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TMI Blog2018 (10) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... is duty will cast upon the RP only when a decision has been approved by the CoC to invite resolution plans therefore, the RP not inviting resolution plans will not tantamount to non-compliance of Section 25(2)(h) of the Code. As to exclusion of 60 days from CIRP period, none of the applications filed by the parties can be considered as having grievance because as to RP is concerned, his only duty is to carry out the approvals given by the CoC, he cannot question that as to why CoC has not sought for extension of time, as to why CoC has not given approval for invitation of resolution plans. He is neither an Adjudicating Authority nor an officer to supervise the discretion vested with the CoC. Suspended directors cannot have any grievance to say that if the company is opted for resolution, they would get something out of the company. Here the principal stakeholders are the creditors, more specifically financial creditors whose interest is stuck in the Corporate Debtor, if they themselves opt for liquidation, such decision or indecision cannot be reversed so as to send it back to the CoC. Moreover, I say that this Adjudicating Authority has no jurisdiction either u/s. 31 or u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It's MA 342/2018 filed by the Directors of the suspended Board of Directors of the Corporate Debtor u/s. 60(5) of the Insolvency Bankruptcy Code, 2016 ( the Code ) arraying the Resolution Professional and various Financial Creditors as R2 to R14 asking this Bench to pass the following orders: (a) Leave be granted to intervene in CP 1239/MAH/2017, (b) 64 days be excluded while computing 180 days' time period of the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor, (c) Alternatively, the Committee of Creditors (CoC) be directed to extend the CIRP time period for a further period of 90 days, (d) Direct the CoC to approve and pay the cost and expenses for obtaining the final Valuation Report of the Corporate Debtor as prepared by the Registered Valuers, (e) Direct the Resolution Professional (RP) to prepare, finalise and publish Information Memorandum of the Corporate Debtor, (f) Direct the CoC to approve the draft of the invitation for Expression of Interest (EOI) within a period of seven days failing which it will be deemed that the draft submitted by the Resolution Professional stands approved by the CoC, (g) Direct the RP to pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble taxes and out of pocket expenses at actual 85.02% 2.23% 12.75% 100.00% 3. To ratify approximate cost of E-voting facility by CDSL amounting to ₹ 12,000/- 85.02% 2.23% 12.75% 100.00% 4. To ratify approximate expense of conducting first CoC amounting to ₹ 75,000/- 85.02% 2.23% 12.75% 100.00% 5. To appoint CA Mr. Atul Rajwadkar (Present IRP) as Resolution Professional at a fees of ₹ 2,00,000/- per month plus taxes (as per the terms of his offer letter) 4.67% 82.58% 12.75% 100.00% 6. To appoint Mr. C Bala Mouli, from RBSA Restructuring Advisors LLP as Resolution Professional at a remuneration of ₹ 6,00,000/- per month as proposed by some members of the CoC 83.54% 1.48% 14.98% 100.00% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which, SREI informed that they would analyse the possibilities of raising such finance and come back on the same, so that the matter of raising interim finance and the amount to be raised would be put for e-voting. 6. It appears that valuation reports prepared by the Registered Valuers could not be collected by the RP as the CoC has not been contributing towards the cost/expenses of the Valuers. The RP stated in this MA that the Registered Valuers have not been inclined to share the valuation reports unless payment has been made to them, by which the RP was unable to perform its duties endowed upon him. 7. In the third CoC Meeting held on 20.2.2018, the points that came for discussion are (i) for reconsideration of earlier decision that CoC would share essential amounts payable towards insurance premiums, salaries to security, valuers fees, essential staff utility bills, CoC meeting expenses, advertisement charges for publication of EOI in proportion to their voting rights, (ii) to inform that the Liquidator of Gupta Coal India had kept a board claiming that the stock of coal at the Six Washery Sites at Ramagundam, Pimpalgaon, Ghugus, Wani, Sasti, Majri belong to Gupta Coal I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of essential expenses to be shared by CoC in proportion to their voting power as per the attached statement, voting on as to whether CoC members are in favour of inviting resolution plan or go for liquidation straight away, (xvii) to authorise RP to engage the attorneys Rajani Associates to seek extension of time by 90 days. These are the points that have been resolved to be voted for approval, but whereas none of these approvals were voted with majority of 75% as specified under Section 21 of the Code except to an item to approve the fees of Dhir Dhir Associates and contribution to the same by the CoC members amongst themselves in the ratio of their voting rights (approval with 82.60% voting share). It is also clear in the voting that CoC members have not even approved to bear the essential expenditure as per their voting share and they have not even approved for extension of CIRP for another 90 days as specified under the Code. Finally, the CoC has not approved either resolution plan or liquidation. 