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TMI Blog2018 (11) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Nakul Sachdeva, Mr. Somesh Dhawan, Mr. Pranshu Paul, Mr. Soham Kumar and Mr. Avinash Amarnath, Advocates for the RP with Mr. Vijay Iyer, RP in person For The Respondents : Mr. Arun Kathpalia and Mr. Gopal Subramanium, Senior Advocates with Ms. Misha, Mr. Manu Nair, Mr. Siddhant Kant, Ms. Bani Brar, Ms. Shantanu Chaturwedi, Ms. Srishti Khare and Ms. Jasveen Kaur, Advocates for Rajputana Properties Pvt. Ltd. Mr. Sanjiv Sen and Mr. Tushar Mehta, Senior Advocates along with Mr. R. Sudhinder, Mr. Soorjya Ganguli, Ms. Nimita Kaul, Ms. Amita Sarkar and Mr. Sumant Batra, Advocates for Committee of Creditors. Mr. Amit Sibal, Senior Advocate with Mr. Nakul Sachdeva, Mr. Somesh Dhawan, Mr. Pranshu Paul, Mr. Soham Kumar and Mr. Avinash Amarnath, Advocates for the RP with Mr. Vijay Iyer, RP in person. Mr. Ashish Rana and Mr. Surekh Baxy, Advocates for Export Import Bank. Mr. P.V. Dinesh and Mr. Rajendra Beniwal, Advocates for R-5- SBI. JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA, J. As all these appeals arise out of the order(s) passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata, in 'Corporate Insolvency Resolution Process' initiated against 'Binani Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 'Resolution Professional' has preferred Company Appeal (AT) (Insolvency) No. 234 of 2018 against the order dated 2nd May, 2018 in so far it relates to adverse observations made by the Adjudicating Authority against the said 'Resolution Professional'. 9. In the aforesaid background, all the appeals were heard together for disposal. 10. For deciding the issue, it is necessary to discuss all the relevant facts, as detailed below. 11. Mr. Vijay Kumar Iyer- 'Resolution Professional' filed an application under Sections 30 and 31 of the Insolvency and Bankruptcy Code, 2016 ('I&B Code' for short) read with Regulation 39 of the 'Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations, 2016' for approval of the 'Resolution Plan' for 'Binani Cement Limited'. It was informed that the application is within time and the 'Committee of Creditors' by majority vote approved the 'Resolution Plan' submitted by 'Rajputana Properties Private Limited'. 12. As noticed, number of objections were filed by the Respondents including, 'Binani Industries Limited', a group company of 'Binani Cement Limited'- ('Corporate Debtor'), 'Ultratech Cement Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availability of credit, and balance the interests of all stakeholders. The recent Ordinance explicitly aims to promote resolution over liquidation. 2. The objective of the 'I&B Code' is Resolution. The Purpose of Resolution is for maximisation of value of assets of the 'Corporate Debtor' and thereby for all creditors. It is not maximisation of value for a 'stakeholder' or 'a set of stakeholders' such as Creditors and to promote entrepreneurship, availability of credit and balance the interests. The first order objective is "resolution". The second order objective is "maximisation of value of assets of the 'Corporate Debtor'' and the third order objective is "promoting entrepreneurship, availability of credit and balancing the interests". This order of objective is sacrosanct. In the matter of "Arcelor Mittal India Pvt. Ltd. v. Satish Kumar Gupta and Ors.", the Hon'ble Supreme Court observed that "the 'Corporate Debtor' consists of several employees and workmen whose daily bread is dependent on the outcome of the CIRP. If there is a resolution applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see that this is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders if the resolution maximises the value of assets of the 'Corporate Debtor'. One cannot balance interest of all stakeholders, if resolution maximises the value for a or a set of stakeholder such as 'Financial Creditors'. One or a set of stakeholders cannot benefit unduly stakeholder at the cost of another. d. The 'I&B Code' prohibits any action to foreclose, recover or enforce any security interest during resolution period and thereby prevents a creditor from maximising his interests. e. It follows from the above: i. The liabilities of all creditors who are not part of 'Committee of Creditors' must also be met in the resolution. ii. The 'Financial Creditors can modify the terms of existing liabilities, while other creditors cannot take risk of postponing payment for better future prospectus. That is, 'Financial Creditors' can take haircut and can take their dues in future, while 'Operational Creditors' need to be paid immediately. iii. A creditor cannot maximise his own interests in view of moratorium.' iv. If one type of credit is given preferential treatment, the other type of credit will disappear from market. This will be against the objective of promoti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not