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2023 (11) TMI 905 - AT - Insolvency and BankruptcySeeking direction for rejection of Resolution Plan - sole financial creditor being related party to the Corporate Debtor - Appellant being under undue and coercive influence of Sunaina Singh which in turn purportedly vitiated the CIRP proceedings - Appellant not challenged the CIRP admission order or the constitution of CoC within 30 days from the date of the passing of the relevant orders by the Adjudicating Authority - challenging the order approving the resolution plan. With the previous adjudication of IA 344 of 2020; IA 728 of 2020 and in the light of the decision of this Tribunal in CA (AT) (Ins.) 1065 of 2021 dated 14.07.2022 upholding the constitution of CoC and this matter having attained finality, whether the issue of sole financial creditor being related party to the Corporate Debtor can be raised again at this stage? - Whether the benefit of findings of the Hon ble Delhi High Court in its order dated 29.07.2022 in CS(OS) 589/2021 regarding the Appellant being under undue and coercive influence of Sunaina Singh which in turn purportedly vitiated the CIRP proceedings was not available before the Adjudicating Authority and the Appellate Authority? - HELD THAT - It is amply clear that this Tribunal on 14.07.2022 came to the categorical conclusion that Sunaina Singh was not a related party having resigned much before the filing of Section 7 application and that her case was not covered by the exception carved out in Phoenix (supra) judgment - it is also noted that this order of 14.07.2022 was not challenged by the Appellant and to that extent has attained finality. The only issue at hand is the allegation raised by the Appellant that the benefit of findings of the Hon ble Delhi High Court dated 29.07.2022 was not available to this Tribunal while passing its orders. Be that as it may, this contention lacks substance as we find that the Adjudicating Authority while passing the second impugned order in IA No. 1394/2022 has dwelled at length on the findings of the Hon ble Delhi High Court dated 29.07.2022 before coming to the conclusion that the financial creditor in the present case is not a related party of the corporate debtor. Having regard to the material facts on record which shows that Sunaina Singh resigned as Director of the Corporate Debtor on 25.03.2019 while the Section 7 application was filed on 25.09.2019 and CIRP of the Corporate Debtor commenced on 07.02.2020, we are satisfied with the above findings in the second impugned order that Sunaina Singh was not a related party of the Corporate Debtor having resigned much before the filing of section 7 application - the Adjudicating Authority while passing the second impugned order was fully abreast of the findings of the Hon ble Delhi Court and has recorded detailed findings as to why these findings are distinguishable and inapplicable in determining the issue of Financial Creditor being a related party of the Corporate Debtor. There is no force in the contention of the Appellant that the findings of the Hon ble Delhi High Court in the context of related party allegation have been missed out by the Adjudicating Authority. The issue of sole financial creditor not being a related party to the Corporate Debtor has been well settled with due consistency both by the Adjudicating Authority and this Tribunal after noticing the relevant provisions of IBC and Phoenix judgment and cannot be reagitated at this stage now. Whether the Appellant not having challenged the CIRP admission order or the constitution of CoC within 30 days from the date of the passing of the relevant orders by the Adjudicating Authority is now entitled to raise these issues belatedly at this stage when the resolution plan came up for approval? - Whether cogent grounds have been made out by the Appellant in terms of Section 61(3) of IBC for challenging the order approving the resolution plan and whether the Appellant under the pretext of contesting the approval of the resolution plan has attempted to indirectly challenge the CIRP admission order dated 07.02.2020? - HELD THAT - It is trite law that under the IBC, once a debt becomes due or payable, in law and in fact, and there is incidence of non-payment of the said debt in full or part thereof, CIRP may be initiated by the Financial Creditor. The Adjudicating Authority only has to determine whether a default has occurred, i.e., whether the debt was due and remained unpaid. Once this is established, the CIRP has to be initiated against the Corporate Debtor. The Adjudicating Authority following this mandate of Section 7(5) of IBC had admitted the section 7 application on 07.02.2020 and initiated the CIRP against the Corporate Debtor. The CIRP admission order could have been challenged and an appeal filed within 30 days from the date of passing of the order. Admittedly, the Appellant never challenged the CIRP order - The statutory scheme of the IBC makes it clear that though the erstwhile Board of Directors are not CoC members, yet they have a right to participate in each and every meeting held by the CoC including right to discuss all the resolution plans presented in such meetings. In the present case too, pursuant to the constitution of CoC, notice of meetings of the CoC were duly sent to the Appellant. Despite service of notices upon the Appellant, it is clear that the Appellant chose neither to attend the meetings of the CoC and participate in the deliberations therein but never raised any objection on the CIRP process in spite of having knowledge of the ongoing CIRP. The rival submissions made is that the Appellant has attempted to indirectly challenge the CIRP admission order dated 07.02.2020 under the pretext of contesting the approval of the resolution plan - The present prayer of the Appellant to set aside the order approving