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2022 (9) TMI 907 - AT - Insolvency and BankruptcyCIRP - power to entertain new Resolution Plan after approval of another resolution plan by the CoC - whether the Respondents after expressing their inability to submit the Resolution Plan vide their e-mail dated 06.11.2019 can again submit the Resolution Plan after lapse of more than 5 months and that to after approval of the Resolution Plan by the CoC in accordance with law? - HELD THAT - From the provisions of law and the Regulation the procedure for submission of resolution plan and the powers of the Committee of Creditors in approving the resolution plan by a vote of not less than 66% of voting share of the Financial Creditors after considering its feasibility and viability may approve the plan. Once the plan is approved by the Committee of Creditors, the Adjudicating Authority empowered to approve the plan under Section 31 which was approved by the Committee of Creditors and meets the requirements as referred to in sub-section (2) of Section 30. Further, the procedure encapsulated under the regulations and as per Regulation 39(1-B) the Committee shall not consider any resolution plan received after the time as specified by the Committee under Regulation 36B. In view of the reasons every Resolution Applicant shall comply with the procedure as prescribed under the law and regulations. The due procedure and the scrutiny are a continuous process and cannot be considered as a simple contractual negotiation between two parties. In the instant case, the Respondents have failed to submit the Resolution Plan within the time therefore there is no immunity to the respondents to file beyond the time prescribed. The RP rightly rejected the request of the Respondents - the Respondents failed to establish that the RP violated the CIRP process. It is only the case of the Respondents such averments allegations have been made and the Adjudicating Authority without going into the reality simply ratified the submissions of the Respondents, which this Tribunal highly deprecate the said stand. It is not in dispute that the CIRP period has been expired prior to submission of plan by the Respondents and the Respondents have not evinced any interest in submitting of resolution plan, after they backed out from the submission of plans vide letter dated 06.11.2019. It is not in dispute that the Respondents backed out and submitted its plan beyond the CIRP period by levelling baseless allegations against the RP to pressurise the RP to place its plan before the CoC . Such conduct of the Respondents is unwarranted. The Adjudicating Authority vide its impugned order had directed the CoC to consider the 2nd settlement offer of the 1st Respondent therein, when the resolution plan after approval from CoC was pending adjudication under Section 31 before the Adjudicating Authority. The Appellant has made out a prima-facie case to be interfered with the Order, passed by the Adjudicating Authority, whereby the Adjudicating Authority exceeded its jurisdiction in directing the Resolution Professional to place the Resolution Plan of the Respondents before the CoC is amounts to interference with the Commercial Wisdom exercised by the CoC in its Commercial Decision, more particularly, in the absence of any material irregularity and violation of any law for the time being inforce - this Tribunal comes to a resultant conclusion that the impugned order passed by the Adjudicating Authority (National Company Law Tribunal, Bengaluru Bench, Bengaluru) is illegal, exceeded its jurisdiction and hence, the same is set aside. Appeal allowed.
Issues Involved:
1. Validity of the Respondents' Resolution Plan submission after the stipulated deadline. 2. Compliance with CIRP Regulations by the Resolution Professional (RP). 3. Adjudicating Authority's jurisdiction in directing the RP to place the Respondents' Resolution Plan before the CoC. 4. Impact of COVID-19 lockdown on CIRP timelines. 5. Commercial wisdom of the Committee of Creditors (CoC). Issue-wise Detailed Analysis: 1. Validity of the Respondents' Resolution Plan Submission After the Stipulated Deadline: The Appellant contended that the Respondents did not submit their Resolution Plan within the prescribed timeline. The Respondents initially expressed their inability to submit the plan due to the non-availability of audited financials of the Corporate Debtor. Despite this, the Respondents submitted their plan on 27.05.2020, well beyond the last date of 07.12.2019. The RP rejected this late submission, stating that the CIRP period had already expired on 16.03.2020, and the CoC had approved METL's plan with 100% voting share. The Tribunal agreed with the Appellant, noting that the Respondents' late submission undermined the CIRP's time-bound nature and the sanctity of the process. 2. Compliance with CIRP Regulations by the Resolution Professional (RP): The Respondents argued that the RP failed to provide the necessary audited financial statements, which led to their initial decision not to submit a plan. However, the Tribunal found that the RP had complied with the regulations by providing the available provisional financial statements and other required documents in the Virtual Data Room (VDR). The Tribunal noted that the RP had taken steps to update the books of accounts and appoint a statutory auditor, keeping the CoC informed. The Tribunal concluded that the RP had acted in accordance with the CIRP Regulations and that the Respondents' claims of non-compliance were unfounded. 3. Adjudicating Authority's Jurisdiction in Directing the RP to Place the Respondents' Resolution Plan Before the CoC: The Appellant challenged the Adjudicating Authority's order directing the RP to place the Respondents' plan before the CoC, arguing that it exceeded its jurisdiction and interfered with the CoC's commercial wisdom. The Tribunal agreed, citing the Supreme Court's decision in the Essar Steel case, which limits judicial review to ensuring that the CoC has considered key parameters like keeping the Corporate Debtor as a going concern, maximizing asset value, and balancing stakeholder interests. The Tribunal emphasized that the Adjudicating Authority could not consider a new resolution plan submitted after the CIRP period and the CoC's approval of another plan. 4. Impact of COVID-19 Lockdown on CIRP Timelines: The Respondents argued that the CIRP period should be extended due to the COVID-19 lockdown, referencing Regulation 40C of the CIRP Regulations. However, the Tribunal cited the Supreme Court's decision in Ebix Singapore Pvt. Ltd. v. Committee of Creditors of Educom Solutions Ltd., which clarified that delays due to lockdown would not extend the statutory timelines for the CIRP. The Tribunal concluded that the Respondents' plan submission was still untimely, regardless of the lockdown. 5. Commercial Wisdom of the Committee of Creditors (CoC): The Tribunal reiterated the principle that the commercial decisions of the CoC are paramount and not subject to judicial review unless there is a material irregularity or violation of law. In this case, the CoC had unanimously approved METL's plan, and the Tribunal found no basis to interfere with this decision. The Tribunal emphasized that the Adjudicating Authority's directive to consider the Respondents' plan was an unwarranted interference with the CoC's commercial wisdom. Conclusion: The Tribunal concluded that the Adjudicating Authority had exceeded its jurisdiction by directing the RP to place the Respondents' late-submitted plan before the CoC. The Tribunal set aside the impugned order, reaffirming the importance of adhering to CIRP timelines and respecting the CoC's commercial decisions. The appeal was allowed, and the interim stay granted earlier was made absolute.
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