2019 (12) TMI 1570 - Tri - Insolvency and Bankruptcy

Validity of Resolution Plan - rejection of resolution plan on the ground that the entire information has not been provided to them for complying with the terms and conditions of the resolution plan - HELD THAT - In view of the allegations and counter allegations made against both the parties, a separate hearing is required to decide the merits of each application. In the meanwhile, as an interim measure, it is prudent on the part of this Bench, after going through an elaborate discussion during the course of the hearing, that the possession be handed over to the CoC, who in turn will handover the same to the erstwhile RP. The successful Resolution Applicant shall hand over the possession to the CoC, after an independent agency or a person takes the inventory and examine the status and the working condition of the machines and then the CoC, in turn shall handover the same to erstwhile RP. The entire process of taking inventory and handing over the possession shall be video graphed and shall be taken in the presence of both the parties - the restoration of the CIRP and the erstwhile RP shall continue as RP henceforth. All the privileges, rights available to the RP under the CIRP under Section 14 mutatis mutandis shall be applicable until the proper decision is taken in this regard. List all the MAs for further consideration on 3.2.2020.

Summary

Issues:
1. Claim for CIRP costs
2. Challenge to resolution plan by successful Resolution Applicant
3. Application by Bank of Baroda for possession of the undertaking

Analysis:

1. Claim for CIRP costs:
The Tribunal heard various applications, including one for claiming the CIRP costs. The successful Resolution Applicant and the Committee of Creditors (CoC) were represented, along with the erstwhile Resolution Professional (RP). The Tribunal observed that a separate hearing was necessary to decide the merits of each application. As an interim measure, it was decided that the possession of the undertaking should be handed over to the CoC, who would then transfer it to the erstwhile RP. The process of taking inventory and transferring possession was to be video-graphed and conducted in the presence of both parties. The Tribunal ordered the restoration of the Corporate Insolvency Resolution Process (CIRP), with the erstwhile RP continuing in that role. The RP was granted all the privileges and rights available under the CIRP until a final decision was made.

2. Challenge to resolution plan by successful Resolution Applicant:
One of the applications before the Tribunal involved a challenge by the successful Resolution Applicant against the resolution plan. The Applicant contended that they had not been provided with complete information necessary to comply with the terms and conditions of the plan. However, during the proceedings, the Applicant's Senior Counsel stated that they were willing to hand over possession of the undertaking to the CoC, without prejudice to their rights and contentions. The Banks' Counsel argued that all required information had been provided to the Applicant, who had defaulted on payments as per the resolution plan. Due to the conflicting claims and counterclaims, the Tribunal decided that a separate hearing was required to determine the merits of this challenge.

3. Application by Bank of Baroda for possession of the undertaking:
The Bank of Baroda, on behalf of the consortium, filed an application seeking possession of the undertaking and its transfer to a third party to ensure proper maintenance and asset value preservation. The Tribunal, after extensive discussions, decided that possession should be handed over to the CoC, who would then pass it on to the erstwhile RP. The CoC and the RP were directed to exercise caution to prevent asset devaluation, ensure continued production, and maintain the unit as a going concern to protect the interests of workers, employees, and stakeholders. The decision on whether to operate the undertaking or hand it over to a third party was left to the discretion of the CoC and RP. All matters were listed for further consideration on a specified date.

In conclusion, the Tribunal's judgment addressed multiple applications related to the CIRP costs, challenges to the resolution plan, and possession of the undertaking. The decision emphasized the need for a fair hearing to resolve the conflicting claims, ordered the transfer of possession to the CoC and then the erstwhile RP, and directed the parties to act prudently to safeguard the asset's value and stakeholders' interests.