2023 (7) TMI 212 - AT - Insolvency and Bankruptcy

Validity of Resolution Plan - allowing the implementation of Resolution Plan without considering the Appellant s case for settlement under Section 12A of I B Code - HELD THAT - Regulation 40C was inserted in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2020, in view of lockdown. According to the said provision, the period of lockdown was not to be counted for the purpose of timelines, for any activity that could not be completed due to such lockdown. The central government issued notification declaring total lockdown period to be extended. The Respondent No.1, on the instructions of Committee of creditors filed an application dated 28.05.2020 under Section 12(2) of the code vide which resolution professional sought an extension of 90 days for the CIRP process and further sought the exclusion of lockdown period as per Regulation 40 C. The Adjudicating Authority granted extension of 90 days beyond 180 days of CIRP and further granted exemption of lockdown period w.e.f. 25.03.2020. The order dated 03.06.2020, although did not specify the number of days that stood exempted, but granted exemption in terms of Section 40-C. Whether the Resolution Applicant was barred under Section 29A of the Code or not? - HELD THAT - It is the case of the Appellant is that Mr. Rahoul Subberwal was Managing Director of three companies which were liquidated in UK and being undischarged insolvent was not eligible and adversely effected eligibility of the M/s Sirius Foods Pvt. Ltd./ Respondent No. 2 as Mr. Subberwal is a shareholder of Respondent No. 2. In this connection, it is noted that the term undischarged insolvent has not been defined in the Code. Moreover, such orders for declaring are required to be issued by the Court. We also take note of the detailed averments of the Respondents that Mr. Subberwal has not been disqualified under Section 6 or Section 7 of the UK Company Directors Disqualification Act, 1986 and he continuous to serve as director in other UK based company in M/s Spice Trail Ltd. and he would not have been allowed to continue in this company, had he remained ineligible as per UK Laws. Non consideration of the settlement offer made by him to the CoC - the Resolution offer of the M/s Sirius Foods Pvt. Ltd. / Respondent No. 2 / Resolution Applicant is lower than the liquidation value as well as the settlement offer amount of the Appellant or not - HELD THAT - The total Resolution Plan amounts to Rs. 27.27 Crores which is much more than both the liquidation value of Rs. 17.88 Crores and the settlement offer of the Appellant is Rs. 19.63 Crores. The averments of the Respondents is agreed upon that the Code do not stipulate that the Resolution Plans size is required to be more than the liquidation value which was also supported by the Hon ble Supreme Court of India in the matter of Maharashtra Seamless 2020 (1) TMI 903 - SUPREME COURT - there are no error in the Impugned Order on this aspect. There are no error in the challenged both Impugned Orders. The Appeal being devoid of any merit is dismissed.

Summary

Issues Involved:
1. Approval of Resolution Plan without specific approval for exclusion of 128 days due to lockdown.
2. Eligibility of the Resolution Applicant under Section 29A of the Insolvency & Bankruptcy Code, 2016.
3. Non-consideration of the Appellant's settlement offer and the comparison of the Resolution Plan with liquidation value.

Summary:

Issue 1: Approval of Resolution Plan without specific approval for exclusion of 128 days due to lockdown

The Appellant contended that the Resolution Plan was approved without the Adjudicating Authority's specific approval for exclusion of 128 days on account of the lockdown. The Tribunal observed that Regulation 40C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2020, allowed for the exclusion of lockdown periods from timelines. The Adjudicating Authority's order dated 03.06.2020 granted an extension of 90 days beyond 180 days of CIRP and further granted exemption of lockdown period from 25.03.2020. Therefore, there was no error in the Impugned Order on this account.

Issue 2: Eligibility of the Resolution Applicant under Section 29A of the Insolvency & Bankruptcy Code, 2016

The Appellant argued that the Resolution Applicant was ineligible under Section 29A of the Code because its Director, Mr. Rahoul Subberwal, was an undischarged insolvent due to his involvement with liquidated companies in the UK. The Tribunal noted that the term 'undischarged insolvent' is not defined in the Code and requires a court order. The Tribunal found merit in the Respondents' arguments that Mr. Subberwal was not disqualified under UK laws and continued to serve as a director in another UK company. The Adjudicating Authority had deliberated on this aspect in detail, and the Tribunal found no error in the Impugned Order on this account.

Issue 3: Non-consideration of the Appellant's settlement offer and the comparison of the Resolution Plan with liquidation value

The Appellant claimed that his settlement offer was higher than the Resolution Plan and should have been considered. The Tribunal noted that the liquidation value was Rs. 17.87 Crores, the Appellant's settlement offer was Rs. 19.63 Crores, and the total Resolution Plan was Rs. 27.27 Crores. The Resolution Plan included payments to the Financial Creditor, CIRP costs, and working capital, amounting to a total significantly higher than both the liquidation value and the Appellant's settlement offer. The Tribunal agreed with the Respondents that the Code does not require the Resolution Plan to exceed the liquidation value, a position supported by the Hon'ble Supreme Court in Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh. Hence, no error was found in the Impugned Order on this aspect.

Conclusion:

The Tribunal dismissed the appeal, finding no merit in the Appellant's arguments and upholding the commercial wisdom of the Committee of Creditors (CoC). The Impugned Orders were affirmed, and no costs were awarded.