the resolution plan submitted by the SRA can only be sustained if grounds mentioned under Section 61(3) of the IBC are met. In the present case, the CoC after considering the viability and feasibility of the resolution plan has approved the same with 100% vote share thereby fairly and squarely meeting the conditionalities laid down in Section 30(4) of the IBC. In the present case, the Resolution Professional after approval of the plan by the CoC filed an application before the Adjudicating Authority seeking approval of the Resolution Plan under Section 31 of the IBC. The CoC has done due diligence and evaluated the matrix in approving the resolution plan of the SRA and the sole member of CoC having 100% voting share has already approved the plan in their commercial wisdom as contemplated under the law. The Appellant has failed to point out any material irregularity or contravention of any provision of law by the CoC in approving the plan. That being the case, the Adjudicating Authority with the limited powers of judicial review available to it, cannot substitute its views with the commercial wisdom of the CoC in rejecting the resolution plan unless it is found it to be contrary to the express provisions of law or there is sufficient basis which establishes material irregularity. The scope of interference with an order approving the resolution plan is very limited. The approved resolution plan can only be challenged before the Appellate Authority on limited grounds in terms of Section 61 (3) of the IBC. However, the Appellant has failed to make out a case of applicability of any such limited grounds. The IBC provides for an initiation of timely resolution of the corporate debtor and in the instant case the resolution plan of the SRA having already been approved by the CoC and the Adjudicating Authority, it cannot now be open to interference on the ground that the CoC was not properly constituted. When the Appellant did not challenge the CIRP admission and constitution of CoC at the right point of time, it cannot raise the matter belatedly and make it a ground for rejection of the duly approved resolution plan. There are no error in the first impugned order dated 12.04.2023 approving the Resolution Plan and in the second impugned order of the same date dismissing IA No. 1394 which sought rejection of the Resolution Plan - appeal dismissed.
Issues Involved:
1. Whether the issue of the sole financial creditor being a related party to the Corporate Debtor can be raised again. 2. Whether the findings of the Hon'ble Delhi High Court regarding undue influence and coercion were not available before the Adjudicating Authority and Appellate Authority. 3. Whether the Appellant can raise issues belatedly at this stage without having challenged the CIRP admission order or the constitution of CoC within the statutory period. 4. Whether cogent grounds have been made out by the Appellant in terms of Section 61(3) of IBC for challenging the order approving the resolution plan. Summary: Issue 1: Related Party Allegation The Tribunal examined whether the issue of the Financial Creditor being a related party to the Corporate Debtor could be raised again. Previous adjudications (IA 344 of 2020, IA 728 of 2020, and CA (AT) (Ins.) 1065 of 2021) had already settled that the Financial Creditor was not a related party. The Tribunal noted that Sunaina Singh resigned as Director of the Corporate Debtor on 25.03.2019, well before the Section 7 application was filed on 25.09.2019 and the CIRP commenced on 07.02.2020. The Tribunal concluded that the issue had attained finality and could not be re-agitated. Issue 2: Findings of the Hon'ble Delhi High Court The Appellant argued that the findings of undue influence and coercion by the Hon'ble Delhi High Court in its order dated 29.07.2022 were not available to the Adjudicating Authority and the Appellate Authority. The Tribunal found this contention lacked substance, noting that the Adjudicating Authority had considered the Hon'ble Delhi High Court's findings and concluded that they were inapplicable to the CIRP proceedings. The Tribunal upheld that Sunaina Singh was not a related party of the Corporate Debtor at the relevant times. Issue 3: Belated Challenge The Tribunal addressed whether the Appellant could raise issues belatedly without having challenged the CIRP admission order or the constitution of CoC within the statutory period. It was noted that the Appellant had knowledge of the CIRP proceedings and chose not to challenge the CIRP admission order within the statutory 30-day period. The Tribunal emphasized that the statutory scheme of the IBC requires timely resolution and that the Appellant's belated challenge was an attempt to derail the CIRP process. Issue 4: Cogent Grounds under Section 61(3) of IBC The Tribunal examined whether the Appellant had made out cogent grounds under Section 61(3) of IBC for challenging the order approving the resolution plan. The Tribunal found that the CoC had approved the resolution plan with 100% voting share after considering its feasibility and viability, and the Adjudicating Authority had found no contravention of law in the resolution plan. The Tribunal reiterated that the commercial wisdom of the CoC is paramount and should not be interfered with unless there is a material irregularity or contravention of law, which was not demonstrated by the Appellant. Conclusion: The Tribunal dismissed the appeal, upholding the Adjudicating Authority's orders approving the resolution plan and dismissing the IA seeking rejection of the resolution plan. The Tribunal emphasized the finality of the related party issue, the inapplicability of the Hon'ble Delhi High Court's findings to the CIRP proceedings, the untimeliness of the Appellant's challenges, and the lack of cogent grounds under Section 61(3) of IBC.
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