amenable to bidding or auction. It requires application of mind by the 'Financial Creditors' who understand the business well. It is not recovery: Recovery is an individual effort by a creditor to recover its dues through a process that has debtor and creditor on opposite sides. When creditors recover their dues - one after another or simultaneously- from the available assets of the firm, nothing may be left in due course. Thus, while recovery bleeds the 'Corporate Debtor' to death, resolution endeavors to keep the 'Corporate Debtor' alive. In fact, the 'I&B Code' prohibits and discourages recovery in several ways. It is not liquidation: Liquidation brings the life of a corporate to an end. It destroys organisational capital and renders resources idle till reallocation to alternate uses. Further, it is inequitable as it considers the claims of a set of stakeholders only if there is any surplus after satisfying the claims of a prior set of stakeholders fully. The 'I&B Code', therefore, does not allow liquidation of a 'Corporate Debtor' directly. It allows liquidation only on failure of 'Corporate Insolvency Resolution Process'. It rather facilitates and encourages resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osure to the 'Corporate Debtor' or some of the 'Financial Creditors' to whom the 'Corporate Debtor' was guarantor. Even the guarantors who are treated to be the 'Financial Creditors', such as 'IDBI Bank Limited (Dubai Branch)', 'Bank of Baroda (London)', 'State Bank of India (Bahrain)', 'Syndicate Bank' have been provided with 100% proposed payment of their verified claim but the 'Export-Import Bank of India' and the 'State Bank of India (Hong Kong)' who are similarly situated have been discriminated. 20. Learned Senior Counsel appearing on behalf of the 'Rajputana Properties Private Limited' submitted that the 'Exim Bank' has been allotted 72.59% as the principal borrower is 'Binani Industries Limited' which itself is a non-performing asset and facing proceedings under the 'I&B Code'. With regard to claim of 'State Bank of India (Hong Kong)', it was submitted that it could not be paid in full as 'Rajputana Properties Private Limited' was never granted the opportunity to undertake diligence of the underlying plans in China despite repeated requests. Therefore, no opportunity to appropriately analyse the commercial viability. 21. Though the aforesaid explanation seems to be attra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulations, 2016. 27. In "Central Bank of India Vs. Resolution Professional of the Sirpur Paper Mills Ltd. & Ors.─ Company Appeal (AT) (Insolvency) No. 526 of 2018", this Appellate Tribunal while noticed the provisions of Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulations, 2016, observed and held as follows: "8. From the aforesaid provisions of I&B Code it is clear that the Board may make regulation but it should be consistent with the I&B Code and rules made therein (by Central Government) to carry out the provisions of the Code. Therefore, we hold that the provisions made by the Board cannot override the provisions of I&B Code nor it can be inconsistent with the Code. 9. Clause (b) and (c) of Regulation 38(1) being inconsistent with the provisions of I&B Code, and the legislators having not made any discrimination between the same set of group such as 'Financial Creditor' or 'Operational Creditor', Board by its Regulation cannot mandate that the Resolution Plan should provide liquidation value to the 'Operational Creditors' (clause (b) of regulation 38(1)) or liquidation value to the dissenting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal given by the 'Ultratech Cement Limited' was not at all considered though it was submitted on 8th March, 2018 i.e. much prior to the approval of the plan (14th March, 2018). The 'Committee of Creditors' have taken plea that the revised offer given by 'Ultratech Cement Limited' was merely an e-mail with an offer. The other plea taken was that the offer was not made in accordance with the 'process document' and if it is considered then it would be a deviation of the process laid down in the 'process document' by the 'Committee of Creditors'. Third objection was that the offer was beyond the time as stipulated under the 'I&B Code'. 32. The Adjudicating Authority has rejected such objections by detailed impugned order. It appears that the 'process document' was issued on 20th December, 2017 which inter alia stipulated general and qualitative parameters. It clearly indicated that 'Committee of Creditors' will negotiate only with the 'Resolution Applicant' which reveals highest score based on the evaluation criteria and whose 'Resolution Plan' is in compliance with the requirements of the 'I&B Code' as confirmed by the 'Resolution Professional'. We have dealt with the object of the ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess Document") that may be considered for the purpose of evaluation of the Compliant 'Resolution Plan' submitted by the Resolution Application ("RA"). Please note that the clarifications mentioned herein are not meant to be exhaustive. The CoC reserves the right, in its sole discretion, to provide further clarifications or delete or modify the same. 2. All terms of the Process Document shall continue to apply and be effective. Therefore, it is evident that the aforesaid clause provides that the 'Committee of Creditors' can delete or modify the clarification at any time before 'Resolution Plan' is accepted. 