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2021 (6) TMI 989 - AT - Insolvency and BankruptcyJurisdiction - power of Adjudicating Authority to interfere before the quasi-judicial determination - locus standi to challenge the inclusion of DSKL in the CIRP - necessary party to application - due date to file EOI is a commercial decision or not. Whether the Adjudicating Authority does not invest with the Jurisdiction to interfere before the quasi-judicial determination is made, under Section 31 of IBC? - HELD THAT - In the present case, Adjudicating Authority, while deciding the Application I.A No. 1029 of 2020, has exercised the jurisdiction under Section 60 (5) (c), which empowers to decide any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor or Corporate Person under this Code . Thus, before approval of the Resolution Plan the Adjudicating Authority can entertain or dispose of the question of priorities or any question of law or facts, arising out of or in relation to CIRP or Liquidation proceedings - the argument of Ld. Counsel for Pankaj Joshi that the Adjudicating Authority has no jurisdiction to entertain and decide the Application cannot be agreed upon. Whether GIACL did not have locus standi to challenge the inclusion of DSKL in the CIRP? - HELD THAT - Admittedly, DSKL requested to submit EOI after one month of due date and the same was rejected in the 7thCoC meeting held on 03.04.2020 and the decision was communicated to the DSKL on 09.04.2020. After lapse of two months DSKL again made attempt to become a part of CIRP before that four eligible Applicants including GIACL were short listed as Prospective Resolution Applicants. Therefore, there was a competition between these four Prospective Resolution Applicants but the RP has tried to induct DSKL in the CIRP in violation of the provisions of Regulation 36-A (6) of the Regulations 2016 - We are unable to convince with the Ld. Counsel for DSKL and Pankaj Joshi that GIACL did not have the locus standi to challenge the inclusion of DSKL in the CIRP. Ld. Adjudicating Authority has rightly entertained the Application I.A No. 1029 of 2020 and decided the same. Whether DSKL was a necessary party to the Application I.A. No. 1029 of 2020? - HELD THAT - DSKL has no vested right because, the right has already been extinguished when DSKL has failed to submit EOI till last date and subsequently, the request for submitting EOI after due date was also rejected by the CoC in view of Regulation 36-A of Regulations 2016. Therefore, DSKL has no right to contest the Application as in the Application the actions of RP CoC are questioned - The question for the consideration before Adjudicating Authority was that, whether the actions of RP and CoC are justifiable in the present facts of this case - we are not convinced with the argument of Ld. Counsel for DSKL that the Ld. Adjudicating Authority has not given reasonable opportunity of hearing and thereby violated the principle of natural justice. Whether to allow DSKL after due date to file EOI is a commercial decision? - HELD THAT - In view of Regulation 30A, withdrawal was not permitted. In that context, Hon ble Supreme Court held that this Regulation has to be read along with the main provision of Section 12A which contains no such stipulation. Therefore, it held that this stipulation can only be construed as directory depending on the facts of each case. It is not ruled, that Regulation 36 A is not in consonance with any of the provision of the IBC or Regulation 36-A is not mandatory in nature. Thus, this Judgment also does not support the case of DSKL. The second limb of argument, that the word shall has to be read as may since no consequence of noncompliance are provided, is not acceptable as Regulation 36-A (6) itself provides that EOI received after the time specified shall be rejected - to allow DSKL after due date at the instance of Pankaj Joshi to file EOI is not a commercial decision. Pankaj Joshi has suppressed the fact that he himself has overturned the decision of 7thCoC meeting and permitted DSKL to submit its EOI. Pankaj Joshi also misguided the CoC that he is not required to take express permission from the CoC to issue a request for Resolution Plan to an eligible Prospective Resolution Applicant . This is not the position in this case the request for submission of EOI after due date was rejected by the CoC then there is no question to issue a request for resolution plan to DSKL - Pankaj Joshi in 09th CoC meeting canvassed the case of DSKL and when one of the CoC Members proposed to publish fresh Form G then he suggested that this is impracticable and delayed the CIRP - the decision taken in 09th Meeting of the CoC was not transparent, fair and was under the influence of Pankaj Joshi. Whether the adverse remarks in Para 54 of the impugned order are baseless and uncalled for? - HELD THAT - Mr. Pankaj Joshi has failed to explain that his actions are bonafide. It is expected from a Resolution Professional that he must act in a fair and balanced manner without getting influenced by the conflicting interest of the parties. In the present case, Mr. Pankaj Joshi suppressed material facts and misguided the members of CoC to achieve the desired decision in favour of DSKL - the adverse remarks and observations made in the Para 54 of the impugned order are not baseless and uncalled for and on the other hand, for appreciating the materials on record and to decide the matter, such observations are necessary. Appeal dismissed.
