2020 (8) TMI 338 - AT - Insolvency and Bankruptcy

Jurisdiction of Adjudicating Authority - withdrawal of approved Resolution Plan - time limitation of achieving Insolvency Resolution of the Corporate Debtor - Principles of Res-Judicata - Delay in completion of Corporate Insolvency Resolution Process of the Corporate Debtor - HELD THAT - The Adjudicating Authority while passing the order of dismissing the application in CA No. 1252(PB)/2019 dated 10.7.2019 had not specifically dealt with the aspect of supply of copy of certificates under Sections 43,45,50 and 66 of the I B Code. Likewise, the (iii)(rd) relief withholding of approval of Resolution Plan sanctioned by the Committee of Creditors of Corporate Debtor was also not expressly adverted to by the Adjudicating Authority at the time of dismissing the CA No.1252(PB)/2019. To put it precisely, the Adjudicating Authority while dismissing CA No.1252(PB)/2019 on 10.7.2019 had merely mentioned about the ivth relief prayed for by 1st Respondent / Resolution Applicant viz. the revaluation of the Resolution Plan submitted by it before the Resolution Professional but not granted the said relief but merely mentioned that no ground for considering the prayer sought in the application is made out by passing a speaking order but merely mentioned, no ground for considering the prayer sought in the application is made out and the said application was dismissed as such. Principles of Res-Judicata - HELD THAT - The said principle is a prohibition against the Court / Tribunal. An inter-party order passed by a competent Tribunal binds them even if it is an erroneous one. If an order is passed in a given proceedings and the same became final, then in Law, it would be binding at a later stage of the proceeding, in the considered opinion of this Tribunal. Res Judicata prohibits an inquiry at the very threshold and bar the trial of a suit or a given proceeding - The Rule of constructive Res Judicata is enshrined in explanation iv of Section 11 of the Civil Procedure Code. In fact, the doctrine of Res Judicata applies to all judicial proceedings and equally to all quasi-judicial proceedings before Tribunals. When any matter might and ought to have been raised as a ground of defence in an earlier proceeding but that was not made, then in Law to avoid plurality of litigations and to bring about finality in it, such matter was deemed to have been constructively in issue and as such is taken as determined . The issue of withdrawal of Resolution Plan by the Applicant has never been considered consciously on merit and / or adjudicated upon in CA No. 1252(PB)/2019 and proceeded to mention that doctrine of constructing Res Judicata does not apply to the issues/points, or any lis between the parties that was not decided previously and despite been pleaded was not considered by court/Tribunal and expressly dealt with in the order so passed etc., this Tribunal is of the considered view that these observations are not legally tenable because of the latent and patent fact that the grounds raised by the 1st Respondent / Successful Resolution Applicant in CA 1816(PB)2018 (withdrawal application) were projected earlier and rejected in CA No. 1252(PB)/2019 through an order dated 10.7.2019. Furthermore, the plea of the 1st Respondent / Successful Resolution Applicant and the finding of the Adjudicating Authority that the prayer for withdrawal was not considered while disposing of CA No. 1252(PB)/2019 is quite in tune with the very principle of Res Judicata which means that the reliefs should be deemed to have been denied when what were claimed being not granted which unerringly points out that they were denied or refused by the Adjudicating Authority. Withdrawal of Resolution Plan - HELD THAT - In the instant case, notwithstanding the fact only upon the approval of the Adjudicating Authority the Resolution Plan of the Resolution Applicant would be binding on all the parties and further that the application for withdrawal was filed by the 1st Respondent/ Resolution Applicant was filed earlier to the stage of Approval by the Adjudicating Authority yet this Court comes to an cocksure conclusion that the Adjudicating Authority , in law cannot enter into the arena of the majority decision of the Committee of Creditors other than the grounds mentioned in Section 32(a to e) of the I B Code. Moreover, after due deliberations, when the 1st Respondent/ Resolution Applicant had accepted the conditions of the Resolution Plan especially keeping in mind the ingredients of Section 25(2)(h) of the Code to the effect that no change or supplementary information to the Resolution Plan shall be accepted after the submission date of Resolution Plan then it is not open to the 1st Respondent/ Resolution Applicant to take a topsy turvy stance and is not to be allowed to withdraw the approved Resolution Plan . Delay in completion of Corporate Insolvency Resolution Process of the Corporate Debtor - HELD THAT - The 2nd Respondent had clearly pointed out before this Tribunal that no special investigation audit was conducted and, therefore, the 1st Respondent/ Resolution Applicant cannot have a grievance that the Resolution Professional had not supplied it a copy of the said Audit Report. Further, the CBI and SFIO proceedings initiated against the Corporate Debtor are pending and hence, and in any event Section 32A of the I B Code grants immunity to the 1st Respondent/ Resolution Applicant in respect of the offences committed by the Corporate Debtor before the start of CIRP . Also, that it specifies that the assets of the Corporate Debtor as represented will be available in the right manner as at the time of furnishing of Resolution Plan . When that be the fact situation, the 1st Respondent/ Resolution Applicant taking an umbrage of pending SFIO investigation of the affairs of Corporate Debtor or the CBI investigation to file CA 1816(PB) of 2019 (withdrawal application) is unworthy of acceptance - During the period from August, 2018 till January 2019 when the orders were reserved by the Adjudicating Authority on the approval application, the 1st Respondent/ Resolution Applicant took part and, therefore, by any stretch of imagination, it cannot be said that the validity of the approved plan was only six months period and such plea is not well founded. This Tribunal comes to an irresistible conclusion that the views arrived at by the Adjudicating Authority in CA No.1816(PB)/2019 in C.P.(IB)No. 101 (PB) 2017 to the effect (i)that doctrine of Res Judicata does not apply to the present case (ii) in granting the relief of withdrawal of Resolution Plan with costs and resultantly allowing the aforesaid CA No. 1816(PB)/2019 in C.P.(IB)No. 101 (PB) 2017 partly specifying the terms therein with costs of ₹ 1 lakh to be paid by the 1st Respondent/ Resolution Applicant are clearly unsustainable in law and accordingly, they are set aside in furtherance of substantial cause of justice - Appeal allowed with no costs.

