2021 (3) TMI 1413 - AT - Insolvency and Bankruptcy

Legality of Resolution Plan - disallowing the terms contemplated in Clause 15.15.5 of the Resolution Plan, thus making the entire Plan unviable and unfeasible - Appellant contends that the Adjudicating Authority has while purportedly approving the Resolution Plan dated March 11, 2019, submitted by the Appellant under Section 31(1) of the Code, unilaterally made certain modifications to the Plan and increased the outflow of the Appellant beyond the sum of ₹400 Crore offered by the Appellant in the Plan, without the consent of the Appellant/Resolution Applicant - HELD THAT - In the instant case, the Adjudicating Authority, instead of approving or rejecting waivers, approvals and extinguishment sought in the Resolution Plan, has only directed the Resolution Applicant to seek such waivers, approvals and extinguishment from relevant authorities. Therefore, it cannot be concluded that the Adjudicating Authority has unilaterally altered or modified the Resolution Plan. Thus, the Appellants contend that the Adjudicating Authority has unilaterally altered the plan duly approved by the 'CoC', without the Resolution Applicant's consent is without any basis. Therefore, the Appellants contend that by not granting the waiver, the Adjudicating Authority has interfered in the 'CoC commercial decision is misconceived. The Adjudicating Authority has not in any manner mandated or directed SSN to make payments of the transfer fee, consideration, premium, arrears of lease rent, penalties, interest or any other payment to WBIDC . The CoC has approved the Resolution Plan, fully aware of Clause 15.3, Clause 15.12 and Clause 15.14 (VI)(g). The Resolution Plan explicitly states that if waivers are not granted or the assumptions made are not true, it will not have a bearing on the Resolution Plan's successful implementation. This Appeal is filed to avoid anticipated action on refusal to implement the Approved Plan - Appeal dismissed. Resolution plan approved - the total payment to the creditors of the Corporate Debtor under the Resolution Plan is ₹ 364.5 Crores, which is far less and below the liquidation value of the Corporate Debtor, which is ₹ 614 crores and the Resolution Plan has been approved despite the fact that there is no maximisation of the assets of the corporate debtor to satisfy the debts of the all the stakeholders concerned - HELD THAT - There has been no interaction or communication between the Resolution Professional and Mr Anoop Krishna in relation to the CIRP of the Corporate Debtor. Mr Anoop Krishna became a director of the group company of the Resolution Applicant. The process of selecting the Successful Resolution Applicant had been conducted fairly and transparently. All three outbidding processes that were conducted, where open processes, were conducted in the presence of Members of the Committee of Creditors and Resolution Applicants. In each process, multiple rounds of outbidding took place and each participating Resolution Applicant was given the same opportunity to outbid the other Resolution Applicant's. Therefore it was not possible for any single Resolution Applicant to influence the outbidding process - It appears that instant appeal is a mala fide attempt on the part of the Appellant to disturb the Resolution Process, and the same cannot be sustained. In the circumstances as stated, it is believed that the Appeal sans merit and deserves to be dismissed. Approved resolution plan - it is alleged that the Adjudicating Authority has erred in holding that the Respondent No.1 Corporate Debtor is the owner of the Wind Mill Project at Dhule, Maharashtra - HELD THAT - The Information Memorandum of the Corporate Debtor provided to all the Resolution Applicants and Members of the CoC has mentioned the Appeal's pendency before Debt Recovery Appellate Tribunal. Therefore, it is clear that all Resolution Applicants have been made aware of the Appeal's pendency. Successful Resolution Applicant is to be bound by order of the Appeal, which may either confirm or set aside the sale of Wind Mill asset - the Adjudicating Authority has also mentioned the above things in its Order and stated that the Corporate Debtor's right to hold the Wind Mill asset is not affected unless the Debt Recovery Appellate Tribunal reverses it. Thus it is clear that the Adjudicating Authority has neither exceeded its jurisdiction nor has determined the title of the property but has merely taken note of the facts at hand in passing the impugned Order - appeal dismissed. Approved Resolution plan - eligibility of 'S.S. Natural Resources Private Limited' a Successful Resolution Applicant (from now on referred to as the H-1 Bidder) to submit a Resolution Plan regarding Ramsarup Industries Ltd (from now on referred to as the Corporate Debtor) - HELD THAT - Shyam Ferro is not an NPA and does not have an investment in a company that is an NPA. Neither Shyam Emco Infrastructure Ltd nor Emco Power Ltd is NPA. They do not have an investment in an NPA company. By merely having a group company, which has shareholders, who are also shareholders in an NPA entity, does not disqualify the Successful Resolution Applicant SSN - eligibility criteria under Section 29 A of the Code are not violated, and SSN is eligible under Section 29 A of the Code to submit a Resolution Plan for the Corporate Debtor. The Adjudicating Authority's finding that the Successful Resolution Applicant SSN is not disqualified under Section 29 A of the Code to submit a Resolution Plan needs no interference from this Appellate Tribunal - the Appeal sans merit and deserves