Issues Involved:
1. Jurisdiction of Adjudicating Authority under Section 31 of IBC. 2. Locus standi of GIACL to challenge the inclusion of DSKL in the CIRP. 3. Necessity of DSKL as a party to the Application I.A. No. 1029 of 2020. 4. Nature of the decision to allow DSKL to file EOI after the due date. 5. Validity of adverse remarks against Pankaj Joshi in Para 54 of the impugned order. Issue-wise Detailed Analysis: Issue No. (i): Jurisdiction of Adjudicating Authority under Section 31 of IBC The contention was whether the Adjudicating Authority could interfere before a quasi-judicial determination under Section 31 of the IBC. The Supreme Court’s decision in Arecellor Mittal India Pvt. Ltd. clarified that Section 60(5) of the IBC empowers the NCLT to entertain or dispose of any application or proceeding by or against a corporate debtor. The Tribunal held that the Adjudicating Authority had jurisdiction to entertain and decide the Application I.A. No. 1029 of 2020, as it involved questions of law or facts arising out of CIRP or liquidation proceedings. Issue No. (ii): Locus standi of GIACL to challenge the inclusion of DSKL in the CIRP GIACL had the locus standi to challenge DSKL's inclusion as it was one of the shortlisted Prospective Resolution Applicants and had a vested right under Regulation 36-A (11) of the Regulations 2016 to object to the inclusion of any other applicant. The Tribunal distinguished this case from Arecellor Mittal India Pvt. Ltd. Vs. Abhijit Guhathakurta, where the context was different, affirming GIACL’s right to challenge. Issue No. (iii): Necessity of DSKL as a party to the Application I.A. No. 1029 of 2020 The Tribunal agreed with the Adjudicating Authority that DSKL was not a necessary party to the application as no relief was sought against it directly. The focus was on the actions of the RP and CoC, and DSKL had no vested right after failing to submit EOI within the deadline. Issue No. (iv): Nature of the decision to allow DSKL to file EOI after the due date The Tribunal concluded that allowing DSKL to file EOI after the due date was not a commercial decision but a regulatory violation. Regulation 36-A (6) mandates that EOIs received after the specified time must be rejected. The Tribunal found that the CoC’s decision to revisit their earlier resolution was influenced by Pankaj Joshi and lacked transparency and fairness. Issue No. (v): Validity of adverse remarks against Pankaj Joshi in Para 54 of the impugned order The Tribunal examined the conduct of Pankaj Joshi and found that he acted with bias and manipulated the process to favor DSKL. Despite a factual error in Para 54 regarding the acceptance of the resolution plan, the Tribunal upheld the adverse remarks, emphasizing the necessity of such observations to appreciate the material facts and decide the matter. Conclusion: The appeals were dismissed, affirming the Adjudicating Authority’s order. The Tribunal found no merit in the arguments presented by DSKL and Pankaj Joshi, maintaining that the actions of Pankaj Joshi were not in good faith and were influenced by bias. The decision to allow DSKL to submit EOI after the due date was not a commercial decision but a regulatory breach.
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