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2023 (8) TMI 546 - AT - Insolvency and BankruptcySeeking approval of the Resolution Plan - Adjudicating Authority had wrongly directed for project wise CIRP - CoC was improperly constituted and that the amount in the Resolution Plan entitled for Kotak Mahindra Bank Limited is much more than the actual Claim admitted by the Resolution Professional - Amount claimed less than the amount provided under the plan - Resolution Plan value is less than the Liquidation value - SRA Consortium is ineligible under Section 29A of IBC - disqualification on account of non-filing of the Financial Statements of their Companies. Project wise CIRP and wrong constitution of COC - HELD THAT - The Application under Section 7 of the Code was filed by the 2nd Respondent, Kotak Mahindra Bank and the Company was admitted into CIRP on 31/01/2020. Kotak Bank has charged on Project Arun Auroville and sought for CIRP of Project Arun Auroville and therefore, the IRP constituted the CoC for Project Arun Auroville and the CIRP was limited to that project only - this Tribunal is of the considered view that there is no merit in the 1st issue raised by the Appellant that the Project wise CIRP was wrongly initiated or that the CoC was erroneously constituted, specifically keeping in view that the Order of project wise CIRP was never challenged. Further, the CoC on 29/10/2020 approved the eligibility criteria for a Prospective Resolution Applicant to provide a Resolution Plan in respect of Project Arun Auroville alone. Based on this eligibility criteria, public announcement was effected on 14/11/2020 clearly stipulating that the Resolution Plan was sought only for Project Arun Auroville . Having participated and attended the CoC Meetings, the Appellant had never exercised his choice of raising this issue - there are no substance in this matter in question. Disqualification of the SRA Consortium u/s 29A of the code - HELD THAT - Admittedly, the Resolution Applicants, Mr. Kamal Pasha and Mr. Syed Fahad were Directors of other Companies which had defaulted in filing their Balance Sheets and Annual Returns for three years prior to 01/04/2014 and these Companies were struck off and the Resolution Applicants suffered disqualification, challenging which decision, the Resolution Applicants filed W.P. No. 43859 and 43860/2017 in which a Common Order was passed by the Hon ble High Court of Karnataka on 12/06/2019, wherein it was held that the provisions of Section 164 (2) (a) of the Companies Act, 2013 is prospective in nature and would not be applicable to default committed prior to 01/04/2014 - A perusal of the Minutes of the Meeting of the CoC held on 21/07/2021 and a plain reading of Form H shows that the aspect of the DIN of the Resolution Applicant being active, is clearly noted. Therefore, this Tribunal is of the considered view that the 4th Respondent / The Consortium of Resolution Applicants cannot be stated to be disqualified under Section 29A of the Code. Is charging of penal interest by Kotak Bank against the provisions of 30(2) of IBC - capitalization of penal interest by the Bank - HELD THAT - This Tribunal is of the considered view that as far as penal interest is concerned, the Appellant is bound by the terms of the Settlement Agreement. The next question which arises for consideration is whether after the moratorium is imposed under Section 13 of the Code, the clock will stop ticking with respect to the Claim amount and therefore, no further interest after the admission of the Claim by the RP is to be charged - A simple and purposive reading of this Section 14 does not specify any interest waiver during the period of moratorium. Therefore, this Tribunal is of the earnest view that the contention of the Learned Counsel for the Appellant that no interest could be charged subsequent to the admission of the Claim by the RP is untenable, specifically keeping in view the Agreement, the Provisions of Section 14 of the Code. As regarding the argument of the Appellant that the RP ought not to have added the interest of the Claim amount after admission of the Claim, it is held that the role of the RP under IBC, 2016 is only to collate the Claims and that he does not have any adjudicatory powers. The right which vested with the Kotak Bank / The Financial Creditor by virtue of the Loan Agreement / Settlement Agreement cannot be interfered by the Code. It is mainly for this reason that the non obstante clause, in the widest terms possible is contained in Section 238 of the Code, so that any vested right of either the Corporate Debtor or the Creditor, under any other law for the time being in force, cannot come in the way of the Code - It is also seen from the record that the Appellant had not filed any Suit to redeem the mortgage and the Bank / Financial Creditor has taken steps to recover the balance amount due from the Appellant after the approval of the Resolution Plan. The Hon ble Supreme Court in a catena of Judgments has laid down that the Commercial wisdom of the CoC is non-justiciable. This Tribunal finds it relevant to place reliance on the Judgment in the matter of KALPRAJ DHARAMSHI ANR. VERSUS KOTAK INVESTMENT ADVISORS LTD. ANR. 2021 (3) TMI 496 - SUPREME COURT , wherein the Hon ble Apex Court has held that unless there is any violation of Section 30 (2) of the Code, the Commercial wisdom of the CoC is not be interfered with. Thus, there are no violation of the Provisions of Section 