36. The 'process document' do not prohibit the 'Committee of Creditors' from amending the clause as apparent from Clause 2.1.3, which reads as follows: "i) Clause 2.1.3 of the process document provides that "the COC reserves the right to amend or modify the criteria of the evaluation of the Resolution Plan/ Financial Proposal submitted by the Resolution Applicants prior to the Resolution Plan Submission Date." 37. The aforesaid clause shows that the 'Committee of Creditors' can amend or modify the criteria of the evaluation of the 'Resolution Plan'/'Financial Proposal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ultratech Cement Limited' which are in consonance with Section 30(2) for the purpose of negotiation and for maximization of the value of the assets. Non-application of mind by the 'Committee of Creditors' and discriminatory behavior in approving the plan submitted by the 'Rajputana Properties Private Limited' is apparent. 41. It is desirable to notice the financial terms of the 'Resolution Plan' of 'Ultratech Cement Limited', relevant of which are as follows: "FINANCIAL TERMS OF THE RESOLUTION PLAN OF ULTRATECH CEMENT LTD. S. No. Particulars Verified Claim (in Rs. Crores) Proposed Payment Interest as on 30.04.2018 1. Insolvency Resolution Process Cost 115.91 (114.08 was revised by COC) 115.91 NA 2. Workman Wages 18.01 18.01 NA FINANCIAL CREDITORS WITH DIRECT EXPOSURE TO CORPORATE DEBTOR 3. Edelweiss Asset Reconstruction Company 2775.82 2775.82 217.63 4. IDBI Bank 335.85 335.85 26.33 5. Bank of Baroda 427.69 427.69 33.53 6. Canara Bank 370.34 370.34 29.03 7. Bank of India 94.66 94.66 7.42 8. State Bank of India 36.89 36.89 2.89 9. Oriental Bank of Commerce 0.72 0.72 0.06 FINANCIAL C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy Resolution is in the domain of 'Committee of Creditors'. The jurisdiction of the Adjudicating Authority being a creature of the statute is limited. 45. It was further submitted that the 'Committee of Creditors', 'Resolution Professional' and all 'Resolution Applicants' are bound by the 'process document' prepared under the mandate of Section 25(2)(h) of the 'I&B Code'. 46. We appreciate the aforesaid submissions made by Mr. Gopal Subramaniam, learned Senior Counsel that the 'Committee of Creditors', 'Resolution Professional' and all 'Resolution Applicants' are bound by the 'process document' prepared under the mandate of Section 25(2)(h) of the 'I&B Code' but non-adherence to process stipulated in terms of Section 25(2)(h) of the 'I&B Code' and to stipulation made in the 'process document' will render such decision illegal. 47. We have noticed the relevant provision of the 'process document' and Section 25(2)(h) and held that the 'Committee of Creditors' have not acted in terms with the provisions of the 'I&B Code' and the 'process document'. The maximization of the value assets of the 'Corporate Debtor' cannot be ignored nor it can be ignored that the same should balance al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tratech Cement Limited' to bail out 'Binani Industries Limited', the promoters and shareholders of the 'Corporate Debtor', wanted to acquire significant shareholding. It was submitted that the report of M/s. HariBhakti & Co., relates to scrutiny of transactions made by 'Binani Industries Limited' between 1st July, 2015 to 30th November, 2017, wherein fraudulent transactions amounting to Rs. 2,400 Crores were noticed. Out of the same, Rs. 1,187 Crorres were an inter corporate deposit in the form of a loan to 'Binani Industries Limited', to buy the shares of the 'Corporate Debtor' itself. However, such illegal or fraudulent transaction of 'Binani Industries Limited' having no connection with 'Ultratech Cement Limited' and such ground having not been raised before the Adjudicating Authority and in absence of any such evidence or report, it is not open to raise such issue during oral arguments, not based on pleadings. 