2021 (7) TMI 1316 - Tri - Companies Law

Approval of Resolution Plan - Section 31(1) of I B Code - direction to Resolution Professional to continue to conduct his hold as Resolution Professional of the Corporate Debtor - implementation of Resolution Plan in the manner set out in the resolution plan - approval of appointment of Monitoring Agent (MA) and Monitoring Committee (MC) from the date of approval of resolution plan - valuation of the assets in relation to the Corporate Debtor - HELD THAT - From reading of the extracted minutes from the 2nd CoC meeting would reveal the fact that the appointment of the Valuers in relation to the Corporate Debtor was deliberated in the meeting of the CoC and that the name proposed by the IRP was accepted by the CoC and accordingly the valuation was done by those valuers - it is seen from the minutes of the 7th CoC meeting that the third valuer Mr. Vaidya Raman was appointed by the Resolution Professional who visited the premises and conducted the valuation to the non-core assets. In the present case, it is seen from the minutes extracted from the 6th CoC meeting that RP further apprised the CoC members, that due to significant difference in the value of land and building submitted by the valuers appointed by IRP, the RP had to appoint third valuer in accordance with provisions of Regulation 35 of CIRP Regulations, 2016. Accordingly, the third valuer has submitted his report before the RP and accordingly the fair value and the Liquidation value in relation to the Corporate Debtor was arrived at by the Resolution Professional - it is clear that the RP has arrived at a Fair Value and the Liquidation Value based on the average of all the three valuers and the same has been done in accordance with Regulation 35 of the IBBI (IRPCP) Regulations 2016. Further, the valuation certificate dated September 2019 relied on by the promoter/suspended Director of the Corporate Debtor would be of no relevance as the same was not done in accordance with the Regulations framed under the IBC, 2016. This Adjudicating Authority finds that there was no error committed by the IRP/RP in so far as appointing the registered valuers in relation to the Corporate Debtor, nor there was any error on the valuation being submitted by those Registered valuers and as a consequence thereof, the objections as raised by all the objectors in relation to the valuation of the Corporate Debtor are overruled - application dismissed. Non-consideration of Section 12A Application - HELD THAT - A perusal of the minutes would show that the promoter of the Corporate Debtor has proposed for a 12A settlement only at the 9th CoC meeting, when the Resolution Plan of the Resolution Applicant was about to be put to vote. Further, it is also seen that the Petitioning Creditor viz. Tourism Finance Corporation of India (TFCI) was also kept in dark about the 12A proposal by the promoters and also flagged an issue stating that the letter has been addressed to the CoC and not to them. However, it is seen that the said agenda of proposal to be made under Section 12A was not considered by the CoC and that they proceeded to vote for the Resolution Plan - it is seen that the proposal as projected by the Learned Senior Counsel for the promoters to be made under Section 12A, seems to be only an eye wash and a dilatory tactics to delay the process of CIRP in relation to the Corporate Debtor and that the fact that the proposal has been mooted only during the eleventh hour is to stall the Resolution Plan as moved by the Resolution Applicant - the allegations of the promoters that their Section 12A Application was not considered by the RP and the CoC do not hold any merits and stands overruled. Procedural Irregularities - HELD THAT - It is significant to note here that, a statutory provision regulating a matter of practice or procedure will generally be read as directory and not mandatory. Thus, even though the objectors to the Resolution Plan have alleged many procedural irregularities in relation to the conduct of the proceedings in relation to the CoC; however those objectors have miserably failed to establish as to what prejudice has been caused to them in respect of the same. Further, a person who has been inducted as a member of the CoC in its 6th meeting cannot be allowed to question the actions taken by the CoC in the past meetings - the objections as raised by the objectors in relation to the procedural irregularities in relation to the conduct of the Corporate Insolvency Resolution Process, are not so grave in order to defeat the Resolution Plan as filed by the Resolution Professional - Application dismissed. Related Party - HELD THAT - This Tribunal is of the considered view that the Applicants are related party in respect of the Corporate Debtor and that the decision of the IRP/RP in categorizing the Applicant viz. M/s. Dharani Finance Limited as Related Party of Corporate Debtor is free from all legal infirmities and does not warrant any interference by this Adjudicating Authority. Accordingly, application stands dismissed. Discrimination in the Resolution Plan - HELD THAT - The contentions of the Learned Senior Counsel for the objectors that differential treatment are being made to them since they are related party in respect of the Corporate Debtor do not hold any merit in view of the discussions made supra and also the decisions referred in support of the same. Hence the objections raised by the objectors in relation to the said issues are overruled. Pending Avoidance Application - HELD THAT - In the present case, a provision is made in the Resolution Plan as to the fate of the avoidance Application pending in relation to the Corporate Debtor and hence the objections raised by the objectors in this regard are required to be eschewed. Objections by Prospective Resolution Applicant - HELD THAT - It is evident that M/s. Apex Laboratories Private Limited, is not even an unsuccessful Resolution Applicant but only an intended prospective resolution applicant, who has failed to submit the Resolution Plan within the timelines fixed by the CoC and M/s. Apex Laboratories Private Limited has no vested right that his resolution plan ought to have been considered by the CoC and no challenge can be preferred thereof before this Adjudicating Authority. Hence, in view of the discussions made supra, the objections raised by the Applicant are overruled and as a consequence, application stands dismissed. Approval of Resolution Plan - HELD THAT - From the catena of judgments rendered by the Supreme Court on the scope of approval of the Resolution Plan, it is amply made clear that only limited judicial review is available for the Adjudicating Authority under Section 30(2) and Section 31 of IBC, 2016 and this Adjudicating Authority cannot venture into the commercial aspects of the decisions taken by the Committee of Creditors. The Resolution Plan is hereby approved and is binding on the Corporate Debtor and other stakeholders involved so that revival of the Debtor Company shall come into force with immediate effect and the Moratorium imposed under section 14 of IBC, 2016 shall not have any effect henceforth - Application allowed.

