2019 (10) TMI 1045 - Tri - Insolvency and Bankruptcy

Valuation - determination of liquidation value - initiation of CIRP - It is the case of the Applicant Bank that it is one of the Financial Creditors of the Corporate Debtor making a claim of ₹ 33,86,46,611.84 as financial debt against the Corporate Debtor before the Resolution Professional. Admission of claim over Series-I Debentures for setting aside the claim rejected by the RP - HELD THAT - ince the Applicant Bank itself is not in a position to place proof before the RP to determine the rejected claim of the Applicant Bank and despite the RP made an attempt to locate the records of the company, since he is also unable to get any material supporting the claim of the Applicant Bank, the RP rejected the claim over Series-1. In view thereof, I am of the considered opinion that unless proof is placed before the RP, it is not possible under law to admit this claim, thereby, I have not found any merit in the argument of the Applicant Bank seeking directions against the RP to admit its claim. As to other relief in respect to the valuation of around 16 grounds of land assigned to the Corporate Debtor by the Government of Tamil Nadu through Assignment Deed in the year 1989, the Applicant Bank counsel says that the liquidation value determined by theJRP over the aforesaid land is decimal in value against the approximate value of ₹ 18.74 crore given by valuer of the Applicant Bank on 24.06.2019 - As property rights have not been conferred upon the Corporate Debtor, this land will only fetch the same money from Tamil Nadu Government that was paid to the Government in the event this property has been taken back by the Government. In view thereof, the Valuer as well as the RP, the RP counsel says, determined liquidation value that was shown at the time of assignment. It is also an admitted fact that this land cannot be used for any other purpose other than the purpose mentioned in the Assignment Deed and there is also no provision entitling the Corporate Debtor to create third party rights, therefore, the value of the property cannot be ascertained basing on the market value prevailing in the vicinity around this land. Maybe it is true that the charge was created over this property by the Bank with the consent of the Government, but that consent will not make any difference to the rights already crystallized by virtue of assignment made in favour of the Corporate Debtor. The valuation given by the Valuers and the determination of the liquidation value of the asset by the RP cannot be re-examined by looking at the allegation made by this Applicant Bank - Application dismissed.

Summary

Issues:
1. Rejection of part claim by Resolution Professional and another Financial Creditor
2. Valuation of the property of the Corporate Debtor at Perungudi Electronic Estate
3. Reconstitution of the Committee of Creditors (CoC) with the original voting share of the Applicant Bank

Analysis:
1. The Applicant Bank filed a claim against the Corporate Debtor for outstanding amounts of Series-I and Series-II debentures. The Resolution Professional (RP) rejected the claim over Series-I debentures as the Applicant Bank failed to provide proof for the claim. The RP's decision was based on the lack of evidence supporting the claim, leading to the dismissal of the Applicant Bank's request for directions to admit the claim.

2. Regarding the valuation of the land assigned to the Corporate Debtor, the Applicant Bank argued that the RP's liquidation value was significantly lower than the market value. The Applicant Bank emphasized the need for a fresh valuation to maximize the asset's value. However, the RP contended that the land was assigned by the Government with restrictions, limiting its market value. The RP and valuer determined the liquidation value based on the terms of the assignment, leading to the dismissal of the Applicant Bank's request for a new valuation.

3. The Applicant Bank also sought the reconstitution of the CoC to include its original voting share, emphasizing the importance of its participation in the voting process. The RP countered by stating that the Applicant Bank did not vote on the Resolution Plan and that its participation would not have altered the outcome due to the requisite majority approval. The RP highlighted the lack of objections raised by the Applicant Bank regarding procedural violations under the Code, leading to the rejection of the Applicant Bank's request for CoC reconstitution.

In conclusion, the Tribunal dismissed the reliefs sought by the Applicant Bank, upholding the RP's decisions on claim rejection, valuation, and CoC composition based on the legal and factual considerations presented during the proceedings.