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2019 (5) TMI 481 - Tri - Insolvency and BankruptcyAppointment of Interim Resolution Pofessional - conditional approval of the resolution plans by CoC - HELD THAT - Regulation 39(3) of the CIRP Regulations does not give room for CoC to pass a conditional approval but only means that the CoC can approve resolution plans which include such modifications to the original plan as the CoC deems fit. Thus, the approval given on the 9th meeting is a conditional approval given to a resolution plan which was not in its final form but still under discussions. The final form was received by the RP on 26.05.2018 which the RP forwarded to SBI, which then gave its oral confirmation to the resolution plan. There are several material irregularities in this procedure followed by the RP. First, the RP bypassed the procedure of calling a meeting to discuss the resolution plan in its final form, in which NSEL would have also been a participant according to Section 24(3)(c) of the Code. In the instant case the RP did not call a meeting of the CoC to approve the final draft of the resolution and further, did not even supply a copy of the final draft of the resolution plan to the other participant of the CoC meetings i.e. NSEL. Second, the RP filed the present application before this Tribunal on the basis of a conditional approval and the written non-conditional approval of SBI dated 29,05.2018 was submitted to this Tribunal only on 25.07.2018 as a response to NSEL's objection. Third, the application for approval of resolution plan was filed on 30.06.2018 when the CIRP period of 270 days had expired on 26.05.2018. The resolution plan is not approved and the application filed by the RP is dismissed and the application filed by the objector, in view of the said dismissal, succeeds.
Issues Involved:
1. Approval of the resolution plan submitted by the Resolution Applicant (RA). 2. Objection to the resolution plan by National Spot Exchange Limited (NSEL). 3. Eligibility of the Resolution Applicant under Section 29A of the Insolvency and Bankruptcy Code, 2016 (the Code). 4. Treatment of NSEL’s claim. 5. Acquisition of promoters’ properties by the Corporate Debtor (CD). 6. Conditional nature of the resolution plan. 7. Procedure for approving the resolution plan. Issue-wise Detailed Analysis: 1. Approval of the Resolution Plan Submitted by the Resolution Applicant (RA): The Resolution Professional (RP) filed an application seeking approval of the resolution plan submitted by Rajinder Singh Sandhu. The plan was approved by the Committee of Creditors (CoC) with a 100% vote from the sole financial creditor, State Bank of India (SBI). However, the Tribunal has to exercise its judicial discretion under Section 31 of the Code, ensuring compliance with Section 30(2) conditions. 2. Objection to the Resolution Plan by National Spot Exchange Limited (NSEL): NSEL filed an application objecting to the resolution plan, seeking its rejection. The Tribunal considered NSEL’s objections, particularly regarding the discriminatory treatment of its claim and the conditional nature of the resolution plan. 3. Eligibility of the Resolution Applicant under Section 29A of the Code: The Tribunal examined whether the RA is eligible under Section 29A, which lists conditions disqualifying a person from submitting a resolution plan. The RA is related to an outgoing promoter and guarantor, Surjeet Singh, making them "persons acting in concert" under the SEBI Takeover Regulations. Since Surjeet Singh is ineligible under Section 29A(c) and (h), the RA is also ineligible. The Tribunal referenced the Supreme Court’s decision in Arcelormittal India, emphasizing that the Code aims to prevent outgoing promoters from regaining control without paying off debts. 4. Treatment of NSEL’s Claim: The resolution plan proposed no payment to NSEL, which the Tribunal found discriminatory. The Supreme Court in Swiss Ribbons emphasized equitable treatment for all creditors. The Tribunal noted that the plan's treatment of NSEL’s claim violated this principle, making the plan unacceptable. 5. Acquisition of Promoters’ Properties by the Corporate Debtor (CD): The resolution plan included acquiring properties of the promoters/guarantors, which are currently attached by other courts. The RA sought to have these properties released from attachments, a relief beyond the Tribunal’s scope. The Tribunal found this request a misuse of the Code, aiming to liberate promoters’ properties under the guise of a resolution plan. 6. Conditional Nature of the Resolution Plan: The resolution plan was conditional on the release of attached properties, raising doubts about its feasibility and effectiveness. The Tribunal emphasized that a resolution plan should not be conditional on unreasonable or beyond-scope reliefs. The conditional nature of the plan undermined its credibility and implementation potential. 7. Procedure for Approving the Resolution Plan: The CoC’s approval of the resolution plan was conditional, requiring further information and modifications. The RP bypassed the procedure of calling a meeting to discuss the final plan, excluding NSEL from participating effectively. The Tribunal noted several procedural irregularities, including the RP filing the application after the CIRP period had expired, necessitating the liquidation of the CD under Section 33(1)(a) of the Code. Conclusion: The Tribunal rejected the resolution plan due to the RA’s ineligibility under Section 29A, discriminatory treatment of NSEL’s claim, improper acquisition of promoters’ properties, conditional nature of the plan, and procedural irregularities in approval. Consequently, the Tribunal ordered the liquidation of the Corporate Debtor, appointing a new liquidator and issuing further directions to ensure compliance with the liquidation process under the Code.
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