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2018 (6) TMI 853 - Tri - Insolvency and BankruptcyResolution process initiated at the instance of the Resolution Professional - Whether the resolution professional exceeds his power in appointing professionals, outsourced the work in violation of circular No. IP/003/2018 issued by the IBBI and incurred exemplary cost in violation of any of the provisions of the Code and Regulations and circular? - Held that - Truly all the cost he spent out of resolution process must be ratified by the CoC and in the case in hand the CoC seen responsible for fixing or rather approving the cost which according to us is at an unreasonable rate. No doubt it gives an additional financial burden to a sinking company which is under resolution. Who has to bear this cost? None other than the corporate debtor. If the RP has taken too much care he could have very well avoided so many appointments. When he was asked why he appointed 22 representatives to monitor the corporate debtor he would say that when he took over the company the management and workmen were not responsive to provide information and to ascertain the correctness of the information he appointed them. The above said discussions leads to a conclusion that ld. RP not taken any care to ensure that such resolution costs are not unreasonable as per Regulation 27. So also not strictly followed Reg. 21(3) of IBBI(IRP for Corporate Persons) Regulations, 2016 in respect of issuing notice of meetings and in violation of the circular outsourced most of his works to his interested persons. This point is answered accordingly. Whether non-consideration of revised offer of resolution applicant Ultra Tech amount to violation of any of the provisions of the I&B Code and Regulations and against the objects of the Code? - Held that - The revised offer of the Ultra tech is to be considered by the CoC and non-consideration of the revised offer is found not legally sustainable and is against objective of maximization of value as provide in the Code and is in violation of the provisions of the Code and Regulations as discussed above. This point is answered accordingly. Whether there is any discrimination against the unsecured financial creditors at par with other financial creditors and the Resolution Plan submitted for the approval is contrary to the scheme of the I&B Code 2016? - Held that - Any resolution applicant who can satisfy the claim of EARC and IDBI can get an approval of its plan by a majority of votes share is a fact brought to our notice and no consideration of very similar financial creditors at par with IDBI add strength to the submission of the ld. Counsel for the above referred Banks that practice of allotment of claim is not based on any concrete basis or norms. So no doubt it amount to discrimination against the above refereed two banks. In the above said view we find some force in the argument advanced on the side of the Banks and satisfied that the plan under dispute requires modification. This point is answered accordingly. Whether the resolution professional ignored any of the operational creditors claim and not honoured their claims as alleged by the Operational Creditors? - Held that - Here in this case one unsecured creditors was given a haircut up to 90% another given 27% haircut and one another given no haircut. In the case of operational creditors whose claims not go beyond one crore is offered no haircut, operational creditors whose dues vary form 1 crore to 5 crores given a haircut of 40% or 1 crore which ever is higher. Operational creditors dues very from 5 Crores to 10 crores 25% of 2 crores and if it exceeds 10 crores 5% of 2.5 crores. The above said factors only adds strength to the contentions of creditors that their claims not considered strictly by the RP in accordance with the Code and Regulations. So the contention that the plan submitted for approval does not contravene any of the provisions of the law for the time being in force is found not true. We do not find any reason to doubt its bona fide. In the interest of healthy trade competition why not its claim is considered?. No valid answer other than stressing on the timeline as specified in the Process Document and evaluation matrix offered. In view of the above said discussion we are unable to hold that there is no discrimination among the creditors who are equal and reduction offered to the operational creditors too is not in accordance with the regulations and within the objective of the Code. Order - The period of duration of litigation on account of CA 227/18 and other applications filed after the date of CA 227/2018 stands excluded. The CIR Process is to be concluded expeditiously before 24.06.2018. (ii) The resolution professional is directed to accept the revised offer quoting the bid amount ₹ 1021.70 crores from UltraTech within 3 days from the date of this order and place it along with the resolution plan of Ultra Tech before the CoC. (iii) The CoC is directed to consider the revised offer along with the resolution plan of Ultra Tech by giving an opportunity to have hearing if any for further modification is found necessary and to take appropriate decision bear in mind the object of the Code. (iv) The CoC is also directed to reconsider the resolution plan of RPPL, if the resolution applicant is willing to raise the offer above the offer of Ultra Tech to be placed before it by the RP along with the resolution plan of Ultra Tech. (v) RP is also directed to comply the provisions of the Code and regulations in submitting the revised offer before CoC and in issuing notice to the director of the suspended board of the corporate debtor and notice also is to be issued one among the operational creditor who filed the above referred application as a representative if the requirement of section 24 (3)(c) of the Code is satisfied.
