. Validity of rejection of the Resolution Plan on the ground of the pendency of the Application(s) before the Adjudicating Authority under Sections 43 and 45 of the I B Code, 2016, which if decided in favour of the Corporate Debtor will add to the value, for which the Resolution Applicants could have considered maximization of Resolution Plan value - HELD THAT - This thought, process is purely hypothetical, and cannot be valid ground for rejection of the Resolution Plan, as the plan cannot be contingent in nature. The members of the CoCs have rejected the Resolution Plan mechanically without application of mind, as if, they have not been interested to consider the same on merits, as there is no shred of evidence that the suitability and viability of the Resolution Plan has been considered on merits. In these circumstances, it will be an exercise in futility to remand the matter to the RP and the CoCs for reconsideration of the Resolution Plan, as they have no intention to consider any Resolution Plan, inspite of the direction of this Authority, as mentioned. The maximum period of time of the CIR Process with regard to the Corporate Debtor is already over. Therefore, this Authority deems it fit to reject the Application, and proceed to pass an order of liquidation of the Corporate Debtor - Application disposed off.
Issues involved:
1. Reconsideration of rejected Resolution Plan by Resolution Professional and Committee of Creditors (CoC). 2. Eligibility of Promoters as Resolution Applicants under Section 29A of the I&B Code, 2016. 3. Rejection of Resolution Plan based on various grounds by CoCs. 4. Compliance with previous orders of the Authority. 5. Grounds for rejection of Resolution Plan by CoCs. 6. Liquidation of the Corporate Debtor. Analysis: Issue 1: Reconsideration of rejected Resolution Plan The Tribunal considered an application filed by prospective Resolution Applicants against the Resolution Professional and CoC, seeking direction to reconsider the rejection of their Resolution Plan. The Applicants claimed to be Promoters of the Corporate Debtor and argued that the rejection was premature, lacking proper consideration, and based on erroneous grounds. They emphasized that their Plan offered a higher value than the liquidation value, making it beneficial for all stakeholders. The Tribunal found that the rejection lacked merit and expressed displeasure towards the CoC member for non-compliance with previous orders. Issue 2: Eligibility of Promoters as Resolution Applicants The Applicants contended that they were not disqualified under Section 29A of the I&B Code, 2016, based on a previous Order declaring the Corporate Debtor as an MSME. They argued that the CoCs failed to consider this Order while rejecting their Plan. The Tribunal agreed with the Applicants, highlighting that the CoCs disregarded the legal implications of the previous Order and rejected the Plan without valid reasons. Issue 3: Rejection of Resolution Plan by CoCs The CoCs rejected the Resolution Plan citing various grounds, including alleged default status of the Applicants, pending applications under I&B Code sections, and perceived inadequacies in the Plan. The Tribunal scrutinized each ground and found them insufficient for outright rejection. It criticized the CoCs for mechanical rejection without proper evaluation, emphasizing the need for merit-based consideration. Issue 4: Compliance with Previous Orders The Tribunal noted that the CoCs failed to comply with the previous Order declaring the Corporate Debtor as an MSME, leading to a disregard for legal directives. It expressed strong disapproval of the CoC member's actions in rejecting the Plan based on discredited grounds, highlighting the importance of upholding Court orders and legal principles. Issue 5: Grounds for Rejection of Resolution Plan The CoCs rejected the Resolution Plan based on grounds like non-submission of stipulated funds, alleged default status, and hypothetical considerations regarding pending applications. The Tribunal found these grounds inadequate and criticized the CoCs for a lack of proper evaluation and mechanical rejection, leading to a decision in favor of the Applicants. Issue 6: Liquidation of the Corporate Debtor Due to the prolonged CIR Process and the rejection of the Resolution Plan, the Tribunal deemed it appropriate to order the liquidation of the Corporate Debtor. It emphasized the need for a Standard Operating Procedure for CoCs to evaluate Resolution Plans effectively, ensuring compliance with the I&B Code regime. In conclusion, the Tribunal directed the CoCs to develop a standardized procedure for assessing Resolution Plans and ordered the liquidation of the Corporate Debtor due to the rejection of the Plan without proper evaluation. The judgment highlighted the importance of legal compliance, merit-based decision-making, and adherence to Court orders in insolvency proceedings.
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