to be dismissed. Rejection of application - only ground for rejection of the Application is that the Committee of Creditors had already approved the Resolution Plan, and the Appellant had not submitted its claim before the Resolution Professional within the time stipulated by the Code - HELD THAT - The CoC took considerable time and efforts to finalise and approve the Resolution Plan with a 74.41% vote share. The COC has taken approximately one year and three months on the Resolution Process of the Corporate Debtor and could approve the corporate debtor's final Resolution Plan. The Appellant is now seeking to turn back the clock in the garb of the Hon ble Supreme Court s order by misinterpreting it, which is not sustainable. The appellant wants to cover up its shortcomings. There is a hiatus on the Appellant part for not filing its claim with the Resolution Professional within the prescribed timelines. Appellant is now seeking to turn back the clock of the entire resolution process spanning a period of approximately 15 to 16 months, jeopardising the successful Resolution Plan involving a debt of about ₹ 6,000 crores, which has been approved of 74.41% of the voting share. It will further jeopardise the claims of the various Financial Creditors and Operational Creditors of Respondent No. 1 Corporate Debtor - the Appeal sans merit and deserve to be dismissed. Admissibility of claims - Appellant contends that the Resolution Professional had no power to adjudicate and reject the claim submitted by him - HELD THAT - The IRP/Resolution Professional is empowered to make the best estimate of the claim based on the information available with him. IRP/RP is further authorised to revise the amounts of the claim admitted, including the estimates of the claim made under Regulation 14(1), when he comes across additional information warranting such revision - In the instant case, Resolution Professional sought additional supporting documents concerning the claim. But the Appellant failed to submit the documents required to be filed as per Regulation 8 of the CIRP Regulations. Verification of claim by the Resolution Professional cannot be treated as an adjudicatory exercise. Therefore, Appellants contention that Resolution Professional has exceeded jurisdiction is not sustainable. The RP had rejected the claim of the Appellant for want of sufficient evidence as required under Regulations. The Adjudicating Authority also found no illegality or irregularity rejected the Company Application against Resolution Professional's order - Appeal dismissed. Approval of Resolution plan - Appellant contends that the Adjudicating Authority has approved the Resolution Plan even though the Resolution Plan in respect of the Corporate Debtor envisages the transfer of land belonging to the Appellant and not the Corporate Debtor - HELD THAT - Since Mr Ashish Jhunjhunwala, the Appellant and the Corporate Debtor promoter, had filed An Application under Section 10 of I B Code, 2016 of the Corporate Debtor. Therefore, after the same was admitted on 8 January 2019, he has been a part of almost all CoC meetings from the beginning, including the 1st CoC meeting, which was conducted on 7th February 2018. Time and again, various issues about the Durgapur unit/land had been discussed in the CoC meetings in the presence of Mr Jhunjhunwala. However, he failed even once to point out that the Appellant was to be treated as a separate entity, and the land could not be part of the Resolution Process. For the 1st time, in the 21st CoC meeting held on 11 February 2019, Mr Ashish Jhunjhunwala raised an objection stating that the land at the Durgapur does not belong to the Corporate Debtor. The same was done only at the fag end and when Mr Jhunjhunwala realised that the CIRP was at the final stage against his expectations - the Corporate veil should be pierced, and the real Promoter/Management s acts and intention cannot be ignored - Appeal dismissed. Recovery of dues - pari passu charge over movable fixed asset - impugned order challenged on the ground that the Adjudicating Authority has arbitrarily dealt with the Appellant s Application in para No. 18 to 23 of the Impugned Order and while dismissing the same without looking into the documents on record has erroneously held that the Appellant has failed in proving that it has an exclusive charge over the Air Separation Plant - HELD THAT - It is also important to mention that the security interest was always available with Pegasus during the corporate insolvency resolution process of the Corporate Debtor. However, concerns were raised only after approval of the Resolution Plan by the CoC . The distribution of proceeds amongst the lenders being an inter-creditor issue. It was the CoC along with the Process Advisers to the CoC that prepared and confirmed the methodology of distribution of proceeds on the basis of security structure. The security interests recorded for each creditor has been made available, to be scrutinised and inspected by the CoC during the CIRP . The distribution methodology has been repeatedly shared with the members of CoC vide various emails. The CoC in its 24th meeting held on 6 March 2019 discussed the methodology of distribution and was put to vote. The members of the CoC were specifically asked to review the final distribution methodology that was prepared. The Pegasus sent an email to the RP on 19 March 2019, i.e. after the voting on the Resolution Plan had concluded, and the Resolution Plan along with the distribution methodology as per the security interest was approved by a vote share of 74.41% - Appeal dismissed.