30(2) of the Code. Being a MSME, the appellant ought to have been given sufficient opportunity and due preference with respect the the plan - HELD THAT - One of the issues raised by the Appellant is that the Resolution Plan value is less than the Liquidation value and that this is in violation of the Provisions of Section 30(2) of the Code. The Adjudicating Authority observed that the Liquidation value is merely to assist the CoC in deciding of the Resolution Plan and its commercial viability - there are substance in the argument of the Learned Counsels for the Respondents that the Liquidation value is Rs. 77,00,00,000/- which is based on the assumption that the project is fully completed in all aspects. The Plan value is Rs. 53,42,00,000/- and it is submitted by the SRA that they would need to invest an additional Rs. 15,00,00,000/- over and above the sum of Rs. 54,00,00,000/-. Additionally, another Rs. 35,00,00,000/- would be required to make the Project viable and also to correct the deviations in the construction of the project as four pent houses were constructed without approval. It is seen from the table that all the dues of the Corporate Debtor company are settled to 100 % and the CoC in its commercial wisdom has unanimously approved the Resolution Plan - there are no force in the contention of the Appellant that the Resolution Plan is for a low amount less than the liquidation value and ought not to have been approved. The Promotor being an MSME is given an opportunity under the Provisions of the Code to present a Plan. At the same time, the Code does not contemplate any kind of preference to be given to an MSME Promotor by the CoC while accepting a Resolution Plan. The CoC in its commercial wisdom examines the criteria for maximisation of value of assets and protecting the interest of all stakeholders. Therefore, the contention of the Appellant that being an MSME Promotor he ought to have been given a preference is unsustainable, more so when the Appellant did not furnish any Resolution Plan but now at a belated stage, after the approval by the Adjudicating Authority , is offering an amount in settlement. Any kind of settlement is between the Parties and no settlement can be directed by way of an Order under the Provisions of IBC, 2016. Appeal dismissed.
Issues Involved:
1. Project-wise CIRP and Wrong Constitution of CoC 2. Disqualification of the SRA Consortium under Section 29A of the Code 3. Charging of Penal Interest by Kotak Bank against the Provisions of Section 30(2) of the Code 4. Preference to MSME Promoter in Resolution Plan Summary: ISSUE: PROJECT-WISE CIRP & WRONG CONSTITUTION OF COC The first issue raised by the Appellant was that the IRP had wrongly constituted the CoC to consist of only the Financial Creditors pertaining to the project 'Arun Auroville'. The Appellant contended that the IRP received several claims in respect of other projects like 'Arun Kaustubh' and should have included all creditors of the Corporate Debtor. The 'Adjudicating Authority' had earlier allowed Kotak Bank's application to set aside the IRP's decision to reconstitute the CoC, confirming project-wise CIRP. This decision was not challenged by the Appellant, and thus, project-wise CIRP attained finality. The Tribunal found no merit in the Appellant's claim that the CoC was erroneously constituted. ISSUE: DISQUALIFICATION OF THE SRA CONSORTIUM UNDER SECTION 29A OF THE CODE The Appellant argued that the Consortium of Resolution Applicants was disqualified under Section 29A of the Code due to their disqualification as directors of other companies. The Tribunal noted that the Hon'ble High Court of Karnataka had restored the DIN of the Resolution Applicants, and the order had attained finality. The RP's due diligence confirmed that the DIN status was active as of the date of submission of the Resolution Plan. Therefore, the Consortium was not disqualified under Section 29A. ISSUE: IS CHARGING OF PENAL INTEREST BY KOTAK BANK AGAINST THE PROVISIONS OF SECTION 30(2) OF THE CODE The Appellant contended that Kotak Bank was unjustified in charging penal interest and capitalizing on the same. The Tribunal held that the terms of the Settlement Agreement, which included penal interest, bound the Appellant. Section 14 of the Code does not specify any 'interest waiver' during the moratorium period. The role of the RP is to collate claims, and the CoC's commercial wisdom in accepting the penal interest was upheld. The Tribunal found no illegality in the CoC's decision to collect penal interest. ISSUE: BEING AN MSME, THE APPELLANT OUGHT TO HAVE BEEN GIVEN SUFFICIENT OPPORTUNITY AND DUE PREFERENCE WITH RESPECT TO 'THE PLAN' The Appellant, an MSME, argued that his plan was not accepted despite being a promoter. The Tribunal noted that the Appellant did not provide the net worth statement, deposit the EMD amount, or submit a Resolution Plan despite attending CoC meetings. The Appellant's offer of settlement was rejected by the Bank, and no 12A Application was filed. The Code does not mandate preference to MSME promoters. The CoC, in its commercial wisdom, approved the Resolution Plan, and the Tribunal found no merit in the Appellant's claim for preference. Conclusion: The appeal was dismissed, and the connected pending interlocutory applications were closed. The Tribunal upheld the commercial wisdom of the CoC and found no violations of the provisions of the Code.
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