2023 (4) TMI 415 - AT - Insolvency and Bankruptcy

Approval of the resolution plan - it is alleged that the Appellant s claim, which is borne out of the arbitral award in his favour, has not been considered in accordance of with the provision in section 30(2)(b) of the IBC - Successful Resolution Applicant, which is represented by the same persons, who were also part of the Board of Directors of the corporate debtor which went into CIRP, were ineligible to submit a resolution plan as per section 29-A of the IBC or not? - R-1 failed his duty to communicate admitted claim amount of the Appellant to him during the CIRP and also in the examination of the submitted resolution plan before its approval by the Adjudicating Authority. HELD THAT - Admittedly, the Appellant submitted his claim in Form B to the Resolution Professional vide communication dated 3.6.2019 (attached at pp. 141-147 of the Appeal Paperbook), wherein the Appellant has made a clear disclosure that his claim pertains to an arbitration award dated 19.3.2015 and that an execution application thereof is filed by the Appellant and also an application under section 34 of the Arbitration and Conciliation Act, 1996 filed by the corporate debtor were pending adjudication. Therefore, it is clear that the Appellant made a clear disclosure about the arbitration award as well as the pendency of execution application and application under section 34 filed by the corporate debtor. On examining the various e-mail communications exchanged between the earlier Successful resolution Professional and R-1 and the Appellant, it is clear from the e-mail sent by Shri Ashish Vyas the then Resolution Professional on 29.6.2019 that the claim of the Appellant to the extent of Rs.16,78,15,035 was admitted in the CIRP. Thereafter, there was change in the Resolution Professional and by another e-mail dated 21.5.2020 sent by the Resolution Professional/R-1 Shri Vijendra Kumar Jain it is seen quite clearly that he sought details of the claim amount and its quantum, along with KYC particulars, which were sent by the Appellant. The same e-mail also notes that ''on scrutiny of claims list of corporate debtor, I could observe that your claim has not been admitted'' - the Resolution Professional R-1 failed in his duty by not pointing out such objectionable comments when placing the Resolution Plan for consideration of Committee of Creditors and the Adjudicating Authority. Thus the portion of the resolution plan as extracted in para 17 of this judgment is fit to be deleted from the Approved Resolution Plan. Section 238 of the IBC lays down that the provisions of IBC shall have effect, notwithstanding anything inconsistent therewith contained in any other law in force or any instrument having effect by virtue of any such law. Quite clearly, the operation of section 238 of IBC shall be applicable to micro, small or medium enterprise and thus section 240-A shall come into play. Section 240-A prescribes that the provision of clauses (c) and (h) of section 29-A shall not apply to resolution applicant in respect of CIRP of any MSME, admittedly the corporate debtor in the present case is a MSME and this fact is not disputed by the Appellant - any order view clauses (c) and (h) of section 29-A of the IBC shall not apply in respect of a resolution applicant in the present CIRP of the corporate debtor, and therefore, there is no disqualification or ineligibility attached to Shri Ashoke Atre or any member of the previous management of the corporate debtor in playing as a prospective resolution applicant in the CIRP of the corporate debtor. Thus, the comments made in the resolution plan which has been quoted from pages 62 to 65 of the reply affidavit of R-2 are completely uncalled for and are liable to be deleted from the approved resolution plan - appeal allowed.

Summary

Issues involved:
1. Treatment of the Appellant's claim in the resolution plan.
2. Eligibility of the Successful Resolution Applicant under section 29-A of the IBC.
3. Duty of the Resolution Professional in communicating the admitted claim amount and examining the resolution plan.

Summary:

Issue 1: Treatment of the Appellant's claim in the resolution plan
The Appellant challenged the approval of the resolution plan by the Adjudicating Authority, arguing that his claim, based on an arbitral award, was not considered in accordance with section 30(2)(b) of the IBC. The Appellant had disclosed the arbitral award and the pending section 34 application against it. Despite this, the Resolution Professional admitted only a part of the claim and failed to communicate the admitted amount to the Appellant. The Successful Resolution Applicant, represented by the same persons who were on the Board of Directors of the corporate debtor, made prejudicial remarks about the arbitral award in the resolution plan, which were not within their jurisdiction. The Tribunal found these comments objectionable and ordered their deletion from the resolution plan. The Appellant should be paid an amount equal to the highest percentage of payment made to any operational creditor in the resolution plan.

Issue 2: Eligibility of the Successful Resolution Applicant under section 29-A of the IBC
The Appellant argued that the Successful Resolution Applicant was ineligible under section 29-A of the IBC. However, the Tribunal noted that the corporate debtor was an MSME, and under section 240-A of the IBC, the provisions of clauses (c) and (h) of section 29-A do not apply to MSMEs. Therefore, the Successful Resolution Applicant was eligible to submit a resolution plan.

Issue 3: Duty of the Resolution Professional in communicating the admitted claim amount and examining the resolution plan
The Tribunal found that the Resolution Professional failed to communicate the precise quantum of the admitted claim to the Appellant and did not bring the objectionable comments in the resolution plan to the notice of the Committee of Creditors and the Adjudicating Authority. The Resolution Professional was reprimanded for this failure.

Conclusion:
The appeal was allowed with directions to delete the objectionable comments from the resolution plan, pay the Appellant an amount equal to the highest percentage of payment made to any operational creditor, and pay litigation costs of one lakh rupees to the Appellant. The Resolution Professional was directed to ensure compliance within 30 days.