8. The RP has stated in his application that the draft Expression of Interest and the Evaluation Matrix were circulated through email by RP on 15.2.2018, however no response ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e its powers through refusing inviting resolution plans from prospective resolution applicants. They further submit that RP is also duty bound u/s. 29 of the Code (preparation of Information Memorandum) to prepare information memorandum, but the Resolution Professional could not do the same, for the valuers have not delivered the valuation reports because of their fee not being paid by CoC. Due to this reason, they submit, RP could not proceed any further for giving invitation of Expression of Interest. In view thereof, not only these suspended directors but also the RP as well as one of the Financial Creditors, namely SREI filed applications before this Bench u/s. 60(5) of the Code to get appropriate directions against CoC members to proceed for invitation of the resolution plans and for approval of the same instead of going directly to liquidation. 11. These applicants further submit that the major consumer/customer of the Corporate Debtor is Maharashtra State Electricity Corporation (MSEC) for washing of the coal that they get from Western Coalfields Limited (WCL) but because of some disputes between WCL and MSEC, MSEC stopped taking coal from WCL which has adversely affected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed financial assistance of ₹ 88 crores on 3.1.2015 to this Corporate Debtor and this money not being repaid, the due outstanding against the Corporate Debtor along with interest has become ₹ 107 crores, for which it has made a claim before the RP, basing on this claim, this applicant has become one of the Financial Creditors of the CoC having 2.79% vote share in the CoC. The total financial debt claim admitted against this Corporate Debtor is ₹ 3850,19,01,834. In this application also, the applicant has repeated what all stated by the RP and the suspended Directors by saying that though the RP placed draft format of the EOI including the Evaluation Matrix, the CoC has not approved any of the draft proposals placed by the RP, and for there being no concrete decision on any of the issues placed before the CoC, this Financial Creditor which has only 2.79% has come out with this application with the same relief of seeking exclusion of 60 days from 180 days' time period of CIRP and also for extension of 90 days' time in addition to 180 days enabling the RP to forthwith prepare, finalise and publish Information Memorandum of the Corporate Debtor and the invitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the current RP, Mr. C B Mouli, as the Liquidator of the Corporate Debtor under Section 34 of the Code along with all the powers as required under the Code; 4. For cost and order thereon provided for; 5. Such other reliefs as this Hon'ble NCLT may deem fit and appropriate in the nature and circumstances of the instant case. 18. Most of the averments made in this application have already been depicted as historical facts from the date of admission till the date of filing this application, whereby we have not separately dealt with the averments of this application herein but by reading this application, the issue seemed to be in the application is that CoC has not co-operated with the RP to proceed further to invite resolution plans from the prospective resolution applicants therefore, sought co-operation of the CoC or in the alternative to pass liquidation order. 19. After having the holistic view of the averments of all these applications, it is evident that, (i) this Corporate Debtor is a company not doing business as on the date of filing Section 10 petition before this Bench. It is not that either Section 7 or Section 9 Petition admission is thrust upon thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussed about liquidation also but finally when it has come for voting, the CoC members could not have come to concurrence to give their approval as specified under the Code to any of the issues mentioned above. In the same breath, we should not also shy away from discussing the powers conferred upon RP as well as CoC, so as to understand as to who has to take call over extension of time, over a decision as to whether to go for resolution or to go for liquidation. This issue will be decided in the ensuing discussion because these observations are mainly limited to look into the factual aspect available on record. (iv) The Corporate Debtor position is so bad that no money is available even to pay to Registered Valuers who were asked to provide the Valuation Reports. The CoC have also not paid money to it. Of course, it is up to them whether it is prudent on their part to shell out further money over a company which would not give anything to them. May be if they feel that it would be throwing good money after bad money, they may not invest any further. It has also not been said by any of these applicants that this Corporate Debtor has valuable assets in the company and that if it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the approvals of the CoC, they have been consolidated u/s. 28 of the Code as to which situations, RP shall take approvals of CoC to deal with Corporate Debtor functioning. It is not only in Section 28, this Code has dealt with rights and powers of CoC, it has been dealt with in various places deciding that RP shall not go on his own unless approval is taken from CoC, in addition to the approvals mentioned under Section 28, it has been very much mentioned in Section 25(2)(h) of the Code that RP is under obligation to take approval of