2022 (4) TMI 654 - Tri - Insolvency and Bankruptcy

Validity of Resolution Plan - placing of Resolution Plan of the Corporate Debtor before the Committee of Creditors - direction to Committee of Creditors of the Corporate Debtor to consider the Resolution Plan - backing of settlement proposal mooted by the promoters through Section 12A application - whether the Resolution Plan of the Applicant can be placed before the CoC for its consideration? - HELD THAT - The Applicant instead of providing the documents as sought for by the RP, has replied by way of an email on 29.10.2020 that it has made its stand clear with regard to Section 29A of IBC, 2016 compliance in the previous correspondence, therefore not required to provide any further information. Even after subsequent communication, instead of providing the information as sought for by the RP, the Applicant has sought to set up a meeting with the members of the CoC. It is to be seen that it is the duty of the Resolution Professional under Section 25(2)(h) of IBC, 2016 to invite the prospective Resolution Applicant, who fulfil the criteria laid down by the RP with the approval of the CoC and as per Section 30(1) of IBC, 2016 the Resolution Applicant is required to submit an affidavit that he is eligible under Section 29A of IBC, 2016 along with Resolution Plan. Further Regulation 36A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 states that the RP shall specify the criteria for the prospective Resolution Applicant as approved by the CoC in accordance with clause of Section 25(2)(h) of IBC, 2016. Thus, it is seen that as per Regulation 36A(9) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the RP is at liberty to seek any additional clarification or additional information or document from the prospective Resolution Applicants for conducting due diligence under Sub - Regulation 8 of Regulation 36A in relation to provisions of clause (h) of sub-section (2) of 25 and provisions of Section 29A of the Code and other requirements as specified in the Invitation for Expression of Interest and the Resolution Applicant is duty bound to provide such information as sought by the RP - Thus, it is required to be noted that the RP is at liberty to seek additional information to conduct due diligence to find out the criteria mentioned in Information Memorandum and also to conduct due diligence that the prospective Resolution Applicant is not hit by Section 29A of IBC, 2016. In any case, at this point of time, the Resolution Plan submitted by one Earth Element has already been approved by the CoC in compliance with the provisions of IBC, 2016 and it has been stated that the plan approved by the CoC is far superior in value to the plan submitted by the Applicant. Further, we have also not found any legal infirmity in the action taken by the RP in conducting due diligence under Section 29A of IBC, 2016 as stipulated under Regulation 36A(8) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and also the Applicant has failed to place on record the additional document as sought for by the RP under Regulation 36A(9) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Application dismissed.

Summary

Issues Involved:
1. Compliance with Section 29A of the Insolvency and Bankruptcy Code, 2016.
2. Rejection of the Resolution Plan by the Resolution Professional (RP).
3. Request for placing the Resolution Plan before the Committee of Creditors (CoC).
4. Allegations of conflict of interest and related party transactions.
5. Procedural adherence and additional information requirements by the RP.

Detailed Analysis:

1. Compliance with Section 29A of the Insolvency and Bankruptcy Code, 2016:
The primary contention raised by the RP was that the Resolution Applicant's co-investor, M/s. Aqua Terra Logistics Private Limited, and M/s. Avani Resources Pte Ltd., which backed the settlement proposal by the promoters through Section 12A application, belong to the same group. The RP cited that the Resolution Applicant failed to provide necessary documents to prove compliance with Section 29A of IBC, 2016, which mandates eligibility criteria for resolution applicants.

2. Rejection of the Resolution Plan by the Resolution Professional (RP):
The RP rejected the Resolution Plan submitted by the Applicant citing various reasons, including non-compliance with the Request for Resolution Plan (RFRP). The RP highlighted that the Applicant's plan was conditional and did not meet the criteria set out in the detailed Expression of Interest (EoI). Additionally, the RP pointed out potential conflicts of interest and misrepresentation by the Applicant regarding their proposed investor.

3. Request for placing the Resolution Plan before the Committee of Creditors (CoC):
The Applicant sought the Tribunal's intervention to direct the RP to place their Resolution Plan before the CoC for consideration. The Applicant argued that the RP had not presented their plan fairly and had limited their interaction with the CoC. However, the Tribunal noted that the CoC had already approved a Resolution Plan submitted by another entity, Earth Elements, which was deemed superior in value.

4. Allegations of conflict of interest and related party transactions:
The RP raised concerns about potential conflicts of interest, noting that the proposed investor for the Applicant's Resolution Plan, Aqua Terra Logistics Pvt. Ltd., was part of the same group as Avani Resources Pte Ltd., which had previously backed a settlement proposal by the promoters. The RP argued that this relationship could lead to conflicts of interest, which the Applicant failed to address adequately.

5. Procedural adherence and additional information requirements by the RP:
The Tribunal emphasized the RP's duty under Section 25(2)(h) and Section 30(1) of IBC, 2016, to ensure that prospective Resolution Applicants meet the criteria approved by the CoC and are eligible under Section 29A. The RP is authorized to seek additional information or clarification from applicants to conduct due diligence. The Applicant's failure to provide the requested information and documents led to the RP's decision to reject their Resolution Plan.

Conclusion:
The Tribunal found no legal infirmity in the RP's actions and upheld the rejection of the Applicant's Resolution Plan. The Tribunal dismissed both applications filed by the Applicant, stating that the RP had acted within their rights to conduct due diligence and seek additional information. The CoC's approval of a superior plan further justified the dismissal of the Applicant's requests.