2022 (8) TMI 715 - AT - Insolvency and Bankruptcy

Power of RP or CoC to call for final compliant Resolution Plan once the CoC concluded the negotiations on Resolution Plans - only resolution plan submitted by the applicant was deemed to be approved - it is alleged that the RP misconstrued amended Regulation 39(3) issued by IBBI dated 07.08.2020 showing the same as pretext and throwing the blame on CoC - retrospective or prospective effect of amendment - HELD THAT - it is clear case that the RP intend to invite fresh resolution plans under the guise of final compliant resolution plan is in our view highly misinterpreting the amendment to the regulations and it is act of contemptuous. - Hence, this Tribunal also draws adverse inference against the RP. The amendment does not give the powers to call for fresh resolution plans as intended by the 1st Respondent/RP under the guise of final compliant resolution plan as stated by the Respondent/RP in his e-mail dated 13.08.2020. This Tribunal makes it clear that the amendment to the Regulation 39(3) of the IBBI Regulations, 2016 as referred above is gave the powers to the committee to evaluate resolution plans received as per evaluation matrix i.e. RFRP and deliberate on the feasibility and viability and vote on all such resolution plans simultaneously, does not mean for calling fresh plans. The evaluation matrix has been provided under Regulation 36-B of IBBI Regulations, 2016 and the Regulations in this regard along with the substantial provision of law have to be read harmoniously. The Learned Adjudicating Authority misinterpreted the Regulations 39(3) of the I B Code, 2016 and not properly understood the judgment of the Hon ble Supreme Court in JAYPEE KENSINGTON BOULEVARD APARTMENTS WELFARE ASSOCIATION ORS. VERSUS NBCC (INDIA) LTD. ORS. 2021 (3) TMI 1143 - SUPREME COURT . The Hon ble Supreme Court in the aforesaid judgment held that the said amendment of sub-regulation (3) of Regulation 39 of CIRP Regulations insertion of sub-regulation (3A) and (3B) thereto, could only be visualised as clarificatory in nature and in any case even before amendment there had not been any prohibition in putting two or more confirming Resolution Plans to vote simultaneously - The Hon ble Supreme Court also clarified the intent of the amendment to the Regulations and the Hon ble Supreme Court also did not hold that as per the amended regulation a fresh/final compliant resolution plans shall be called beyond the time stipulated under the Code. Further, this Tribunal is of the view that the amendment is only to consider the feasibility, viability of each plan and not to call fresh resolution plans (decided by RP) under the guise of final compliant resolution plan. This Tribunal hold that the order passed by the Adjudicating Authority dated 07.05.2021 is per se illegal and without application of mind and also not in conformity with the provisions of law - this Tribunal comes to a resultant conclusion that the Appellant has made out a prima facie case to be interfered with the order passed by the Adjudicating Authority. Appeal allowed.

Summary

Issues Involved:
1. Validity of the Impugned Order dated 07.05.2021 by the Adjudicating Authority.
2. Allegations against the Resolution Professional (RP) regarding the handling of the CIRP process.
3. Applicability and interpretation of the amendment to Regulation 39(3) of the IBBI Regulations, 2016.
4. Confidentiality and procedural lapses in the CIRP process.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Order dated 07.05.2021 by the Adjudicating Authority:
The Appellants filed an appeal against the order dated 07.05.2021, which rejected their I.A. No. 606 of 2020. The Appellants argued that their Resolution Plan was declared as H1 bidder by the CoC, and the RP's subsequent actions to invite final compliant plans were beyond the scope of the IBC and IBBI Regulations. The Tribunal found that the Adjudicating Authority misinterpreted the regulations and failed to consider the minutes of the CoC meeting held on 12.08.2020, which were crucial for proper adjudication. The Tribunal concluded that the impugned order was illegal and without proper application of mind.

2. Allegations against the Resolution Professional (RP) regarding the handling of the CIRP process:
The Appellants accused the RP of misguiding the CoC and misinterpreting the amended regulations to call for fresh resolution plans. The RP's actions, including sharing confidential information and accommodating another Resolution Applicant, were seen as suspicious and contrary to the IBC provisions. The Tribunal noted that the RP failed to produce the minutes of the CoC meeting dated 12.08.2020, which raised doubts about the RP's conduct. The Tribunal deprecated the RP's actions and drew adverse inferences against him.

3. Applicability and interpretation of the amendment to Regulation 39(3) of the IBBI Regulations, 2016:
The Tribunal examined the amendment to Regulation 39(3) effective from 07.08.2020, which mandates simultaneous voting on all compliant resolution plans. The Tribunal clarified that the amendment does not authorize the RP to call for fresh resolution plans beyond the stipulated time. The RP's interpretation of the amendment to invite final compliant plans was deemed a misinterpretation and an act of contempt. The Tribunal emphasized that the amendment is intended to evaluate and vote on plans received within the specified time, not to call for new plans.

4. Confidentiality and procedural lapses in the CIRP process:
The Appellants raised concerns about the confidentiality of their Resolution Plan, which was compromised when the RP opened the plan in a virtual meeting. The Tribunal acknowledged the Appellants' concerns and highlighted the RP's failure to maintain confidentiality. The Tribunal also noted procedural lapses, such as the RP's failure to provide crucial documents like the minutes of the CoC meeting, which affected the fairness of the process.

Conclusion:
The Tribunal set aside the impugned order dated 07.05.2021 and declared the RP's letter dated 13.08.2021 as illegal and non-est. The Tribunal directed the CoC to consider only the plans submitted prior to 12.08.2020 and proceed in accordance with the law. The appeal was allowed, and the interim order dated 23.06.2021 was made absolute. No costs were ordered, and any pending applications were closed.