2018 (3) TMI 1267 - Tri - Insolvency and Bankruptcy

Corporate insolvency process - Committee of Creditor (CoC) - whether the Resolution Professional has to take a decision regarding the Resolution applicants eligibility in considering the resolution plan before submission of the Resolution Plan to the CoC and is bound to communicate his decision as to eligibility of resolution applicants to the objectors who are not strangers but one among the resolution applicants - Held that - Only that resolution plan meets the requirement as provided under sub section (2) of section 30 of the I&B code shall present to the CoC. Nothing in the reply affidavit to satisfy that the RP has taken a justifiable decision in regards eligibility of the resolution applicants whose plans were submitted to the CoC. What he relied as per the reply affidavit is the affidavit and documents submitted by the resolution applicants. Those documents not at all produced for the perusal of this Bench. The decision taken by the RP regarding the eligibility of the resolution applicants as per section 29A of the Code is with out considering the objections raised by the applicants in the case in hand. Mere pleading in the reply affidavit that RP has considered all objections raised by the applicants seems to have devoid of any merit. More over the pleading in it indicate that the Ld.RP had no knowledge about the connected persons conviction detailed above in a foreign Court. Whether the RP is duty bound to inform the decisions in respect of the objections regarding Eligibility of the resolution applicants to the objectors? - Held that - RP has to record his reasons for taking any decisions he has to take in the process of finding out a resolution applicant, that he has to record all information and evidence he has collected for enabling to take a decision so as to see that a reasonable prudent person to take a view on the appropriateness of his decisions. What is prohibited is only in making any private communication with any of the stake holders. Even if he wishes to make such communication in the interest of finding out a reputable resolution applicant he can with prior permission of the Adjudicating Authority. Here in this case he neither produced any proof in support of his decisions along with the reply affidavit nor able to submit any materials for the perusal of the Bench at the time of hearing the applications. Information in respect of decision taken by the RP in holding that Tata Steel Ltd, and Vedanta Ltd. is eligible and that what materials he relied upon for holding such a decision is not at all violate Clause 21 of IBBI (I P) Regulation as alleged. In view of the above said it appears to me that Ld. RP is obliged to communicate the decisions, he had taken in holding the eligibility of the disputed resolution applicants overruling the objections of the applicants. Whether this Adjudicating Authority has to take a decision in respect of the eligibility of the resolution applicants under section 29A of the code - Held that - Legislative intention behind introduction of section 29A and proviso to section 30 of the Code is with an object to prevent any tainted stakeholders or any stake holders whose related or connected parties or persons is a defaulter or a convict as per the provisions of section 29A and no such stake holders cannot in any way become a resolution applicant for participating in the bidding for stressed assets. The RP as well as CoC at present is equally responsible for safeguarding the interest and assets of a corporate debtor under the insolvency resolution process and would take as much caution in order to see any applicants or the applicants related or connected persons falls with in the purview of Section 29A. not at all an applicant qualified for submission of a resolution plan. That being the statutory duty upon CoC, it appears to me that this Bench cannot pass an order regarding the eligibility of the resolution applicants as it is under consideration of CoC. Accordingly, these applications are liable to be allowed in part with following directions - (i) A copy of the decision taken by the RP in respect of eligibility of resolution applicant Tata Steal Ltd and Vedanta Ltd, as per section 29A, with supporting reasons for taking the decisions is to be given to the applicant with in three days of the date of this order with proper acknowledgement; (ii) The applicants are allowed to submit its reply or its further objections if any to the decisions taken by the RP to him in person or through by e-mail with in three days of the date of receipt of the copy of the decision as directed above; (iii) The RP is directed to place all the objections of the applicants with supporting documents before the CoC with a copy of this order for its independent consideration as per proviso to section 30 of the Code.

Summary

Issues Involved:
1. Eligibility of Tata Steel Limited to submit a Resolution Plan under Section 29A of the Insolvency and Bankruptcy Code, 2016.
2. Eligibility of Vedanta Limited to submit a Resolution Plan under Section 29A of the Insolvency and Bankruptcy Code, 2016.
3. Jurisdiction of the Adjudicating Authority to entertain applications challenging the decisions of the Resolution Professional before the Committee of Creditors (CoC) approves the Resolution Plan.
4. Obligation of the Resolution Professional to communicate decisions regarding the eligibility of Resolution Applicants to the objectors.
5. Duty of the Adjudicating Authority to decide on the eligibility of Resolution Applicants under Section 29A of the Code.

Issue-wise Detailed Analysis:

1. Eligibility of Tata Steel Limited:
The applicant, Renaissance Steel India Private Limited, contended that Tata Steel Limited was ineligible to submit a Resolution Plan under clauses (d), (i), and (j) of Section 29A of the Insolvency and Bankruptcy Code, 2016. The ineligibility was based on the conviction of Tata Steel UK Limited, a 100% subsidiary of Tata Steel Limited, by the UK Government under the Health and Safety at Work Act, 1974. The applicant argued that the penalty and conviction of Tata Steel UK Limited should disqualify Tata Steel Limited from submitting a Resolution Plan.

2. Eligibility of Vedanta Limited:
The applicant also challenged the eligibility of Vedanta Limited under the same clauses of Section 29A. The contention was based on the conviction of Konkola Copper Mines (KCM), a subsidiary of Vedanta Resources Plc (which holds a significant equity stake in Vedanta Limited), by the Government of Zambia for environmental violations. The applicant produced evidence showing that KCM was convicted and fined for multiple offenses under the Environmental Protection and Pollution Control Act of Zambia.

3. Jurisdiction of the Adjudicating Authority:
The Resolution Professional (RP) and respondents argued that the applications were premature and not maintainable since the Resolution Plans had not yet been approved by the CoC. They contended that any challenge to the Resolution Plans should be made only after the CoC's approval and submission to the Adjudicating Authority under Section 31 of the Code. However, the tribunal held that the applications were maintainable under Section 60(5)(c) of the Code, which allows the Adjudicating Authority to decide on any question of law or facts arising out of or in relation to the insolvency resolution process.

4. Obligation of the Resolution Professional:
The tribunal found that the RP had not adequately communicated his decisions regarding the eligibility of Tata Steel Limited and Vedanta Limited to the objectors. The RP's failure to provide reasons and supporting documents for his decisions was seen as a lapse in his duty. The tribunal emphasized that the RP must act with objectivity and maintain written records of his decisions and the evidence supporting them, as per the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016.

5. Duty of the Adjudicating Authority:
The tribunal concluded that it was not within its purview to decide on the eligibility of the Resolution Applicants directly. Instead, it directed the RP to communicate his decisions and the reasons for them to the applicants, allowing them to submit further objections. The RP was then instructed to present these objections and supporting documents to the CoC for independent consideration as per the proviso to Section 30(4) of the Code.

Conclusion:
The tribunal allowed the applications in part, directing the RP to provide the applicants with copies of his decisions regarding the eligibility of Tata Steel Limited and Vedanta Limited, along with supporting reasons. The applicants were permitted to submit further objections, which the RP was to present to the CoC for consideration. The tribunal emphasized the importance of transparency and objectivity in the RP's conduct and the CoC's responsibility to ensure the eligibility of Resolution Applicants under Section 29A of the Code.