2020 (4) TMI 152 - Tri - Insolvency and Bankruptcy

Validity of Resolution Plan - section 60(5)(c) of the of the Insolvency Bankruptcy Code, 2016 - HELD THAT - It appears that these suspended directors will not get anything out of those Resolution Plans or some other plans, because the debt exposure admitted against this company is around ₹ 64 crore, as to liquidation value of the company, it is only ₹ 21 crore including the property in dispute with regard to High Tension Line passing through the property held by the Corporate Debtor. These suspended directors/allegations are in respect to assumed grievances of the persons, whoever fails to show that worth of each of these companies is more than ₹ 10 crore. The homebuyers, whose suffering he is talking of, they are not present before this Bench, their names are also not known to these suspended directors. As to Performance Guarantee, it will be dealt with at the time of dealing with the Resolution Plan coming before this Bench for approval. Application dismissed.

Issues:
Violation of CIRP regulations in Resolution Plan; Allegations by suspended directors; Lack of authorization for homebuyer representatives; Eligibility of Resolution Applicants; Criminal case against Managing Director; Performance Guarantee concerns; Net worth of Resolution Applicant; Siphoning of funds allegations; Liquidation value of the company; Presence and authorization of homebuyers in the case.

Violation of CIRP Regulations in Resolution Plan:
The application filed under section 60(5)(c) of the Insolvency & Bankruptcy Code, 2016 alleged that the Resolution Plan presented was in violation of CIRP regulations as the RP did not issue a fresh invitation for Expression of Interest. The suspended directors claimed that the Resolution Applicant's plan, already approved by CoC, was managed by the Managing Director, raising concerns about compliance with the law.

Allegations by Suspended Directors:
The suspended directors raised objections regarding the Resolution Plan's compliance with the law, alleging potential harm to homebuyers. However, they failed to provide specific details or evidence to support their claims. The RP highlighted that the suspended directors had not previously raised objections at CoC meetings, except for one instance regarding incomplete information provided to a particular entity.

Lack of Authorization for Homebuyer Representatives:
The suspended directors questioned the authorization of homebuyer representatives involved in the process. They argued that these representatives were not authorized as per regulations, but failed to demonstrate any direct authorization from the homebuyers they claimed to represent.

Eligibility of Resolution Applicants:
The RP clarified that certain Resolution Applicants were not considered due to not meeting eligibility criteria, specifically lacking the required net worth. As per section 30(2) of the Code, the RP is obligated to present Resolution Plans to CoC only if eligibility criteria are met, as outlined in Regulations 37 of IBBI CIRP Regulations.

Criminal Case Against Managing Director:
The application mentioned a criminal case against the Managing Director of the Resolution Applicant. However, no substantial evidence was presented to establish a direct link between the case and the Resolution Plan, leading to doubts about the relevance of this allegation.

Performance Guarantee Concerns:
While the RP confirmed the readiness of the Resolution Applicant to provide a Performance Guarantee, concerns were raised about potential delays or hindrances due to objections raised by the suspended directors. The RP feared that such objections could impede the smooth implementation of the Resolution Plan.

Net Worth of Resolution Applicant:
The Resolution Applicant's net worth was stated to be significantly higher than the minimum requirement, exceeding ?600 crore compared to the ?10 crore stipulated in the EOI. This financial aspect indicated the financial stability and capacity of the Resolution Applicant to fulfill obligations.

Siphoning of Funds Allegations:
The RP initiated applications against the suspended directors for alleged siphoning of funds amounting to ?21 crore from the Company, indicating financial irregularities and potential misconduct. These allegations further complicated the evaluation of the Resolution Plan and the credibility of the involved parties.

Liquidation Value of the Company:
The admitted debt exposure of the company was around ?64 crore, while the estimated liquidation value was only ?21 crore. This disparity, coupled with the presence of unresolved financial issues and the disputed property, raised concerns about the overall financial health and viability of the company.

Presence and Authorization of Homebuyers in the Case:
The suspended directors' concerns regarding homebuyers' interests and suffering lacked concrete evidence or representation from the homebuyers themselves. The absence of specific names or authorization from affected homebuyers weakened the credibility of the claims made by the suspended directors.

In conclusion, the Tribunal dismissed the application as misconceived, emphasizing the lack of merit in the contentions raised by the suspended directors. The judgment highlighted the importance of meeting eligibility criteria for Resolution Applicants and adhering to CIRP regulations to ensure transparency and fairness in the insolvency resolution process.

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