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2024 (11) TMI 61 - AT - IBCConditionality of LoIs issued by the RP with the approval of the CoC - not in conformity with the resolution plan and addendum submitted by the SRA - infirmity in the impugned order ordering liquidation of the Corporate Debtor or not - HELD THAT - The SRA never objected at any stage upto the 28th CoC meeting to making the resolution plan subject to the prospective orders to be passed by the Adjudicating Authority. Instead the SRA requested the CoC to issue him a LoI. However, after the LoI was circulated to the SRA for his perusal and acceptance on 24.05.2021 by email, it is at this stage that the SRA through his Advocate on 29.05.2021 raised preliminary objections to the LoI being conditional for being subjected to the prospective orders of the Adjudicating Authority. This shows that the SRA was well aware before seeking the LoI from the CoC that the LoI was to be subject to the outcome of hearing dated 21.01.2021. Hence it becomes clear that it was an after-thought on the part of the SRA to raise the bogey of conditional LoI. It is already noticed that the SRA was informed by the RP on 10.05.2021 of the result of the e-voting and asked to provide three sets of hard copies of the finally approved resolution plan including the Addendum - The RP again sent a communication on 12.05.2021 to the SRA to include conditions at Clause 7.10.6 and Clause 12.6.1 which SRA had missed out through they were a part of the resolution plan with the Addendum. Clearly these conditionalities cannot be held to be a surprise for the SRA as these alleged conditionalities were discussed and deliberated in the CoC meetings and it was clear to all the participants including SRA that these conditionalities were integral to the resolution plan of the SRA - it is also noticed that the RP had addressed the reply to the SRA on 31.05.2021 reiterating that the condition under LoI had been subsisting since the 23rd CoC meeting which letter encapsulated all decisions taken in previous meetings of CoC wherein the Appellant was present. In these meetings dated 01.03.2021, 10.03.2021, 29.04.2021 and 21.05.2021, CoC had raised both the issues of the prospective order of the Adjudicating Authority as well as the requirement to correct the resolution plan. In the present case once CoC had approved the resolution plan, the SRA stood precluded from raising any observations to the conditions stated in the LoI as these were not alien to the resolution plan as submitted by the SRA which was approved by the CoC. Present was not a case of conditional and addendum LoI but a case where the SRA was vacillating in accepting the LoI and not wanting to put his skin in the game by baselessly alleging that the LoI was conditional. The Adjudicating Authority rightly refused to entertain the objections of the SRA to the conditions in the LoI since withdrawal or modification of resolution plan after approval by the CoC is not permissible in law. The timely and quick resolution of stressed assets is key to the successful working of IBC. The outer limit of CIRP of 330 days had also expired and yet formal acceptance of the resolution plan by SRA was nowhere in sight because of deliberate procrastination on the part of the SRA. Further, delay was diluting the value of the assets. In such circumstances, opting for liquidation was the best option available before CoC. Thus, there are no infirmity in the decision of the Adjudicating Authority to approve the liquidation of the Corporate Debtor. Since the CoC is statutorily empowered to decide on the liquidation of the Corporate Debtor at any time before the confirmation of the resolution plan. This decision is a collegiate, commercial wisdom of the CoC which is not subject to judicial review except for ensuring that the resolution plan meets the requirements of the IBC and related Regulations. The paramount supremacy of the commercial wisdom of CoC has been upheld in a catena of judgments by the Hon ble Supreme Court. The Explanation to Section 33(2) of IBC makes it amply clear that the CoC is entitled to take a final call, to liquidate the Corporate Debtor prior to affirmation of the resolution plan by the CoC. There are no good grounds to allow the three appeals. The Appeals being devoid of merit stand dismissed.
Issues Involved:
1. Conditionality of the Letter of Intent (LoI) issued by the Resolution Professional (RP) and its conformity with the approved resolution plan and addendum. 2. Validity of the order for liquidation of the Corporate Debtor. Detailed Analysis: Issue 1: Conditionality of the Letter of Intent (LoI) The central contention revolves around whether the LoI issued by the RP, with CoC's approval, was conditional and not aligned with the resolution plan and addendum submitted by the Successful Resolution Applicant (SRA). The SRA argued that the LoI imposed conditions not present in the resolution plan approved by the Committee of Creditors (CoC) with a 99.90% majority. The SRA maintained that the LoI should have been unconditional and that the CoC could not impose additional conditions post-approval of the resolution plan. The tribunal examined the sequence of events, noting that the SRA was aware of ongoing litigations concerning other resolution applicants and that the resolution plan was subject to the outcome of these proceedings. The tribunal found that the SRA had not objected to the conditionality of the LoI during the CoC meetings and only raised objections after the issuance of the LoI. The tribunal concluded that the conditions in the LoI were not alien to the resolution plan and that the SRA was precluded from raising objections post-CoC approval. The tribunal emphasized that the resolution plan, once approved by the CoC, could not be withdrawn or modified by the SRA, as per the legal precedent set by the Supreme Court in the Ebix Singapore Pvt. Ltd. case. Issue 2: Validity of the Order for Liquidation The tribunal addressed whether the Adjudicating Authority's order for the liquidation of the Corporate Debtor was valid. The CoC, with a 99.61% majority, decided to liquidate the Corporate Debtor after the SRA failed to provide an unconditional acceptance of the LoI. The tribunal noted that the Corporate Insolvency Resolution Process (CIRP) period had expired, and no resolution plan was available for submission to the Adjudicating Authority for approval. The tribunal found that the CoC was within its rights to opt for liquidation, as no approved resolution plan was submitted within the statutory timeline. The tribunal referred to the statutory provisions of Section 33 of the Insolvency and Bankruptcy Code (IBC), which empower the CoC to decide on liquidation before the confirmation of the resolution plan by the Adjudicating Authority. The tribunal upheld the CoC's decision, emphasizing the supremacy of the CoC's commercial wisdom, which is not subject to judicial review unless statutory requirements are unmet. The tribunal found no statutory aberration by the RP or CoC and concluded that the decision to liquidate was in the best interest of all stakeholders, given the prolonged CIRP and the potential depreciation of the Corporate Debtor's assets. Conclusion: The tribunal dismissed the appeals, finding no merit in the arguments presented by the SRA. The tribunal directed the liquidator to proceed with the liquidation process as per the e-auction notice already issued.
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