Summary

Issues Involved:

1. Modification of the Resolution Plan by the Adjudicating Authority.
2. Viability and feasibility of the Resolution Plan.
3. Discrimination between Financial Creditors and Operational Creditors.
4. Eligibility of the Resolution Applicant under Section 29A of the I&B Code.
5. Ownership and transfer of assets in the Resolution Plan.
6. Claims and objections by various stakeholders.
7. Implementation of the Resolution Plan and the impact of the Covid-19 pandemic.

Issue-wise Detailed Analysis:

1. Modification of the Resolution Plan by the Adjudicating Authority:
The Appellant contended that the Adjudicating Authority unilaterally modified the Resolution Plan by imposing additional financial obligations, rendering the Plan unviable. The Authority did not approve the waiver of transfer fees and other charges related to the transfer of 315 acres of land in Kharagpur, leading to an increased financial burden on the Appellant. The Adjudicating Authority clarified that any exemption for payment must be dealt with by the respective authorities if applied for, and it did not unilaterally alter the Plan.

2. Viability and Feasibility of the Resolution Plan:
The Appellant argued that the modifications made by the Adjudicating Authority affected the Plan's feasibility and viability. The Covid-19 pandemic further exacerbated the situation, making the Plan unviable. The Resolution Professional and the Adjudicating Authority maintained that the Plan was viable and feasible, and the Appellant's claims were based on presumptions. The Adjudicating Authority noted that the Appellant had not participated in the Monitoring Agency meetings and had not paid any amount towards the implementation of the Plan.

3. Discrimination between Financial Creditors and Operational Creditors:
The Appellant contended that the Resolution Plan discriminated against Operational Creditors, who should receive the same treatment as Financial Creditors. The Adjudicating Authority and the Resolution Professional argued that distinctions could be made between creditors who are not similarly situated, and the Plan provided for equitable treatment of all creditors. The Supreme Court's judgment in Essar Steel India Ltd. v. Satish Kumar Gupta was cited, which held that differential treatment of creditors is permissible.

4. Eligibility of the Resolution Applicant under Section 29A of the I&B Code:
The Appellant challenged the eligibility of the Successful Resolution Applicant (S.S. Natural Resources Pvt. Ltd.) under Section 29A, alleging that its group companies had defaulted on loans. The Resolution Professional and the Adjudicating Authority found that the Appellant did not provide sufficient evidence to establish ineligibility. The Adjudicating Authority upheld the eligibility of the Successful Resolution Applicant.

5. Ownership and Transfer of Assets in the Resolution Plan:
The Appellant (Vanguard Credit and Holdings Pvt. Ltd.) claimed ownership of 52.49 acres of land in Durgapur, which was included in the Resolution Plan. The Adjudicating Authority found that the land was mortgaged to the Financial Creditors and was essential for the Corporate Debtor's business. The Resolution Plan provided for the transfer of the land to the Successful Resolution Applicant, and the Adjudicating Authority upheld this provision.

6. Claims and Objections by Various Stakeholders:
Several stakeholders, including Pegasus Assets Reconstruction Pvt. Ltd. and Indian Renewable Energy Development Agency Ltd. (IREDA), raised objections to the Resolution Plan. Pegasus claimed an exclusive charge over certain assets, while IREDA contested the inclusion of a Wind Mill Project in the Plan. The Adjudicating Authority found that the claims were not substantiated and upheld the Resolution Plan.

7. Implementation of the Resolution Plan and the Impact of the Covid-19 Pandemic:
The Appellant argued that the Covid-19 pandemic made the Resolution Plan unviable, invoking the Force Majeure Clause. The Adjudicating Authority noted that the Plan was approved before the pandemic, and the Appellant had already defaulted on its obligations. The Authority directed the Monitoring Agency to take steps for implementing the Plan and to move for liquidation if the Successful Resolution Applicant failed to comply.

Conclusion:
The National Company Law Appellate Tribunal dismissed all appeals, upholding the Resolution Plan approved by the Adjudicating Authority. The Tribunal directed the Monitoring Agency to ensure the implementation of the Plan and take appropriate action if the Successful Resolution Applicant failed to comply. The Tribunal emphasized the importance of adhering to the commercial wisdom of the Committee of Creditors and the need for timely resolution of insolvency cases.