Summary

Issues Involved:
1. Jurisdiction of Adjudicating Authority.
2. Withdrawal of Resolution Plan.
3. Applicability of Res Judicata.
4. Validity of Resolution Plan.
5. Impact of delay in Corporate Insolvency Resolution Process (CIRP).
6. Investigation and audit concerns.

Issue-wise Detailed Analysis:

1. Jurisdiction of Adjudicating Authority:
The Appellant contended that the Adjudicating Authority (NCLT) erroneously exercised its jurisdiction by allowing the withdrawal of the Resolution Plan, which was beyond its statutory powers. The Appellant argued that the authority should operate within the confines of the Insolvency and Bankruptcy Code (IBC) and referred to precedents to support this claim.

2. Withdrawal of Resolution Plan:
The Adjudicating Authority allowed the 1st Respondent (Successful Resolution Applicant) to withdraw its Resolution Plan, citing that an unwilling and reluctant resolution applicant cannot ensure effective implementation. The Appellant argued that the Resolution Plan, once approved by the Committee of Creditors (CoC), becomes binding, and withdrawal should not be permitted. The Tribunal held that the Adjudicating Authority had no jurisdiction to permit the withdrawal of the Resolution Plan after its approval by the CoC.

3. Applicability of Res Judicata:
The Appellant argued that the withdrawal application was barred by Res Judicata, as the issues raised were previously decided in an earlier application (CA 1252/2019). The Tribunal agreed, stating that the grounds for withdrawal were already rejected in the prior application, making the subsequent application barred by Res Judicata.

4. Validity of Resolution Plan:
The 1st Respondent claimed that the Resolution Plan was only valid for six months from submission and became commercially unviable due to delays. The Appellant countered that the six-month period was the minimum validity for CoC acceptance, not for indefinite approval. The Tribunal held that the Resolution Plan remains binding post-CoC approval, conditional to the Adjudicating Authority's approval.

5. Impact of Delay in CIRP:
The 1st Respondent cited delays in the CIRP process as a reason for withdrawal, arguing that the financial position of the Corporate Debtor could have deteriorated. The Tribunal noted that delays caused by the court should not disadvantage the parties involved, referencing the principle "Actus curiae neminem gravabit."

6. Investigation and Audit Concerns:
The 1st Respondent expressed concerns regarding ongoing investigations by the Serious Fraud Investigation Office (SFIO) and the Central Bureau of Investigation (CBI). The Tribunal found that no special investigation audit was conducted, and Section 32A of the IBC grants immunity to the Resolution Applicant from offences committed by the Corporate Debtor before the commencement of CIRP.

Result:
The Tribunal concluded that the Adjudicating Authority's decision to allow the withdrawal of the Resolution Plan was unsustainable in law. The impugned order dated 02.01.2020 was set aside, and the appeal was allowed with no costs. The CA No. 1816(PB)/2019 was dismissed, and the associated I.A. No. 531/2020 was closed.