2021 (1) TMI 388 - AT - Insolvency and Bankruptcy

Seeking direction for consideration of its Resolution Plan which is 12% more than the offer of the successful Resolution Applicant - power of Adjudicating Authority to judicial scrutiny and statutory provision to interfere with the commercial wisdom of the COC. What are the powers of the Adjudicating Authority under Section 31 of the I B Code? - HELD THAT - The Adjudicating Authority has a very limited power of judicial scrutiny under Section 31 of the I B Code and the statutory provision does not permit the Adjudicating Authority to interfere with the commercial wisdom of the COC. Even for maximization of value of assets of the Corporate Debtor. In the impugned order Ld. Adjudicating Authority erroneously assumed that it is the duty of the Adjudicating Authority to satisfy itself that the price offer is reasonable and adequate. For this purpose considered the liquidation value and fair value of the Corporate Debtor and price offered by successful Resolution Applicant and reached a conclusion that the Respondent No. 1 s offer is around 12% more than the offer of successful Resolution Applicant - Thus Ld. Adjudicating Authority has exceeded his jurisdiction and indulge in quantitative analysis which is not permissible under Section 31 of the I B Code. Whether the Adjudicating Authority can direct the COC to consider the Resolution Plan of a person who was not part of CIRP? - HELD THAT - The Respondent No. 1 is not part of CIRP. The Respondent No. 1 has filed Application directly before the Adjudicating Authority. The Adjudicating Authority in the guise of maximization of the value of assets of the Corporate Debtor directed that the Respondent No. 1 s Application and Resolution Plan be put up before the COC for consideration. There is no provision in the code or regulation which provides that while exercising the power under Section 31 of the I B Code the Adjudicating Authority can direct the COC to consider the Resolution Plan of such person who has not been part of CIRP. Otherwise also if such procedure is adopted then the CIRP will be frustrated. Once the Resolution Plan has been opened and fundamentals and financials of the Plan and offer made therein were disclosed to all the participants including RP. Then anyone can enhance its offer before the Adjudicating Authority in the guise of maximization of realisation. Therefore no further fresh bid or offer could have been accepted or considered as held by this Appellate Tribunal in the case of KOTAK INVESTMENT ADVISORS LIMITED VERSUS MR KRISHNA CHAMADIA (RESOLUTION PROFESSIONAL IN THE MATTER OF RICOH INDIA LIMITED) MR KALPRAJ DHARAMSHI MS REKHA JHUNJHUNWALA 2020 (8) TMI 389 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI - Thus Ld. Adjudicating Authority has erroneously entertained the Application and Resolution Plan of the Respondent No. 1 and directed the RP to put up the same before the COC for consideration. Whether the conduct of the Appellant during the pendency of the CIRP can be considered in this Appeal? - HELD THAT - The order passed by the Adjudicating Authority on 22.10.2019 has no relevance with this Appeal. Therefore there are no force in the objection raised by Learned Counsel for the Respondent No. 1. Thus when the Application for approval of Resolution Plan is pending before the Adjudicating Authority at that time the Adjudicating Authority cannot entertain an Application of a person who has not participated in CIRP even when such person is ready to pay more amount in comparison to the successful Resolution Applicant. If a Resolution Plan is considered beyond the time limit then it will make a never-ending process. Thus impugned order is not sustainable in law as well as in fact. The impugned order is hereby set aside. The Adjudicating Authority is directed to proceed with the Application filed by the RP for approval of Resolution Plan as per law - appeal allowed.

Summary

Issues Involved:
1. Powers of the Adjudicating Authority under Section 31 of the I&B Code.
2. Whether the Adjudicating Authority can direct the COC to consider the Resolution Plan of a person who was not part of CIRP.
3. Whether the conduct of the Appellant during the pendency of the CIRP can be considered in this Appeal.

Issue-wise Detailed Analysis:

Issue No. 1: Powers of the Adjudicating Authority under Section 31 of the I&B Code

The Hon'ble Supreme Court in Maharashtra Seamless Limited vs Padmanabhan Venkatesh & Ors. held that once the Resolution Plan is approved by the COC, the Adjudicating Authority's role under Section 31(1) of the I&B Code is limited to ensuring that the Resolution Plan meets the requirements of Section 30(2). This Appellate Tribunal in Sharvan Kumar Agarwal Consortium reiterated that the Adjudicating Authority has a very limited power of judicial scrutiny and cannot interfere with the commercial wisdom of the COC, even for maximization of the value of assets of the Corporate Debtor. The impugned order erroneously assumed that the Adjudicating Authority must ensure the price offer is reasonable and adequate, which led to an unauthorized quantitative analysis.

Issue No. 2: Whether the Adjudicating Authority can direct the COC to consider the Resolution Plan of a person who was not part of CIRP

The Respondent No. 1 did not submit any Resolution Plan pursuant to the expression of interest issued by the RP and was not part of the CIRP. The Adjudicating Authority directed the COC to consider the Resolution Plan of Respondent No. 1, which was not permissible. This Tribunal in Kotak Investment Advisors Ltd. held that once the Resolution Plan has been opened and disclosed, no further fresh bid or offer could be accepted or considered. The case of Chhatisgarh Distilleries Ltd. vs. Dushyant Dave & Ors. confirmed that the Adjudicating Authority cannot direct the COC to consider a new Resolution Plan submitted after the deadline, even if it offers a higher amount.

Issue No. 3: Whether the conduct of the Appellant during the pendency of the CIRP can be considered in this Appeal

The Respondent No. 1 claimed that the Appellant misrepresented facts and misled the Tribunal. It was noted that Kalinga Enterprises Ltd. (KEL), a related party to the Appellant, filed an application seeking direction for its Resolution Plan to be considered. However, the Appellant argued that the definition of a related party under Section 5(24)(d) of the I&B Code pertains to the Corporate Debtor, not the Resolution Applicant. The Tribunal found that the objection raised by the Respondent No. 1 had no relevance to the current Appeal.

Conclusion:

The Tribunal concluded that the Adjudicating Authority exceeded its jurisdiction by directing the COC to consider the Resolution Plan of Respondent No. 1, who was not part of the CIRP. The Adjudicating Authority's role is limited to ensuring compliance with Section 30(2) and cannot interfere with the commercial decisions of the COC. The impugned order was set aside, and the Adjudicating Authority was directed to proceed with the Application filed by the RP for approval of the Resolution Plan as per law. The Appeal was allowed with no order as to costs.