2022 (4) TMI 373 - AT - Insolvency and Bankruptcy

Approval of Resolution Plan - requirement of inclusion of the Respondent No.3 in the list of Prospective Resolution Applicants or not - convention of meetings for Scheme of Arrangement - HELD THAT - As per Form- G published, the last date for submission of the Expression of Interest was 31.12.2020. The list of Prospective Resolution Applicants was also uploaded. It is true that in the 18th meeting of the CoC dated 02.03.2021, the CoC took note of the three Resolution Plans which were received from Mainthan Alloys Limited , ESL Steel Limited and Rimjhim Ispat Private Limited . However, minutes of the 18th meeting of the CoC indicate that Resolution Plans were not voted upon in the said meeting. Similarly, in the 19th CoC meeting dated 08.03.2021 detailed discussion was made on the Resolution Plans received from the Resolution Applicants. The minutes under Agenda Item No.5 noticed that Applicants were requested to reconsider the financial proposal made by them. On 20.03.2021, the Resolution Professional issued a final list of the Prospective Resolution Applicants in which Respondent No.3 was also included - delay in submission of Expression of Interest by Tata Steel Mining Limited was condoned by the CoC in its meeting held on 18.03.2021 and e-voting results dated 20.03.2021. It is well settled that the commercial wisdom of the CoC is to be given due regard. The CoC having decided to condone the delay in submission of Expression of Interest by Respondent No.3 and to include the Respondent No.3 in the list of Resolution Applicants, no exception can be taken by the Appellant to the decision of the CoC. The object of the IBC is to maximise the assets of the Corporate Debtor and as noted above, in the 19th CoC meeting, earlier Resolution Applicants were requested to revise the financial proposal. Thus, by the time Respondent Nos.3 was permitted to submit a Resolution Plan neither any Resolution Plan was accepted nor even put to e-vote. Hence, the commercial wisdom of the CoC to accept the Respondent No.3 as Prospective Resolution Applicant cannot be faulted. The submission raised by the Appellant on the basis of Scheme of Arrangement under Section 230 of the Companies Act, 2013 was elaborately considered by the Adjudicating Authority and it has been rightly held that the said Scheme having never been approved by the Creditors cannot come to any benefit of the Appellant and further after initiation of the CIRP, the present Appellant who is Suspended Director of the Corporate Debtor is hit by Section 29A of the Code. The submission of the Learned Counsel for the Appellant, thus, on the basis of Scheme of Arrangement under Section 230 of the Companies Act, 2013 has no substance. The Adjudicating Authority by a very elaborate and well considered order has discussed all the submissions which were raised on behalf of the Appellant and has rightly rejected the submission. The Order passed by the Adjudicating Authority is a well considered order which needs no interference by us in exercise of our Appellate Jurisdiction. There are no merit in the appeal - appeal dismissed.

Summary

Issues:
1. Challenge to rejection of I.A (IB) No. 644/KB/2021 by the Adjudicating Authority.
2. Inclusion of Respondent No.3 as Prospective Resolution Applicant and approval of their Resolution Plan.
3. Submission of Scheme under Section 230 of the Companies Act, 2013 by the Appellant.

Analysis:

Issue 1:
The Appellant challenged the rejection of I.A (IB) No. 644/KB/2021 by the Adjudicating Authority. The Appeal was filed against the judgment dated 25.11.2021 passed by the National Company Law Tribunal, Kolkata Bench. The Appellant, a Suspended Director of the Corporate Debtor, contested the order rejecting the I.A. The Adjudicating Authority's decision was based on the proceedings related to the Insolvency and Bankruptcy Code, 2016. The Resolution Professional invited Expression of Interest (EoI) and received submissions from various Prospective Resolution Applicants. The Resolution Plan submitted by Respondent No.3 was ultimately approved by the Committee of Creditors (CoC) with 100% votes. The Appellant filed I.A (IB) No. 644/KB/2021 challenging this process. The Adjudicating Authority rejected the Application, leading to the Appellant's appeal.

Issue 2:
The Appellant's Counsel argued against the inclusion of Respondent No.3 as a Prospective Resolution Applicant. The Counsel contended that the CoC's decision to allow Respondent No.3 to submit a Resolution Plan was illegal. However, the Tribunal noted that the CoC's commercial wisdom in accepting Respondent No.3 was valid. The CoC had the authority to condone the delay in submitting the Expression of Interest by Respondent No.3. The Resolution Plan of Respondent No.3 was thoroughly deliberated and approved by the CoC. The Adjudicating Authority found no arbitrariness in the CoC's decision, emphasizing the need to maximize the assets of the Corporate Debtor.

Issue 3:
The Appellant's second submission pertained to the Scheme filed under Section 230 of the Companies Act, 2013. The Adjudicating Authority had previously granted time for convening a meeting of Creditors for approval of the Scheme of Arrangement. However, the Scheme was not approved as only one Creditor attended the meeting and did not agree with the proposed financial proposal. The Appellant, being a Suspended Director, was disqualified under Section 29A of the Code from submitting any Scheme of Arrangement or Resolution Plan. The Tribunal cited the Supreme Court's decision in a related case to support the ineligibility of the Appellant to participate in the Scheme under Section 230 of the Companies Act, 2013.

In conclusion, the Tribunal dismissed the Appeal, finding no merit in the submissions made by the Appellant's Counsel. The Adjudicating Authority's well-considered order addressed all arguments raised by the Appellant, leading to the dismissal of the Appeal.