2020 (5) TMI 707 - Tri - Companies Law

Seeking approval of Resolution Plan - Approval of the Carval Resolution Plan by CoC is in breach of proviso to Section 31(4) of the Code or not - Discrimination against Operational Creditor - Deliberate suppression of vital facts - Violation of IBC as amended, Corporate Insolvency Resolution Process or not - HELD THAT - When any condition is mentioned in the plan and that condition is required to be fulfilled by the stakeholders after approval of the plan by the CoC, and accomplishment of the provisions of the plan is contingent upon some future actions after approval, then there could be a situation of uncertainty in future in fulfilling of the provisions of the plans, but here in this situation, since interlinking already been approved the Carval Plans alone being approved, nothing has remained contingent, the Resolution Applicant is under unconditional obligation to fulfil the provisions of the Plans, therefore there are no merit in the objection raised by Jatia Group. Approval of the Carval Resolution Plan by CoC is in breach of proviso to Section 31(4) of the Code or not - HELD THAT - In the cases of combination, the Adjudicating Authority is mandated to examine as to whether approval is obtained from CCI or not, if not approved, it will not be approved by the Adjudicating Authority. Moreover, in the proviso, it is not said that if approval of CCI is not obtained before CoC approved the plans; the plan approved by the CoC would amount to nullity. Above all, it is not that plans are without approval of CCI, the difference is -approvals are ex-post facto approvals, not ex-ante approvals. If this difference makes any difference to the rights of anybody, then these approvals shall be put to test as to whether post facto approval caused any grievance to any of the stakeholders. It is not the case that by virtue of this post facto approval, Jatia group rights are affected - CCI approval is in no way connected to the commercials CoC examines, since CCI is the Regulatory authority to avoid unhealthy competition in the market, CCI approval is mandatory to the approval of the plan, so that this infraction would not become hindrance if the plan is approved by CCI after CoC has approved. Here plans were approved by CCI. Discrimination against Operational Creditor - HELD THAT - If at all equitable treatment is set as a test to approve the Resolution Plan ignoring the provisions of the Code, it always differs from case to case and from person to person. It is only a perception. Perception is always dependent upon the mindset of the person dealing with it, which ultimately will become a threat to predictability and certainty. When the Code is clear as to how to go about, with all humility I hold that this test is beyond the scope of Sec. 53 r/w Section 30(2) of the Code, for this reason only the Honourable Supreme Court time and again reiterated that the Adjudicating Authority shall not enter into the aspects left to be decided by the CoC - As to maximisation of the assets of the Corporate Debtor and keeping the company as a going concern, it is the point to be decided by the CoC. Unless it is pointed out that the CoC examination is vitiated by fraud, the Adjudicating Authority is not expected to interfere with the decision of the CoC. Deliberate suppression of vital facts - HELD THAT - It appears the Resolution Application filed revised PBG so as to meet the requirements as mentioned in the format. It is not the case of the Noble counsel that PBG given by the Resolution Applicant is not proportionate to the value of the plan. At the end of the day, one has to see as to whether PBG equivalent to the requirement has been given or not, while approving plans, it is quite common, the Resolution Applicant offers something, when something offered is not in compliance of the requirement, CoC would ask for compliance, if the applicant fulfills the compliance, CoC would further proceed with the plan. In this case also, same thing happened. PBG is normally taken to bind the Resolution Applicant to fulfill the plan; it will not make any difference to quantum of payment and timings mentioned in the plans - there are no merit in the objections raised by Nobel. When the Operational Creditor they will only get their share as set out in the Code. It cannot be seen whether Operational Creditors are receiving money equivalent to the money Financial Creditors getting, because operational creditors as a class cannot equate themselves with the financial creditors and ask for more than what they are entitled u/s 53 r/w section 30(2) of the Code. With regard to other objections, such as some financial creditors arising discussions in the CoC meeting with regard to the approval of the resolution plans, it is to be seen as to whether the Financial Creditors who raised queries in the meetings have voted in favor of the plan or against the plan and whether the approval is with requisite majority or not. If the approval is given with requisite majority, the discussions taken place in the meeting cannot invalidate the plans duly approved by the CoC. There are no merit in the objections raised by Noble - the Resolution Plan approved by the CoC of Metallics and the Resolution Plan approved by the CoC of Value Steels are hereby approved.