53. Learned Senior Counsel submitted that after the 'Resolution Plan' was approved, the 'Binani Industries Limited' moved before the Hon'ble Supreme Court and intended to deposit certain amount by transferring their shares to 'Ultratech Cement Limited'. However, any subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions with both 'Resolution Applicants'. In compliance with order dated 15th May, 2018 of this Appellate Tribunal, the 'Committee of Creditors' gave its decision on Section 29A and having found eligible 'Ultratech Cement Limited' 'Resolution Plan' was considered and also asked 'Rajputana Properties Private Limited' to raise its offer, to achieve "maximization of value of assets" as per the object of 'I&B Code'. The 'Committee of Creditors' after duly following the orders of the Adjudicating Authority and this Appellate Tribunal approved the plan submitted by 'Ultratech Cement Limited' with majority vote. For submitting the plans of 'Rajputana Properties Private Limited' (19th March, 2018) and 'Ultratech Cement Limited' (18th June, 2018), the 'Committee of Creditors' has shown utmost respect towards the process document, the provisions of the 'I&B Code' and judicial orders passed by different fora. 60. It was also submitted that the 'Committee of Creditors' consisting of the 'Financial Creditors' encumbered with public money, ought to act in the interest of maximization of asset value. Further, as per the scheme of the 'I&B Code', the 'Committee of Creditors' has the discretionary p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in the provisional list. (6) The resolution professional may, with the approval of the committee, extend the timeline for submission of resolution plans." 61. Therefore, according to learned Senior Counsel for the 'Committee of Creditors', if need be and if an extraordinary situation so arises, the 'Committee of Creditors' holds the discretion in conformity with the Regulations framed by the Board to extend the timeline over and beyond the 'process documents'. The said fact is also evidenced in the proviso to Clause 1.3.1 of the 'process document' which provided that even after the deadline of the submission of the 'Resolution Plan', any 'Resolution Plan' could be verified by the 'Resolution Professional' as per 'I&B Code' and be considered by the 'Committee of Creditors'. However, it is also provided that the 'Committee of Creditors' may it its discretion, evaluate, accept or reject such 'Resolution Plans'. 62. It is informed that the 'Committee of Creditors' by majority decision has approved the plan submitted by 'Ultratech Cement Limited' which was found to be eligible in absence of any demerit under Section 29A of the 'I&B Code'. Case of 'Binani Cements Limited' 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e into force on 6th June, 2018 i.e. much after the impugned order was passed (2nd May, 2018). The Applicant has not filed an application for withdrawal after approval of the 90% voting share of the 'Committee of Creditors', therefore, the Appellant- 'Binani Industries Limited' cannot take advantage of Section 12A nor can be allowed to settle the matter. Even if they settle the matter, the 'Corporate Insolvency Resolution Process' cannot be terminated by the Adjudicating Authority or this Appellate Tribunal in absence of any illegality. 69. In so far as the observations made by the Adjudicating Authority against the 'Resolution Professional' are concerned, we are of view that the observations were uncalled for, for the following reasons: i. The 'Resolution Professional' had approached the Adjudicating Authority for seeking clarification in respect of the applications filed by the 'IDBI' for being representative as a member of the 'Committee of Creditors'. ii. The Adjudicating Authority passed order on 17th November, 2017 against which the appeal was filed by the 'IDBI' before this Appellate Tribunal wherein by order dated 18th December, 2017, we directed the 'Resolution Profess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors' by 100% voting shares voted in favour of 'Ultratech Cement Limited' and resolved that the Letter of Intent in connection with and amending the 'Resolution Plan' of 'Ultratech Cement Limited' be issued to 'Ultratech Cement Limited'. 72. The 'Resolution Professional' has now placed the same before this Appellate Tribunal for passing appropriate order under Section 31 of the 'I&B Code'. 73. In exercise of powers conferred by Section 31 of the 'I&B Code' read with order of remand by the Hon'ble Supreme Court, we have gone through the records, revised 'Resolution Plan' submitted by 'Ultratech Cement Limited, gist of which noticed earlier and being satisfied that the 'Resolution Plan' approved by the 'Committee of Creditors' under sub-section (4) of Section 30 in its 17th meeting held on 28th May, 2018 meets the requirements as referred to in sub-section (2) of Section 30, we approve the revised 'Resolution Plan' submitted by 'Ultratech Cement Limited' which shall be binding on the 'Corporate Debtor' and its employees, members, Creditors, guarantors and other stakeholders involved in the 'Resolution Plan'. 74. In the result, the Company Appeal (AT) (Insolvency) Nos. 123 & 188 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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