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2024 (5) TMI 628 - AT - Insolvency and BankruptcyViolation of Principle of Natural Justice - denial of opportunity of hearing - grounds which were taken by the Adjudicating Authority were neither pleaded by the application filed by the Torrent Power Limited and Vantage Point Asset Management Pte. Ltd. nor they were addressed at the time of hearing of the application as pleaded by the RP and CoC - correctness of approved Resolution Plan - HELD THAT - There are substance in the submission of the Counsel for the Appellant that process adopted by the Adjudicating Authority in proceeding to allow application has violated the Principles of Natural Justice. No notice was issued in the application, no reply was called on the applications and while allowing the said application the entire plan which was approved has been remitted for reconsideration - the impugned order deserves to be set aside on the ground of violation of Principles of Natural Justice. The Hon ble Supreme Court further in Ramkrishna Forgings Limited vs. Ravindra Loonkar, Resolution Profession of ACIL Limited Anr., 2023 (11) TMI 910 - SUPREME COURT again reiterated that Adjudicating Authority has jurisdiction only under Section 31(2) of the Code, which gives power not to approve the Plan, only when the Resolution Plan does not meet the requirements of the Code. The observation that in absence of any discrimination or perverse decision, it is not open to the Adjudicating Authority or this Appellate Tribunal to modify the Plan was in reference of the claim of Operational Creditor, which was under consideration in the said Appeal. The expression discrimination has to be understood in the context of the Operational Creditor, who as per the provisions of Section 30, sub-section (2) is entitled to an amount. In event the amount offered to the Operational Creditor is not in accordance with Section 30, sub-section (2), there may be a ground for interference. The concept of discrimination of payment to various creditors have been further explained and elaborated in by the Hon ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS 2019 (11) TMI 731 - SUPREME COURT , where it has been held that there can be different payment to various classes of creditors. Another expression used in paragraph-6 by this Tribunal is perversity. In the facts of the present case, there can be no allegation against the Appellant about the concealment of any fact from the Adjudicating Authority. The Appellant was only a Resolution Applicant, who has submitted a Resolution Plan, which after evaluation was placed before the CoC by the RP. The CoC being led by two leading Banks, i.e., Bank of Baroda and State Bank of India, having vote share of 92.77% and 7.23% respectively was well aware of the financial intricacies and there has to be intrinsic assumption that the Financial Creditors were well aware of all financials of each Resolution Plan. The findings of the Adjudicating Authority regarding incomplete financial data has been challenged in the Appeals both by Sarda as well as RP and CoC - the impugned order passed by Adjudicating Authority dated 06.10.2023 deserves to be set aside, on the violation of principles of natural justice, consequent to which order, the matter needs to go back to the Adjudicating Authority for fresh consideration. Appeal disposed off.
Issues Involved:
1. Violation of Principles of Natural Justice. 2. Jurisdiction of the Adjudicating Authority to interfere with the commercial wisdom of the CoC. 3. Allegations of incomplete financial data provided to the CoC. 4. Discrimination and perversity in the decision-making process. Summary: 1. Violation of Principles of Natural Justice: The Appellant argued that the Adjudicating Authority violated the Principles of Natural Justice by allowing I.A. 3399/2023 without issuing a notice or calling for a reply from the Successful Resolution Applicant (SRA), Resolution Professional (RP), or Committee of Creditors (CoC). The Adjudicating Authority reserved the order on the same day the applications were listed, without giving an opportunity to the concerned parties to respond. The Tribunal found substance in this submission and noted that the process adopted by the Adjudicating Authority was not in consonance with the Principles of Natural Justice. The Tribunal set aside the impugned order on this ground and remitted the matter back for fresh consideration. 2. Jurisdiction of the Adjudicating Authority to interfere with the commercial wisdom of the CoC: The Appellant submitted that the Adjudicating Authority exceeded its jurisdiction by interfering with the commercial wisdom of the CoC. The Tribunal referred to several judgments, including K. Sashidhar vs. Indian Overseas Bank & Ors. and Pratap Technocrats Pvt. Ltd. vs. Monitoring Committee of Reliance, which emphasized that the commercial wisdom of the CoC is paramount and non-justiciable. The Tribunal reiterated that the Adjudicating Authority's jurisdiction is confined to ensuring compliance with Section 30(2) of the Insolvency and Bankruptcy Code (IBC) and cannot extend to examining the merits of the CoC's commercial decision. 3. Allegations of incomplete financial data provided to the CoC: The Adjudicating Authority had concluded that incomplete financial data was placed before the CoC, which rendered the decision-making process perverse. The Tribunal noted that this finding was not based on any pleadings raised by Torrent Power Limited and Vantage Point Asset Management Pte. Ltd. The Tribunal emphasized that the Adjudicating Authority should have given an opportunity to the RP, CoC, and SRA to explain the financial data before arriving at such a conclusion. The Tribunal refrained from recording any findings on the issue of incomplete data or perversity in the process, as the matter was being remitted for fresh consideration. 4. Discrimination and perversity in the decision-making process: Torrent Power Limited argued that there was discrimination in the process as the Appellant was given an opportunity to modify its offer in the guise of seeking clarification, which was not afforded to other Resolution Applicants. The Tribunal found that the clarification was sought from all Resolution Applicants in accordance with the CoC's decision and did not constitute discrimination. The Tribunal also noted that the Adjudicating Authority's finding of perversity was not supported by the pleadings and submissions before it. The Tribunal reiterated that a distinction must be maintained between decisions that are perverse and those that are not, and minor procedural infractions do not render a decision perverse. Conclusion: The Tribunal set aside the impugned order dated 06.10.2023 and remitted the Plan approval Application (IA No.2794 of 2023) and the other two Applications (IA No.3336 of 2023 and IA No.3339 of 2023) to the Adjudicating Authority for fresh decision. The Tribunal requested the Adjudicating Authority to dispose of the applications at an early date, preferably within 60 days. The Tribunal also denied any relief to the Intervenor, Jindal Power Limited, as it had not filed any application before the Adjudicating Authority.
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