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2020 (11) TMI 669 - Tri - Insolvency and BankruptcyApproval of Resolution Plan - Directions to the Committee of Creditors (CoC) requiring the CoC to consider Final Resolution Plan - directions to amend the Request For Resolution Plan (RFRP) issued by the Resolution Professional - main contention of the learned counsel for the applicants is that certain clauses in the RFRP are in contravention of the provisions of the SARFAESI Act and the RBI Guidelines. HELD THAT - The Resolution Plan was rejected on the ground that M/s. Prudent ARC will not invest in equity and will not become a shareholder of the Corporate Debtor. RFRP provides that in case of Consortium, all the parties in the Consortium to be jointly and severally liable for implementation of the Plan. This objection has been raised by the Resolution Professional from time to time. However, the Plan was not amended to include M/s. Prudent ARC to share the responsibility of implementing the Resolution Plan jointly and severally with other Resolution Applicants in the Consortium. The plan is not in conformity with the RFRP. The RFRP is duly approved by the CoC. When the Plan is in conformity with the RFRP, then only the Resolution Professional is expected to place such Resolution Plan with CoC. The Adjudicating Authority cannot decide viability or feasibility of the requirements in RFRP. The CoC in its wisdom has formulated RFRP in their own interest. The Resolution Plan is inevitably to be complied with the requirements before placing the same at CoC for its consideration. M/s. Prudent ARC joined in the Consortium only to satisfy the requirements of networth. It is the requirement of RFRP that the Resolution Applicant cannot unilaterally change/withdraw Resolution Plan once it is submitted to the Resolution Professional. According to the Resolution Plan filed by the Resolution Applicants, M/s. Prudent ARC, they will not participate in the equity as per the extent of RBI Guidelines. It is very clear from the arguments of the learned counsel for the Resolution Professional that the Plan submitted by the applicants is contrary to the conditions laid down in RFRP. Interestingly, the Resolution Professional had given three chances to the applicants to make amendments to the Resolution Plan so as to make it compatible with requirements of the RFRP. Instead of complying with the requirements of the RFRP, M/s. Prudent ARC is voicing its difficulty in complying with the RFRP requirements. The personal difficulties of M/s. Prudent ARC have nothing to do with the requirements of RFRP. The requirements of RFRP bind on all the Resolution Plans. The Resolution Professional is expected to place Resolution Plans which are in conformity with the requirements of RFRP. There is no need to place the Resolution Plans which are not in conformity with the RFRP requirements. Section 30(3) of the I B Code provides that if the Plan confirms the requirements contained in section 30(2) of the I B Code, then the same to be placed before the CoC. There is nothing wrong in not placing the Resolution Plan of the applicants before the CoC since the Plan is not conforming to the requirements of the RFRP. Further it is not satisfying the requirements of Section 30(2)(c) and (d). Therefore, there is no irregularity committed in not placing the Resolution Plan of the applicant before the CoC and rejecting the same by the Resolution Professional. Application dismissed.
Issues Involved:
1. Whether the Committee of Creditors (CoC) should consider the Final Resolution Plan dated 23.05.2020 submitted by the applicants. 2. Whether the Request for Resolution Plan (RFRP) issued by the Resolution Professional is arbitrary and inconsistent with the I&B Code and RBI guidelines. 3. Whether the Resolution Professional acted arbitrarily in rejecting the Resolution Plan without presenting it to the CoC. Detailed Analysis: 1. Consideration of Final Resolution Plan by CoC: The applicants, a consortium of three Resolution Applicants, submitted a Final Resolution Plan on 23.05.2020. The Resolution Professional denied consideration of this plan, claiming it did not comply with the RFRP dated 13.01.2020. Consequently, the applicants were denied access to the CoC meeting held on 26.05.2020. The applicants argued that their plan was in compliance with the IBC and that the Resolution Professional arbitrarily rejected it without presenting it to the CoC. 2. Arbitrary Nature of RFRP: The applicants contended that certain clauses in the RFRP were arbitrary and not in consonance with fair bidding. They argued that the RFRP should align with the objectives of the I&B Code. Specific clauses in the RFRP, such as 3.3.12(vi) and (vii), were challenged for being unreasonable. The applicants also argued that the RFRP provided excessive and unreasonable powers to the Resolution Professional, which could lead to a biased and unfair bid process. 3. Actions of the Resolution Professional: The Resolution Professional argued that the Resolution Plan was non-compliant with the RFRP, particularly clauses 3.3.6, 3.3.12(vii), and 3.3.12(b)(ix). The Resolution Professional highlighted that the applicants' plan stipulated that one of the consortium members, Prudent ARC, would not participate in the equity as per RBI guidelines, which was in contravention of the RFRP requirements. The Resolution Professional provided multiple opportunities for the applicants to amend their plan to comply with the RFRP, but the applicants failed to do so. Consequently, the Resolution Professional did not present the non-compliant plan to the CoC. Findings: The Tribunal noted that the Resolution Professional had given the applicants several chances to amend their plan to meet the RFRP requirements. The applicants' plan did not comply with the RFRP, particularly regarding the joint and several liability of consortium members for the implementation of the plan. The Tribunal emphasized that the CoC, in its commercial wisdom, had formulated the RFRP requirements, which were binding on all Resolution Applicants. The Resolution Professional was correct in not presenting a non-compliant plan to the CoC. The Tribunal concluded that the Resolution Professional did not act arbitrarily in rejecting the Resolution Plan. The applicants' contention that certain RFRP clauses were arbitrary was not within the Tribunal's purview to decide. The CoC's commercial wisdom in formulating the RFRP could not be questioned by the Adjudicating Authority. Therefore, the application was dismissed.
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