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TMI Blog2018 (2) TMI 1222X X X X Extracts X X X X X X X X Extracts X X X X ..... the Resolution Plan given by Respondent No.4/ARC was placed before the Committee of Creditors ["COC" for short] on 4.1.2018 and COC rejected the said Resolution Plan. Thereupon, the Promoter/Director vide IA No. 20 of 2018 requested this Authority to treat the Draft Amendment as integral part of the IA No. 9 of 2018. In the Draft Amendment, it was proposed to amend the Memo of Application by inserting the prayer, i.e., to quash the Minutes of the Meeting of the Board of Directors dated 4.1.2018 and to take on record the Resolution plan submitted by the Respondent No. 4/ARC. 3. The Applicant is referred to as "Promoter/Director" of the Corporate Debtor, the 3rd Respondent is referred to as 'Resolution Professional"; the 4th Respondent is referred to as "Resolution Applicant/ARC"; Respondent No. 1 herein is the "Corporate Debtor"; and Respondent No.2 herein is the "Financial Creditor" who triggered the Corporate Insolvency Resolution Process by filing CP (IB) No. 5 of 2017 under Section 7 of the Code. The said CP (IB) No. 5 of 2017 was admitted by this Adjudicating Authority on 19.4.2017. The chronology of dates and events that are helpful for adjudication of the issues involved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a and contention of the Promoter/ Director is that the Resolution Professional did not place the Resolution Plan dated 2/3.1.2018 before the COC on 4.1.2018 but after the amendment of the prayer, the contention of the learned Senior Counsel appearing for the Promoter/ Director is that the Resolution Professional after satisfying that the Resolution Plan is in consonance with the requirements of section 30 sub-section (2) and Regulation 37 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 was placed before the COC and the COC without assigning any reason by simply saying that the Resolution Plan does not meet the criteria of the IB Code rejected the Resolution Plan although it is in the interest of the Corporate Debtor, its Promoters, Members, Financial Creditors and other Stakeholders, During the course of arguments, learned Senior Counsel appearing for the Promoter/Directors referred to Sections 30, 60, 60(5), 37, 38 of the Regulation 37 of the Insolvency And Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 under Section 31(1) of the Code and vehemently contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries Ltd. (supra), has referred to the report of Bankruptcy Law Reforms Committee, 2015 ("Reforms Committee") in order to gain an insight into why IBC was enacted and purpose for which it was enacted. Briefly stated the Reforms Committee examined whether in the case of a company which has committee a default in repaying its debt obligations, whereas secured creditors are able to repossess the fixed assets which are pledged with them, there are several creditors and lenders who are not secured lender and when default takes place lenders are able to recover only 20% of the value of debt on a Net Present Value (NPV) basis. In short, the Reforms Committee came to the conclusion that those industries which do not have a strong asset base are being deprived of credit which makes it difficult for corporates to raise finance by issuance of long dated corporate bonds (unsecured) which are essential for most infrastructure projects. The Reforms Committee found that where a default occurs, an unsecured lender was either to take the company into liquidation or to negotiate a debt restructuring, where the creditors accept a reduced amount on NPV basis, in the hope that negotiated v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for under Section 14 of IBC. Therefore, the most fundamental distinction between the provision of the Companies Act and IBC is, whereas under the Companies Act winding up would be a manner for the Court alone to decide, under IBC, there is a paradigm shift inasmuch as it displaces the management of the Company and an IRP is appointed and the Creditors Committee is left to decide the fate of the company." 7. Therefore, the wisdom of the Parliament is that it is for the COC to take a business decision to reject or accept a Resolution Plan. In case if the COC accepts a Resolution Plan, then it is subject to the authority and jurisdiction of the Adjudicating Authority. As already said, no provision is made in the IB Code or in the Rules or in the Regulations that would enable or enjoin upon the Adjudicating Authority to sit over the Resolution of the COC in rejecting a particular Resolution Plan. 7.1 Therefore, this Adjudicating Authority is of the considered view that it has no authority or jurisdiction to interfere with the Resolution of the COC in rejecting the Resolution Plan. 8. Learned Senior Counsel appearing for the Applicant vehemently contended that when a Resolution Pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information about the Resolution Plan. In fact, the Resolution Applicant could have himself rejected the Resolution Plan because he was of the opinion that the Resolution Plan is not in accordance with the provisions of the IB Code. But, instead of doing so, the Resolution Professional placed the Resolution Plan before the COC. 9. Here, it is pertinent to refer to Section 25 of the Code which deals with duties of Resolution Professional. Section 25(2)(i) reads as follows; Duties of resolution professional 25.(2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely: (a) to (h)..... (i) present all resolution plans at the meetings of the committee of creditors; Therefore, the Resolution Professional is right in his duty in presenting the Resolution Plan dated 3.1.2018 also before the Committee of Creditors for its decision with full details and stating that the Resolution Plan does not meet the criteria specified in IBC, 2016. Further, the Regulation 39, if not totally inconsistent with Section 25(2)(i), is imposing a further duty on the Resolution Professional to scrutiny the Resolution Plan and come to a conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution Applicant did not arise till 20th December, 2017. In fact, on 30th December, 2017 the Resolution Professional informed the Resolution Applicant that the Resolution Plan is not based on Information Memorandum and asked the Resolution Applicant to file a Resolution Plan after obtaining the Information Memorandum and after entering into 'NDA'. Thereafter, the Resolution Applicant entered into NDA and obtained Information Memorandum and filed the signed Resolution Plan on 3.1.2018. Therefore, there is no lapse on the part of the Resolution Professional. More so, it is the Resolution Applicant who failed to act in a diligent manner and file the Resolution Plan well within time, if not within 30 days before the expiry of the Corporate Insolvency Resolution Process period. Moreover, the Resolution Plan filed by the Resolution Applicant contained information other than the information based on Information Memorandum. When such is the case, it is not possible for the COC to take a decision on such a Resolution Plan because they have no information about the information that has been furnished by the Resolution Applicant. Therefore, the rejection of the Resolution Plan by the COC cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h requires interference of this Adjudicating Authority with the decision of the COC. Here, the COC rejected the Resolution Plan not on the ground that it is not a viable Resolution Plan, but on the ground that it is not in conformity with the requirements of the Code. On the ground that the Resolution Plan is not rejected by the Resolution Professional on the basis that it does not confirm to the requirements of the Code and Regulations, it cannot be concluded that the Resolution Plan is in accordance with the requirements. When the information is there before the COC regarding the non-compliance of the requirements of the Code and Regulations, Committee of Creditors is perfectly justified in rejecting the Resolution Plan. Therefore, there are no facts and circumstances that warrant interference by this Adjudicating Authority in the rejection of the Resolution Plan dated 3.1.2018 submitted by the Resolution Applicant, even assuming that this Adjudicating Authority has got jurisdiction to decide the validity or otherwise of the rejection of the Resolution Plan submitted by the Resolution Applicant.
12. The Application is dismissed. No order as to costs. X X X X Extracts X X X X X X X X Extracts X X X X
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