Issues Involved:
1. Mismanagement and misconduct by the Resolution Professional (RP). 2. Non-consideration of revised offer by UltraTech Cement Limited. 3. Discrimination against unsecured financial creditors. 4. Ignoring claims of operational creditors. 5. Approval of the resolution plan by the RP. Detailed Analysis: Issue 1: Mismanagement and Misconduct by the Resolution Professional (RP) The applications alleged serious misconduct and mismanagement by the RP, including wrongful losses to the Corporate Debtor, improper asset valuation, and excessive delegation of duties. The RP was accused of violating Section 24 of the Insolvency and Bankruptcy Code (IBC) and Regulation 21(3)(a) of the Insolvency and Bankruptcy Regulations, 2016. The Tribunal found that the RP had indeed violated these provisions by excluding directors from crucial meetings and failing to issue proper notices with agendas. The RP was also found to have incurred unreasonable resolution costs, violating Regulation 27, which mandates that such costs should not be unreasonable. Issue 2: Non-consideration of Revised Offer by UltraTech Cement Limited UltraTech Cement Limited argued that their revised offer, which was higher than the accepted bid, was not considered by the RP and the Committee of Creditors (CoC). The Tribunal found that the RP and CoC had acted unfairly and arbitrarily by not considering the revised offer, which was submitted within the stipulated time under Section 12 of the IBC. The Tribunal held that the process documents and evaluation criteria used to exclude UltraTech's revised offer were not legally binding and violated the objective of maximizing asset value. Issue 3: Discrimination Against Unsecured Financial Creditors Applications by SBI Hong Kong and EXIM Bank alleged discrimination in the treatment of their claims compared to other financial creditors like IDBI. The Tribunal found that the RP had allowed the entire claim of IDBI, despite it being an un-invoked corporate guarantee, while other similar claims were given significant haircuts. This was deemed discriminatory and not in line with the scheme of the IBC, which mandates equitable treatment of creditors. Issue 4: Ignoring Claims of Operational Creditors Several applications by operational creditors contended that their claims were ignored or not fully verified by the RP. The Tribunal found that the RP had not adhered to Section 24(3)(c) of the IBC, which mandates that representatives of operational creditors should be allowed to attend CoC meetings. The RP's failure to verify all claims before submitting the resolution plan was also highlighted, indicating a lack of due diligence and transparency. Issue 5: Approval of the Resolution Plan by the RP The RP submitted a resolution plan for approval, which was contested by various stakeholders. The Tribunal found that the RP had not followed the mandated process and had acted under undue influence from certain creditors. The RP's actions were found to be in violation of the IBC and the Insolvency and Bankruptcy Board of India (IBBI) regulations. The Tribunal directed the RP to reconsider the revised offer from UltraTech and ensure a fair and transparent process. Orders: 1. The Tribunal allowed the applications by UltraTech Cement Limited, directing the RP to accept and consider their revised offer. 2. The CoC was directed to reconsider both the revised offer from UltraTech and the existing plan, ensuring a transparent bidding process. 3. The RP was instructed to comply with the IBC provisions and regulations in issuing notices and verifying claims. 4. The Tribunal dismissed applications that sought injunctions against claims by EARC and other similar reliefs. 5. The Tribunal emphasized the need for the IBBI to review the Code and regulations to prevent such issues in the future.
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