2020 (9) TMI 1003 - Tri - Companies Law

Approval of scheme of compromise or arrangement - section 230(2)(a) and (c) of Companies Act - the proposed Scheme has not been consented to by 75% of the Secured Creditors - Creditors Responsibility Statement is not attached to the CA - no statement made in the CA with regard to safeguards for protection of other secured and unsecured creditors - report by the auditor of Liquidity test not attached - Valuation report in respect of the shares and the property by a registered valuer is not attached - terms of the Scheme contemplate a debt restructuring of the financial creditors in addition to Operational Creditors. HELD THAT - This Bench has considered the affidavit filed by the Respondent Company as well as its authorised representative. Suffice it to say that we do not find the explanations altogether convincing. This is especially due to the fact that Mr Vijay Tiwari had seen and replied to the email dated 12.05.2020 much before the hearing on that very day started. Therefore, there is no way we can accept the submission that he simply forgot to inform the Bench regarding IA No.904/MB.IV/2020, even after being informed of it on the morning of the hearing. He has also sought to pin the blame on the Respondent Company and his arguing counsel for the error on his part. The actions on the part of Mr Vijay Tiwari amount to obtaining orders of the Bench behind the back of the Applicant Bank. This cannot be encouraged. Further, as a professional, it does not behove Mr Vijay Tiwari to blame others for his mistake, when he is the professional on record representing the Respondent Company. However, considering that the authorised representative is young and that he has a long way to go in his career, we restrain ourselves from imposing any costs.We, however, advise him to be more careful in future. Considering all factors, the following further directions are hereby given (a) The meetings referred to in this Tribunal s order dated 12.06.2020 shall be confined to that of Operational Creditors alone, and shall not include the Financial Creditors, who are outside the purview of the proposed Scheme. (b) The sixty-day time limit to conduct the meetings shall now be counted from 27.07.2020 instead of 12.06.2020. (c) In case physical meeting of the Operational Creditors is feasible, the same shall be held within the local limits of Mumbai City. In case the meetings of the Operational Creditors are convened through any audio-visual means capable of being recorded, then the unedited raw footage of the meeting to be conducted by videoconferencing shall be preserved for record and also submitted to this Tribunal along with an affidavit to this effect. (d) It shall be the duty of the Respondent Company to ensure that the unedited raw footage of the meeting shall be preserved in good condition and that the same is not corrupted due to any reason whatsoever, whether technical or human. Any failure in this regard shall be viewed seriously. Application disposed off.

Summary

Issues Involved:
1. Intervention Application (IA No.904/MB.IV/2020)
2. Recall of Order (IA No.1002/MB.IV/2020)

Issue-wise Detailed Analysis:

1. Intervention Application (IA No.904/MB.IV/2020):

1.1 Background:
The Applicant Bank (ICICI Bank Limited) filed an application seeking to intervene in CA (CAA) No.401/MB.IV/2020 and to reject the said Company Application (CA).

1.2 Applicant Bank's Contentions:
(a) The Company Application did not conform to the statutory requirements of section 230(2)(a) and (c) as the proposed Scheme lacked consent from 75% of the Secured Creditors.
(b) The Creditors Responsibility Statement was not attached.
(c) No statement regarding safeguards for protection of other secured and unsecured creditors was included.
(d) The auditor's report on the company's fund requirements post-Corporate Debt Restructuring (CDR) was missing.
(e) The requisite statement on adopting the CDR guidelines specified by the RBI was absent.
(f) The valuation report by a registered valuer was not attached.
(g) The Scheme contemplated debt restructuring for financial creditors in addition to Operational Creditors.

1.3 Respondent Company's Defense:
(a) The Applicant Bank held less than five percent of the total debt, making the IA not maintainable under section 230 of the Companies Act, 2013.
(b) Objections should be considered at the final hearing for sanction of the Scheme, not at the Application Stage.
(c) The Applicant Bank was holding out against signing the Inter Creditor Agreement (ICA), while other financial creditors had signed.
(d) The Scheme had the requisite approval from 75% of the creditors as per the RBI Circular dated 07.06.2019.

1.4 Tribunal's Observations:
The Tribunal noted that the Scheme applied only to Operational Creditors and not to Financial Creditors. The Applicant Bank, being a Financial Creditor, was protected by a consent order from the Hon'ble Bombay High Court.

1.5 Resolution:
(a) The Scheme shall apply only to Operational Creditors and not to Financial Creditors.
(b) The Respondent Company shall revise the Scheme to remove any references affecting Financial Creditors and circulate the revised Scheme to all stakeholders for objections.
(c) The Applicant Bank's rights and interests shall remain unaffected by the Scheme.
(d) Objections to the Scheme will be considered at the final hearing.
(e) Financial Creditors shall consider any Resolution Plan under the RBI circular independently of the present Scheme.

1.6 Conclusion:
IA No.904/MB.IV/2020 was disposed of with the above directions.

2. Recall of Order (IA No.1002/MB.IV/2020):

2.1 Background:
The Applicant Bank sought recall of the order dated 12.06.2020, which allowed the Respondent Company to conduct meetings of its Operational Creditors.

2.2 Applicant Bank's Contentions:
(a) IA No.904/MB.IV/2020 was filed and served on the Respondent Company, but the Respondent Company failed to inform the Tribunal about the pending IA.
(b) The Respondent Company's Authorised Representative, Mr. Vijay Tiwari, did not inform the Tribunal about the pending IA despite being reminded via email.

2.3 Respondent Company's Defense:
Mr. Vijay Tiwari claimed he forgot about the intervention application and did not inform the Tribunal due to this oversight. He apologized for the inadvertent mistake.

2.4 Tribunal's Observations:
The Tribunal found the explanations unconvincing, noting that Mr. Tiwari had seen and replied to the email before the hearing. The Tribunal concluded that the actions amounted to obtaining orders behind the Applicant Bank's back, which could not be encouraged.

2.5 Resolution:
(a) The meetings shall be confined to Operational Creditors alone.
(b) The sixty-day time limit for conducting the meetings shall start from 27.07.2020.
(c) The Respondent Company must ensure the preservation of unedited raw footage of the meeting if conducted via videoconferencing.
(d) Mr. Avdhesh Bairwa was appointed as the Chairman for the meeting of Operational Creditors.
(e) Mr. Yogesh Choudhary was appointed as the Scrutiniser for the meeting.
(f) Notices for the meeting shall be published and sent to relevant authorities and hosted on the company's website.
(g) Compliance with the directions shall be reported to the Tribunal.

2.6 Conclusion:
IA No.1002/MB.IV/2020 was disposed of, with interim orders vacated and further directions provided for conducting the meetings of Operational Creditors.