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2023 (7) TMI 1400 - AT - Insolvency and BankruptcyContinuation or stay in the liquidation order of the Corporate Debtor - eligibility under Section 29A of the IBC to submit a resolution plan - resolution plan unilaterally - manner of rejection of the resolution plan can be deemed to have been marred by material irregularity in the conduct of CIRP of the Corporate Debtor by the RP or not - HELD THAT - After due deliberations, it is the CoC members who advised the RP that only Section 29A compliant plan should be placed before CoC for consideration and voting. Given that CoC had decided that only Section 29A compliant resolution plan can be placed for consideration of CoC members and further that the CoC had sought the opinion of the RP on the Section 29A eligibility of Epitome, it cannot be said that the RP had exceeded his jurisdiction or had acted unilaterally or that RP had supplanted the commercial wisdom of the CoC. Further, the fact that the RP had opined that the Appellant was not eligible in terms of Section 29A criteria cannot be held against the RP simply because the opinion of the RP did not suit the interest of the Appellant - Further it is the CoC which took the decision to intimate the decision of the RP to Epitome which the RP carried out dutifully vide their email dated 16.07.2021. It is significant to note that the 29th CoC meeting was held on 15.07.2021 which pre- dated the letter from the RP to the Appellant informing them about their ineligibility which was dated 16.07.2021. Thus what was conveyed by the RP to the Appellant also clearly had the sanction of the CoC. It is also noticed that it was the CoC which had directed the RP to give his opinion on the Section 29A compliance of the Appellant and in terms of the IBC, the RP was duty-bound to give his views to the CoC. The CoC members having seconded the RPs opinion after due consideration of all facts presented before it by the RP, it can be safely inferred that this acquired the character of being the final and determinative opinion of the CoC based on the exercise of its own commercial wisdom and definitely not one which was foisted upon the CoC by the RP unilaterally. Thus there is no basis for holding this action on the part of the RP to be in breach of the settled proposition of law. There are no hesitation in holding that there is no substance in the contention of the Appellant that the RP had usurped the role of the CoC in rejecting the resolution plan of the Appellant and in suo motu determining ineligibility of the Appellant in terms of Section 29A of IBC. It was the CoC which had requested the RP to field his views on the Section 29A eligibility of the Appellant. Thus in giving the prima facie opinion as to whether the Appellant was Section 29A compliant or not, the RP did not tender the opinion on his own volition but on the specific directions and on behest of the members of the CoC. Whether the liquidation order passed by the Adjudicating Authority should be allowed to be completed or be set aside? - HELD THAT - Both Epitome, the Appellant in the first appeal and Sanghathan, the Appellant in the second appeal have contended that the liquidation order passed by the Adjudicating Authority should be set aside on grounds of the alleged material irregularities in the CIRP of the Corporate Debtor. The RP cannot be said to have exceeded the powers vested upon it by the IBC. It is reiterated that there is no sound basis to the claim of the Appellant that the RP unilaterally rejected the resolution plan leading to material irregularity in the CIRP of the Corporate Debtor. It was a duly considered and unanimous decision of the CoC not to put the resolution plan of the Appellant for consideration and voting. Further we notice that the liquidation of the Corporate Debtor was unanimously approved by the CoC with 100% votes in favour of liquidation in the 30th CoC meeting held on 19.07.2021. Prima-facie on this count, no illegality or impropriety can be attributed to CIRP process undertaken by the RP. The CoC had made all endeavors for resolution of the Corporate Debtor in the first place and had voted upon liquidation only as the last resort. The resolution process has run for more than 3 (three) years before the liquidation resolution was passed by the CoC. Thus reading any ulterior motive behind this decision is misconceived and lacks foundation. There are no reasons to disagree with the decision of the Adjudicating Authority in passing the liquidation order of the Corporate Debtor as a going concern having been so voted and unanimously recommended by the CoC in the exercise of its commercial wisdom - there are no merit in both the appeals - appeal dismissed.
Issues Involved:
1. Material irregularities in the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor. 2. Whether the liquidation order passed by the Adjudicating Authority should continue to be implemented or be stayed. Summary: Issue 1: Material Irregularities in CIRP - Appellant's Contention: Epitome Components Pvt. Ltd. argued that the Resolution Professional (RP) unilaterally rejected their resolution plan by wrongly declaring them ineligible under Section 29A of the Insolvency and Bankruptcy Code (IBC). They claimed that Sushma and Nalini, who were classified as promoters of Videocon Industries Limited (VIL), had negligible shareholding and should not have been considered related parties. The RP's failure to place their resolution plan before the Committee of Creditors (CoC) was a material irregularity. - Respondent's Rebuttal: The CoC and RP contended that Sushma and Nalini were indeed promoters of VIL and thus, Epitome was ineligible under Section 29A. The RP had sought clarifications and legal opinions, which were discussed in the 29th CoC meeting. The CoC, in its commercial wisdom, decided not to place Epitome's resolution plan for voting. - Tribunal's Findings: The Tribunal found that the RP had acted within his jurisdiction and had transparently placed all relevant information before the CoC. The CoC, after due deliberation, decided that only Section 29A compliant plans should be considered. The RP's actions were not unilateral but were based on the CoC's directions. There was no material irregularity in the CIRP process. Issue 2: Liquidation Order - Appellant's Contention: Both Epitome and Marathwada Audogik and General Kamgar Sanghatan argued that the liquidation order should be set aside. Epitome claimed they were still interested in reviving the Corporate Debtor and that the liquidation process lacked foundation. Sanghatan contended that the CoC failed to consider the interests of all stakeholders, especially the livelihood of 134 families dependent on the Corporate Debtor. - Respondent's Rebuttal: The CoC argued that the liquidation decision was taken after exhaustive efforts to resolve the insolvency. The CoC had unanimously approved the liquidation with 100% votes. The liquidation process was near completion, and a successful bidder had been declared. The commercial wisdom of the CoC is paramount and cannot be challenged. - Tribunal's Findings: The Tribunal upheld the liquidation order, noting that the CoC had made all efforts for resolution before deciding on liquidation. The decision was taken in the CoC's commercial wisdom and was not influenced by any ulterior motives. The Adjudicating Authority had passed a speaking order, and the liquidation process was conducted transparently. The Tribunal found no merit in the appeals and dismissed them, allowing the liquidation process to proceed. Conclusion: The Tribunal dismissed both appeals, finding no material irregularity in the CIRP and upholding the liquidation order passed by the Adjudicating Authority. The commercial wisdom of the CoC was deemed paramount, and the liquidation process was allowed to continue.
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