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2020 (9) TMI 386 - AT - Insolvency and BankruptcyApproval of Resolution Plan - Prior permission of the CCI was not obtained under Proviso to Section 31(4) of I B Code - HELD THAT - This is a material irregularity by the Respondents and contravention of Section 30 of the I B Code, 2016; it seems that the purpose of the IBC is to ensure that wherever a Combination as referred in Section 5 of the Competition Act, 2002 the requirement is the concerned Resolution Applicant shall obtain the approval of CCI prior to the approval of such Resolution plan by the CoC. The purpose is complied with in the present case, the approval from CCI has been obtained in June, 2019 and approval of the Resolution plan has been made by the Adjudicating Authority in April, 2020/May, 2020, this aspect has been taken care of by the Adjudicating Authority. The Adjudicating Authority, while approving the plan has also stated vide its order dated 30.04.2020 para 17(2) that wherever approval/ permissions are required the same is to be obtained within a period of one year from the date of the approval of the Resolution Plan. In Para 17 of the impugned order dated 30.04.2020, the Adjudicating Authority has provided various directions to various authorities to assist the Corporate Debtors, so that the Resolution Plan is operational - All this suggests that the Adjudicating Authority was conscious of CCI approval and hence, ignoring the fact that CCI approval has been obtained post CoC approval of the Resolution Plan is in order. Suppression of Fact regarding implementation of Resolution Plan - HELD THAT - Suppression of Fact regarding implementation of Resolution Plan resulting from resignation of Mr.Johannes Sittard on 01.04.2018 and being only a person technically competent to run the Corporate Debtor was also examined and it is found that Dr. Sittard resigned only as a partner of Nittah Capital Resources on 01.04.2018 but he is still associated with Nittah Capital Resources in his capacity and designation as Non-Executive Chairman and Director Nittah Capital Resources and as on date he continues to hold the designation of Non- Executive Chairman and Director of Nittah Capital Resources. However, the Adjudicating Authority has already made appropriate arrangement by putting a specific condition that the Resolution Applicant would appoint an observer. In any case, individual can come and go and Company is to run. However, a responsibility is fixed on the Resolution Applicant/Respondent No.3 that Dr. Sittard should continue for next one year or for such extended period till the Corporate Debtor stands on its feet. Extension of Performance Bank Guarantee and its variation in terms of the Request for Resolution Plan (RFRP) - HELD THAT - It is found that the Bank Guarantee for the requisite amount was kept for one year for full amount of ₹ 250 Crore but after one year due to the financial crisis faced by pandemic Covid-19, the Resolution Applicant requested for reduction of amount of Performance Bank Guarantee and CoC has accepted the lower amount of ₹ 50 Crore in place of PBG of ₹ 250 Crore as required by RFRP after expiry of the PBG on 30.04.2020. the CoC has exercised its right under Clause 6.4 of the RFRP, agreed to allow for modification in the validity period of PBG. The Adjudicating Authority has elaborately covered this issue in para 61 of its order dated 30.04.2020. There are no merits in the appeal - appeal dismissed.
Issues Involved:
1. Non-compliance with obtaining prior approval from the Competition Commission of India (CCI). 2. Suppression of material facts and breach of duties by the Resolution Professional. 3. Ineligibility of Carval due to submission of false information. 4. Non-provision of Bank Guarantee as per the Request for Resolution Plan (RFRP). Issue-wise Detailed Analysis: 1. Non-compliance with Obtaining Prior Approval from the CCI: The appellants argued that the Resolution Plan was approved by the Committee of Creditors (CoC) without obtaining the mandatory prior approval from the CCI, making the approval process null and void. They cited various legal precedents to support their claim that prior approval is a statutory precondition. However, the respondents contended that the requirement for CCI approval is directory and not mandatory. They referenced the judgment in Arcelormittal India Pvt. Ltd. Vs. Abhijeet Guhathakurta, which held that CCI approval could be obtained before the Adjudicating Authority's approval of the plan. The tribunal agreed with the respondents, noting that the CCI approval was obtained on June 4, 2019, before the Adjudicating Authority's approval on April 30, 2020, thus fulfilling the requirement. 2. Suppression of Material Facts and Breach of Duties by the Resolution Professional: The appellants claimed that the Resolution Professional (RP) acted in breach of his duties and obligations, leading to grave irregularities in the exercise of his powers. They alleged that there was suppression of material facts before the Adjudicating Authority. The tribunal examined these claims and found that the RP had acted in compliance with the provisions of the Insolvency and Bankruptcy Code (IBC) and the Corporate Insolvency Resolution Process (CIRP) regulations. The tribunal noted that the Adjudicating Authority had provided various directions to ensure the operationalization of the Resolution Plan, indicating that the RP had not suppressed any material facts. 3. Ineligibility of Carval Due to Submission of False Information: The appellants alleged that Carval was ineligible under Regulation 39(1)(c) of the CIRP Regulations for submitting a Resolution Plan with false information. They pointed out that Carval falsely represented Dr. Johannes Sittard as a director of Nithia Capital Resources Advisors LLP, despite his resignation effective April 1, 2018. The respondents clarified that Dr. Sittard had resigned only as a partner but continued to hold the designation of Non-Executive Chairman and Director. The tribunal found the respondents' explanation satisfactory and noted that the Adjudicating Authority had already made provisions for the appointment of an observer to ensure the successful implementation of the Resolution Plan. 4. Non-provision of Bank Guarantee as per the RFRP: The appellants argued that the Resolution Applicant did not provide a Bank Guarantee as required by the RFRP, leading to material irregularity. They claimed that the reduction of the Bank Guarantee from ?250 Crores to ?50 Crores was done unilaterally by certain financial creditors and was not disclosed to the Adjudicating Authority. The respondents explained that due to the financial crisis caused by the COVID-19 pandemic, the CoC accepted the reduced Bank Guarantee amount. The tribunal found that the CoC had exercised its commercial wisdom in accepting the reduced amount and that this decision was within the provisions of the RFRP. Conclusion: The tribunal dismissed the appeal, finding no merit in the appellants' arguments. It upheld the Adjudicating Authority's approval of the Resolution Plan, noting that the requirements of the IBC and CIRP regulations had been met. The tribunal emphasized the commercial wisdom of the CoC and the compliance with statutory provisions, including obtaining CCI approval before the Adjudicating Authority's final approval. Pending interim applications were disposed of, and there were no orders as to costs.
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