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2021 (10) TMI 1293 - AT - Insolvency and BankruptcyConsideration of Resolution Plan - consideration of Resolution Plan which was received belatedly post expiry of 330 days, despite, extending the period of CIRP by 45 days - fundamental or vested rights vis- -vis the CIRP - Appellant/ Second Respondent takes a stand that the impugned order passed by the Adjudicating Authority had failed to appreciate that the First Respondent/ Prospective Resolution Applicant s Application was a premature one at the moment, since no Resolution Plan was approved for the Corporate Debtor in CIRP . HELD THAT - In the instant case, the Adjudicating Authority on 08.01.2021 in IA No.1079/2020 in CP (IB) No.184/HDB/7/2019 (filed by the 2nd Respondent/Resolution Professional) had granted another 60 days extension from 08.01.2021 expiring on 08.03.2021 and that the 330 days period was also to lapse on the same day - It transpires that the Resolution Professional had re-issued the Form G on 25.01.2021 because of the perceived increase in value of the Corporate Debtor as per Regulation 36-A read with Regulation 36(B)(7) of IBBI (Insolvency Resolution for Corporate Persons) Regulations 2016. The last date for submission of Resolution Plan was on 24.02.2021 and further, that the said date was extended to 01.03.2021, till 06.03.2021 and then, finally till 08.03.2021. This Tribunal is of the considered opinion that application filed by the Resolution Professional on 03.03.2021 (six days before the expiry of 330 days on 09.03.2021) ought to have been determined by the Adjudicating Authority , prior to the passing of the impugned order dated 24.06.2021 (uploaded on 09.07.2021), with a view not to give room for complications and to avoid wider ramifications and implications. Unfortunately, such a course was not resorted to, which in the considered opinion of this Tribunal is not a desirable/ palatable one. Need of Speed - HELD THAT - It cannot be gainsaid that speed is the gist for an effective functioning of the I B Code. As per Section 12(2) of the Code, an application for an extension of Insolvency Resolution Process must be made by Resolution Professional, if directed/ instructed in that regard, by means of a Resolution passed by the 75% majority of the Creditors . The timeline i.e. prescribed is for the reason that liquidation proceedings otherwise should not be for an interminable period, thereby jeopardizing the interest of all Stakeholders in the Corporate Insolvency Resolution Process . Observance of Time Frame - HELD THAT - All the concerned Authorities are necessarily required to adhere to the timeline enunciated in Regulation 40A of the IBBI (Corporate Insolvency Resolution Process for Corporate Persons) Regulations, 2016. No wonder, the I B Code, 2016 provides for the consequences of the period mentioned in Section 12 coming to an end in the event that the said period is over without the receipt of a Resolution Plan or after rejection of a Resolution Plan in terms of Section 31. Adjudicating Authority s Power - HELD THAT - The power of the Adjudicating Authority to extend further time limit cannot be extended beyond 90 days, which is the maximum period in Section 12 of the I B Code. Section 12(3) of the Code further enjoins that any extension of CIRP under this Section shall not be granted more than once and Section 12(3) of the Code is to be read with the third proviso to Section 30(4) which mentions that the maximum period of 30 days specified in the second proviso is permissible, as the only exception to the extension of the period not being granted more than once - Undoubtedly, an extension of time limit for CIRP is a grey/ critical arena. In a case, where CIRP is pending and not completed within 330 days within which the Resolution of stressed asset is to take place, only in an exceptional / extraordinary case, the outer time limit of 330 days can be extended with a view to secure the ends of justice. Effect of Non-Observance of Time Line - HELD THAT - A Tribunal/ Appellate Tribunal is to follow the requirement and discipline of I B Code, 2016, enacted by the Parliament, to streamline the Resolution of Corporate Insolvencies, of course bearing in mind of the fact that the relevant provisions of the Code are well thought of in public interest and to ensure good Corporate Governance. The repercussions in not following the timeline prescribed in IBC are that (i) maximisation of the value assets of the Corporate Debtor will weaken the realisation potential prospect of the Creditors; (ii) The promoters of the Company will remain undischarged from their obligation/liability. The individual who is to proceed against the Company, is suspended from exercising his right for moratorium remains in force till the CIRP period is continuing. It is to be pointed out that the Tribunal/ Appellate Tribunal are showered with restricted jurisdiction mentioned in the I B Code, 2016 and they cannot function as Courts of Equities or exercise plenary powers. In short, they are scrupulously bound by the discipline of statutory provisions and they cannot traverse beyond the parameters of law. Resolution Professional s Duty - HELD THAT - A Resolution Professional is not to be made liable because his perception is incorrect unless it is unreasonable. He is required to take prudent/ reasonable care in arriving at a subjective judgment based on circumstances that the best price , to be permitted by him - As per Section 25(h) of the I B Code, 2016 the Resolution Professional has a duty to invite Prospective Resolution Applicants , who satisfy such criteria as may be laid down by him with the approval of Committee of Creditors , considering the complexity and scale of operations of the Business of the Corporate Debtor and such other conditions as may be prescribed by IBBI to project Resolution Plans , present such Plan(s) to the Committee of Creditors etc. As per Section 30(2) of the I B Code, the Resolution Professional is to examine each Resolution Plan received by him and confirm that it meets the requirements mentioned in sub-section (2). Confidentiality of Plan - HELD THAT - The Resolution Plan