2021 (3) TMI 28 - AT - Insolvency and Bankruptcy

Constitution of CoC - CoC only constituted Operational creditors - Appellant claims that the Impugned Order suffers as certain guiding yardsticks for consolidation were absent with regard to the DCCL - HELD THAT - It appears from record and the Adjudicating Authority has painstakingly written the Impugned Judgment and succinctly put relevant facts on record. The Adjudicating Authority found that WAML had agreed to the consolidation. As records DCCL in Paragraph 7, Adjudicating Authority noted that DCCL was incorporated for running and maintaining Dasve Convention Centre at the premises leased to it by Respondent No. 2- LCL and for this purpose the Lease-Agreement dated 30th September, 2010 was executed which was not duly stamped and registered and was cancelled by the Resolution Professional of Respondent No. 2. It is to be noted that the CIRP in LCL had started on 30th August, 2018 while CIRP in DCCL started on 05th February, 2019. The Adjudicating Authority noted that in the three CIRPs Resolution Plans were received only in the matter of LCL and none was received in the other two CIRPs. It was also noticed that in the Resolution Plans submitted with regard to the LCL, the Applicants wanted pre-condition that entire group debt with respect to LCL group of Companies should be extinguished instead of stand-alone debt of LCL. There is no dispute that LCL has about 49 subsidiaries or joint-ventures. There are no error in the Impugned Order consolidating the three CIRPs. The subsidiary DCCL appears to have been created for running the Convention Centre and it does appear to be linked with the business of Respondent No. 2-LCL with annual rent of token Re. 1. The Appellant who is only an Operational Creditor of DCCL is trying to find fault with the consolidation Order the object of which is Resolution of the Companies while the Appellant appears to be more concerned that its money as Operational Creditor should be protected. Appeal dismissed.

Summary

Issues:
Consolidation of Corporate Insolvency Resolution Process (CIRP) of multiple companies under one Resolution Professional.

Detailed Analysis:
1. The appeal was filed against the Impugned Order passed by the Adjudicating Authority, consolidating the CIRP of three companies, including Lavasa Corporate Ltd. (LCL) and its subsidiaries, despite objections from the Operational Creditor of one subsidiary, Dasve Convention Centre Ltd. (DCCL).

2. The Appellant, claiming to be an Operational Creditor of DCCL, argued that the consolidation decision was against the majority decision of DCCL's CoC, which solely consisted of Operational Creditors.

3. The Adjudicating Authority relied on the yardsticks specified in previous judgments and directed the consolidation based on common control, common directors, assets and liabilities, inter-dependence, and pooling of resources among the companies involved.

4. The Appellant contended that DCCL's distinct creditors, lack of common liabilities, and absence of financial creditors should have precluded its consolidation with the other companies based on the yardsticks applied in a previous judgment.

5. The Respondent's Counsel argued that consolidation was in the best interest of the companies as DCCL was a subsidiary of LCL, and their businesses were inter-linked, as highlighted in the CoC's willingness to support consolidation for full claim recovery.

6. The Adjudicating Authority found substantial inter-dependence and synergies between the companies, especially noting DCCL's reliance on LCL for its operations, justifying the consolidation based on the yardsticks applied in the previous judgment.

7. The Adjudicating Authority emphasized that without consolidation, the resolution of the companies, including DCCL, would not be possible, potentially leading to a loss of significant value for stakeholders and defeating the objective of the Insolvency and Bankruptcy Code.

8. Ultimately, the Appeal was dismissed as the Court found no error in the consolidation decision, emphasizing the resolution objective over individual creditor interests, especially considering the inter-linkages and dependencies between the companies involved.

This detailed analysis provides a comprehensive overview of the issues, arguments, and reasoning presented in the judgment regarding the consolidation of the CIRP of multiple companies under one Resolution Professional.