Summary

Issues Involved:
1. Joint hearing of Resolution Plans for two interlinked companies.
2. Approval of Resolution Plans by the Committee of Creditors (CoC).
3. Urgent hearing of applications during COVID-19 lockdown.
4. Compliance with Section 30(2) and Section 31 of the Insolvency and Bankruptcy Code (IBC), 2016.
5. Objections raised by unsuccessful Resolution Applicant and Operational Creditors.
6. Concessions and exemptions sought by the Successful Resolution Applicant.
7. Objections by Jatia Group regarding conditional offer and non-compliance with CCI approval.
8. Allegations of discrimination against Operational Creditors.
9. Allegations of material suppression of facts.

Detailed Analysis:

1. Joint Hearing of Resolution Plans for Two Interlinked Companies:
The Tribunal noted that the functioning of M/s. Uttam Galva Metallics Limited (Metallics) and M/s. Uttam Value Steel Limited (Value Steel) was interlinked. Consequently, the National Company Law Tribunal (NCLT), Mumbai Bench, ordered a joint hearing of the Resolution Plans filed for these companies.

2. Approval of Resolution Plans by the Committee of Creditors (CoC):
The Resolution Plans submitted by the Consortium of Carval Investors LLP and Nithiya Capital Resources Advisors LLP were approved by the respective CoCs with 88.9% votes. The Resolution Professional (RP) filed the approved plans before the Tribunal for approval under Section 31 of the IBC.

3. Urgent Hearing of Applications During COVID-19 Lockdown:
The CoC moved an urgent application for the hearing of pending applications citing the expiration of the performance guarantee. Despite objections from Noble Resources International Pte Limited, the Tribunal allowed the urgent hearing, emphasizing the necessity for banks to realize dues during the COVID-19 crisis.

4. Compliance with Section 30(2) and Section 31 of the IBC, 2016:
The RP issued certificates confirming compliance with Section 30(2) of the IBC. The Tribunal examined the provisions for payment to stakeholders and other terms of the Resolution Plans, including the implementation through a Special Purpose Vehicle (SPV) and capital reduction.

5. Objections Raised by Unsuccessful Resolution Applicant and Operational Creditors:
Applications filed by the unsuccessful Resolution Applicant (SSG) and an Operational Creditor (Noble) were dismissed on merits. The Tribunal found no merit in the objections raised regarding the approval process and compliance issues.

6. Concessions and Exemptions Sought by the Successful Resolution Applicant:
The Tribunal granted certain concessions and exemptions sought by the Successful Resolution Applicant, including procedural waivers, continuation of approvals, and tax exemptions. However, it clarified that the implementation of the Resolution Plan was not contingent on these concessions.

7. Objections by Jatia Group Regarding Conditional Offer and Non-Compliance with CCI Approval:
Jatia Group objected to the conditional nature of Carval's Resolution Plans and the lack of prior approval from the Competition Commission of India (CCI). The Tribunal held that the conditional offer was acceptable as it was approved by the CoC. Regarding CCI approval, the Tribunal noted that the approval was obtained post facto and harmonized the procedural infraction, stating it did not affect the rights of stakeholders.

8. Allegations of Discrimination Against Operational Creditors:
Jatia Group claimed inequitable treatment as they were receiving only 0.19% of their claim. The Tribunal held that the distribution was in accordance with Section 53 of the IBC and that Operational Creditors were not entitled to more than their statutory share. The Tribunal emphasized that commercial decisions of the CoC should not be interfered with unless vitiated by fraud.

9. Allegations of Material Suppression of Facts:
Jatia Group alleged suppression of the fact that Mr. Johannes Sittard was no longer a director of Nithiya. The Tribunal found no evidence that this non-mention caused any material difference to the resolution process and dismissed the allegation.

Conclusion:
The Tribunal approved the Resolution Plans for both Metallics and Value Steel, with the concessions and exemptions granted. Objections raised by Jatia Group and Noble were found to lack merit and were dismissed. The approval process was deemed compliant with the IBC, and the commercial wisdom of the CoC was upheld.