furnished by one or the other Resolution Applicant is a confidential one and it cannot be disclosed to any Competing Resolution Applicant nor any view can be taken or objection can be asked for from other Resolution Applicants in regard to one or the other Resolution Plan . It cannot be lost sight of that the conduct of Resolution Professional is important in deciding whether he is guilty of Misfeasance or Fraud or any other Serious Irregularity in the preparation of Resolution Plan . As a matter of fact, the Resolution Plan is confidential in nature . No wonder, the Resolution Professional is to act in an expeditious fashion. In short, an Insolvency Professional is to perform his duties by facing challenges that he come across during CIRP. This Tribunal considering the entire conspectus of the attended facts and circumstances of the case in an holistic fashion and in view of the fact that as per the ingredients of Section 60(5) of the I B Code, the facts/ points of law were raised application filed by the First Respondent/ Prospective Resolution Applicant arising out of the impugned order pertaining to the Insolvency Resolution Process (concerning the Corporate Debtor ) and further that the Adjudicating Authority is to adhere to the procedural aspect prescribed in relevant sections of the I B Code, of course depending on the question of priorities/ question of law and facts involved, and this Tribunal, by adhering to the statutory requirements of I B Code, 2016 directs the Second Respondent/ Resolution Professional to place only the Resolution Plan of First Respondent/ Consortium of Prudent ARC Limited Vizag Minerals and Logistics Pvt. Ltd. ( Prospective Resolution Applicant ) and the Resolution Plan of Sindhu Trade Links Ltd. ( STLL ), which were submitted before the due date, before the Committee of Creditors for its consideration and to complete the CIRP keeping in mind on 07.11.2019, the C.P.(IB) No.184/7/HDB/2019 was admitted by the Adjudicating Authority commencing CIRP against the Corporate Debtor , a timely resolution of stressed assets is a prime factor in the successful working of the Code, the interest of the Stakeholders including the Creditor(s) , effectively balancing within the four corners of Law , and as per I B Code, 2016 and Regulations without any further loss of time. Appeal disposed off.
Issues Involved:
1. Extension of timelines for submission of Resolution Plans. 2. Authority of the Committee of Creditors (CoC) to extend timelines beyond 330 days. 3. Maintainability and locus standi of the prospective Resolution Applicant's application. 4. Confidentiality and consideration of Resolution Plans submitted after the deadline. 5. Adjudicating Authority's jurisdiction and procedural adherence. Detailed Analysis: 1. Extension of Timelines for Submission of Resolution Plans: The primary issue was whether the CoC could extend the timelines for Request for Resolution Plan (RFRP) while two Resolution Plans were already submitted. The Adjudicating Authority observed that the timelines specified in Regulations 36A and 36B are mandatory. The 330-day period had completed on 08.03.2021, and the CoC extended the time at the request of another Resolution Applicant, Vedanta Limited, under the guise of value maximization of the Corporate Debtor. The CoC and the Resolution Professional extended the RFRP timelines beyond 330 days without the Adjudicating Authority's approval, which was deemed contrary to the Code and its Regulations. 2. Authority of the CoC to Extend Timelines Beyond 330 Days: The Adjudicating Authority noted that the CoC does not have the authority to extend RFRP timelines beyond 330 days without specific approval from the Adjudicating Authority. The CoC's decision to extend the timelines was seen as stepping into the shoes of the Adjudicating Authority, which was not permissible. The CoC's action was viewed as a violation of the Code's letter and spirit. 3. Maintainability and Locus Standi of the Prospective Resolution Applicant's Application: The Appellant contended that the Adjudicating Authority addressed the merits of the prospective Resolution Applicant's application without considering the preliminary issue of maintainability and locus standi. According to the Appellant, a prospective Resolution Applicant has no vested right to raise objections in the CIRP, as established in the Supreme Court's judgment in Arcelor Mittal’s case. The Adjudicating Authority was also criticized for not addressing whether the application was premature, given that no Resolution Plan had been approved at that stage. 4. Confidentiality and Consideration of Resolution Plans Submitted After the Deadline: The First Respondent argued that the Resolution Professional's action of considering an additional plan submitted after the deadline compromised the confidentiality of their Resolution Plan. The Adjudicating Authority directed the Resolution Professional and CoC to consider only the two plans received before the 330-day period expired. The Tribunal emphasized that the Resolution Plan is confidential and cannot be disclosed to competing Resolution Applicants. 5. Adjudicating Authority's Jurisdiction and Procedural Adherence: The Tribunal highlighted the importance of adhering to the procedural aspects prescribed in the relevant sections of the I&B Code. The Adjudicating Authority has the jurisdiction to determine questions of priorities, law, or facts arising out of or in relation to Insolvency Resolution. The Tribunal noted that the Adjudicating Authority should have decided the extension application (I.A. No.120 of 2021) before passing the impugned order in I.A. No.244/2021 to avoid complications. Conclusion: The Tribunal directed the Resolution Professional to place only the Resolution Plans of the First Respondent and Sindhu Trade Links Ltd., which were submitted before the due date, before the CoC for consideration. The Tribunal also set aside the adverse observations made by the Adjudicating Authority against the CoC and the Resolution Professional, emphasizing the need for a timely resolution of stressed assets within the framework of the I&B Code.
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