Summary

Issues Involved:
1. Approval of the Resolution Plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016.
2. Appointment of the Resolution Professional and the conduct of the Corporate Insolvency Resolution Process (CIRP).
3. Valuation of the Corporate Debtor’s assets.
4. Procedural irregularities and compliance with IBC regulations.
5. Consideration of Section 12A Application.
6. Classification of creditors as related parties.
7. Allegations of discrimination in the Resolution Plan.
8. Pending avoidance applications.
9. Objections by prospective resolution applicants.

Detailed Analysis:

1. Approval of the Resolution Plan:
The Resolution Professional (RP) sought approval of the resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016. The plan proposed to infuse ?423 Crore, addressing the interests of all stakeholders, including secured and unsecured financial creditors and operational creditors. The plan was approved by the Committee of Creditors (CoC) with a majority of 87.39%.

2. Appointment of the Resolution Professional and Conduct of CIRP:
The Corporate Insolvency Resolution Process (CIRP) was initiated on 05.05.2020, and Mr. Mukesh Kumar Gupta was appointed as the Interim Resolution Professional (IRP). The IRP made a public announcement and constituted the CoC based on received claims. Subsequently, the CoC replaced the IRP with the current RP, Mr. Radhakrishnan Dharmarajan, who conducted further CoC meetings and processed the resolution plans.

3. Valuation of the Corporate Debtor’s Assets:
The valuation of the Corporate Debtor’s assets was a significant point of contention. The IRP appointed two registered valuers, and due to discrepancies in their valuations, a third valuer was appointed. The fair value and liquidation value were determined to be ?730.885 Crore and ?569.33 Crore, respectively. Objections were raised regarding the valuation process, alleging undervaluation and procedural lapses. However, the Tribunal found that the valuation was conducted in compliance with Regulation 35 of the IBBI Regulations, 2016, and overruled the objections.

4. Procedural Irregularities and Compliance with IBC Regulations:
Several objections were raised regarding procedural irregularities, such as delays in public announcements, verification of claims, and issuance of the Information Memorandum. The Tribunal noted that while there were deviations from the model timelines, these did not significantly prejudice the process. The Tribunal emphasized that procedural provisions regulating practice or procedure are generally directory, not mandatory.

5. Consideration of Section 12A Application:
The promoters’ request for a Section 12A withdrawal was raised late in the process, during the 9th CoC meeting. The CoC did not consider this request, as it was not properly presented through the Petitioning Creditor and was seen as a dilatory tactic. The Tribunal found no merit in the promoters' allegations regarding the non-consideration of the Section 12A application.

6. Classification of Creditors as Related Parties:
M/s. Dharani Finance Limited challenged their classification as a related party. The Tribunal upheld the RP’s decision, stating that the applicants failed to demonstrate that their debts were due solely on account of conversion or substitution of debt into equity shares. The Tribunal dismissed the applications challenging the related party classification.

7. Allegations of Discrimination in the Resolution Plan:
Objections were raised about differential treatment of related and unrelated parties in the distribution of amounts. The Tribunal noted that the CoC, in its commercial wisdom, has the discretion to approve differential payments, provided the plan complies with the IBC and its regulations. The Tribunal found no merit in the allegations of discrimination.

8. Pending Avoidance Applications:
Concerns were raised regarding the treatment of avoidance applications in the Resolution Plan. The Tribunal referred to the decision in Venus Recruiters Pvt. Ltd. vs. Union of India, noting that the plan provided for the handling of such applications, and thus, the objections were dismissed.

9. Objections by Prospective Resolution Applicants:
M/s. Apex Laboratories Private Limited, a prospective resolution applicant, sought to refix timelines and issue the Information Memorandum. The Tribunal found that the applicant had no vested right to have its plan considered after failing to submit within the stipulated timeframe. The Tribunal dismissed the application, citing the Supreme Court’s ruling in Arcelor Mittal India Private Limited vs. Satish Kumar Gupta.

Conclusion:
The Tribunal approved the Resolution Plan, finding it compliant with the mandatory requirements under the IBC. The objections raised were overruled, and the Resolution Professional was directed to hand over all records to the Resolution Applicant for implementation. The moratorium under Section 14 of the IBC was lifted, and the Resolution Plan was declared binding on all stakeholders.