the CoC to invite prospective resolution applicants, it is not that as stated by the various applicants that RP is free to invite prospective resolution plans notwithstanding the approval of CoC. To have clarity, let us revisit Section 25(2)(h) which is as follows: 25. Duties of Resolution professional. (1) .. (2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely:------- (a) .. (h ) invite prospective resolution applicants, who fulfil such criteria, as may be laid down by him with the approval of Committee of Creditor s, having regard to the complexity and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to give a meaningful reading, Court is required to look up at the preamble so as to read the provision in a meaningful perspective. Here in this Code, it is known to everybody that the corporate debtor management has been shifted from the Board of Directors to the CoC. It is not said anywhere that rights of the CoC in managing the company are eclipsed by some caveats. The RP is limited to work to the extent that has been mentioned in the Code and obtain time to time approvals from CoC in running the company. If at all his duties are extended beyond the stretch that has been mentioned in the Code, it is arbitrary and in contravention to the powers conferred upon the CoC. In view of this legal proposition, I don't believe that the RP can overlook the CoC in inviting prospective resolution applicants by publishing EOI. It is not the understanding of law. 25. Side by side it is also imperative to see what powers are conferred upon this Adjudicating Authority either for approval of the resolution plan or for initiation of liquidation as enunciated under Section 33 of the Code. It is also important to look into general power, that is not dealt with under any of the provisions of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 151 of CPC can travel to any place wherever specific jurisdiction has not been given. No doubt it is true that general power has been given under Section 60(5) of the Code, but it has to be seen when and where such jurisdiction could be exercised. If at all, any action has been taken contravening the provisions of the Code or any fraud is committed under the garb of any of the section then such action could be called as vitiated by fraud. In a situation like that, may be, since this Adjudicating Authority has no other provision, it may invoke Section 60(5) of the Code. But when an action by any of the parties de hors fraud and non-compliance of the provisions of the Code cannot be said as an action open to this Adjudicating Authority to exercise jurisdiction u/s. 60(5) of the Code. 28. If we ask explanation why CoC has not gone for resolution, it is nothing but transgressing into the discretion of the CoC. It has not been said anywhere in these applications that the CoC acted beyond its jurisdiction and beyond its powers. It has only been said that there is a possibility for revival therefore, instead of going for liquidation, the CoC should have gone for resolution process. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dues. The interesting part is none of these applicants said anywhere that there are valuable assets in this company costing such and such value. To me it appears, it is nothing but delay tactics to deprive the CoC from proceeding further to realise whatever that is remained in the company. There is no requirement to see the valuations or to see the Information Memorandum to order for liquidation u/s. 33 except seeing as to whether resolution plan has been received under sub-section (6) of Section 30 or the rejected resolution plan u/s. 31 of the Code. That being the legal proposition, there is no need to put the clock back to direct CoC for inviting EOI, and for receiving resolution plans, then to examine the same. 30. In view of the reasons aforementioned, CoC not approving to invite resolution plans will not become non-compliance of the duties of the RP because this duty will cast upon the RP only when a decision has been approved by the CoC to invite resolution plans therefore, the RP not inviting resolution plans will not tantamount to non-compliance of Section 25(2)(h) of the Code. 31. In the facts above mentioned and the reasons given above, the citations Inder Preet S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. 35. As to MA 347/2018 filed by SREI Equipment Finance Ltd. having 2.79% voting share in the CoC seeking exclusion of 60 days' time, its voting share will not make any difference to any of the decisions of the CoC. First its voting share is miniscule moreover whatever that is required to be done within 270 days, i.e. to go for resolution or for liquidation, that exercise has already been taken place, discussion has happened in the CoC and voting has taken place. Voting has been fractured not weighing either side. In this backdrop, law does not permit this Bench to send it back to the CoC jumping all the provisions of law. However, I make it again clear that CoC has discussed every issue accordingly, they voted therefore, whatever to be done within the CIRP period that has been done, and henceforth there is no requirement of exclusion of the period that has been mentioned in this application. In view of the same, we don't find any merit in this application filed by this financial creditor having 2.79% voting share in the CoC. 36. As to MA 194/2018 filed by the RP, whatever points he has raised in his application, have already been discussed by this Bench and observat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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