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TMI Blog2019 (5) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... deration the provisions under Section 33(1) of IBC, 2016, as extracted above, the only recourse available is liquidating the CD in view of the CoC in their meeting having unanimously rejected the only Resolution Plan available before it thereby effectively approved for the liquidation of the Corporate Debtor and there being no Resolution Plan being placed before it, this Tribunal orders for liquidation of the Corporate Debtor and in the circumstances the CD stands liquidated and the incidence of liquidation to follow, on and from the date of this order in terms of provisions of IBC, 2016 and more particularly as given in Chapter-III of IBC, 2016 and also in terms of Insolvency and Bankruptcy (Liquidation Process) Regulations, 2017 - Further in terms of the said Regulations, the Liquidator shall file his report to this Tribunal as mandated therein. The present RP, namely Mr. Vijender Sharma shall act as the liquidator based upon his consent expressed, as the liquidator of the CD. He shall issue the public announcement that the CD is in liquidation. In relation to officers/employees and workmen of the CD, taking into consideration Section 33(7) of IBC, 2016, this order shall be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) That the CIRP was initiated on 03.05.2017 and that at the time of initiation of CIRP, one Mr. Ashwani Kumar was appointed as the IRP of the CD and that during his tenure as IRP, the said Mr. Ashwani Kumar had filed three status report dated 12.05.2017, 01.06.2017 and 20.06.2017. (2) That in the first COC meeting held on 07.06.2017, the applicant RP was appointed by COC, instead of the IRP appointed by this Tribunal, namely, Mr. Ashwani Kumar and the change of RP to the present one was also confirmed by this Tribunal on 30.06.2017 based on an application filed by ICICI Bank Ltd. under Section 22(3)(b) of IBC, 2016. (3) Consequent to the affirmation by this Tribunal of the appointment of the applicant and confirmation by Insolvency and Bankruptcy Board of India, (IBBI), the applicant it is stated accepted the office of RP in relation to the CD on 26.07.2017.The applicant further states that the following status reports have been filed, the details of which are as under:- Sl. No. Particulars Date Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realization from any debtor of the CD and under the circumstances even maintenance of the plant of the CD has become difficult and that even the fees of former RP as well as the applicant have also not been paid. (5) That it is also stated that there is also an unclaimed balance of ₹ 18.82 lakhs lying in Punjab National Bank deposited during the CIRP for which also directions are being sought from this Tribunal by the applicant RP and also further directions in relation to preservation of the value of the CD in the absence of funds. (IV) Now turning to the applications filed by the Resolution Applicants the following averments are made: - (1) Application No. C.A.190(PB) of 2018 vide Diary No.1763 dated 02.04.2018. (i) That the resolution applicants have filed the Resolution Plan between the period 22.11.2017 and 16.01.2018 when an application was pending before this Tribunal seeking for extension of CIRP by a further period of 90 days. (ii) That after extension of CIRP since there was a time gap of only 10 days for the extended period also to expire on 28.01.2018 and in the mean while the COC in its 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be given priority more than liquidation, this tribunal vide its order dated 09.04.2018 directed the RP to place before the COC the resolution plan submitted by the Resolution Applicants and for the COC to vote thereon in relation to the Resolution Plan of the resolution applicants. As brought out in the application filed by the RP in C.A.No. 884 (PB)/2018 on 16.04.2018 the said Resolution Plan of the Resolution Applicants seems to have been rejected by the COC in its 6th meeting and COC had recommended for liquidation which had triggered one more round of litigation on the part of the resolution applicants aggrieved this time around of the decision of COC in rejecting the Resolution Plan by filing one more application in which the facts, to some extent have been contrived to suit the convenience of the resolution applicants particularly in relation to the proceedings that transpired before this Tribunal which are obviously eschewed being contrary to the proceedings that transpired, and the remaining details of which are as follows:- (2) Application No.626 (PB)/2018 filed vide diary No. 4141 dated 26.06.2018:- (i) That vide order dated 09.04.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of stakeholders and in the circumstances the sole Resolution Plan which has been submitted must go through taking into consideration that the rejection by COC is not supported by law and also further developments in the legal front which had taken place by way of amendment made to IBC, particularly to provisions 30(4) and 240A by way of Ordinance made effective on and from 06.06.2018. (2) IBC, 2016 came into effect on and from 01.12.2016 and even after a period of almost 2 years still the Code is a work in process as both the Central Government and the Legislature in relation to IBC and the regulator, namely IBBI in relation to regulations are in the process of fine tuning it based on the exigencies of the situation thrown in view of judicial interpretation as well as to further the avowed objects for which the Code was enacted. While the inclusion of home buyers within the definition of a financial creditor is a case in point in relation to amendments carried out in view of judicial interpretation, exigencies arising out of necessity not to allow the defaulting promoters, in substantial of the cases they primarily being the reason for insolvency of a CD, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts as envisaged under Section 29A or rejection of the Resolution Plan outright by the COC, acting in the dual capacity of a stake-holder as well as a referee what with the RP being the linesman seeing to that all the parties act square and fair within the confines of law and for decisions to be made by the COC accordingly. As to whether such a decision made by it is sustainable or not in relation to the approval or rejection of the resolution plan, the adjudicating authority virtually acts as a referral body which is required to consider the decision of the COC when it comes before it either for approval of resolution plan failing which for liquidation, in retrospect. At this stage it will be also appropriate to mention that the roles of RP, COC and Adjudicating Authority has been clearly demarcated by the Hon'ble Supreme Court in the decision rendered by it in the matter of Arcelormittal India (P.) Ltd. v. Satish Kumar Gupta 150 SCL 354 which is of immense significance and hence is considered first before going into the list of dates. In this connection paragraphs 75 to 81 of Arcelor Mittal's case is reproduced as below: Powers by RP and CoC in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssional is not required to take any decision, but merely to ensure that the resolution plans submitted are complete in all respects before they are placed before the Committee of Creditors, who may or may not approve it. The fact that the Resolution Professional is also to confirm that a resolution plan does not contravene any of the provisions of law for the time-being in force, including Section 29A of the Code, only means that his prima facie opinion is to be given to the Committee of Creditors that a law has or has not been contravened. Section 30(2)(e) does not empower the Resolution Professional to decide whether the resolution plan does or does not contravene the provisions of law. Regulation 36A of the CIRP Regulations specifically provides as follows:- (8) The resolution professional shall conduct due diligence based on the material on record in order to satisfy that the prospective resolution applicant complies with- (a) the provisions of clause (h) of sub-section (2) of section 25; (b) the applicable provisions of section 29A, and (c) other requirements, as specified in the invitation for expression of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Adjudicating Authority could be entertained as there is no vested right or fundamental right in the resolution applicant to have its resolution plan approved, and as no adjudication has yet taken place. 80. It is the Committee of Creditors which will approve or disapprove a resolution plan, given the statutory parameters of Section 30. Under Regulation 39 of the CIRP Regulations, subclause (3) thereof provides: - (3) The committee shall evaluate the resolution plans received under sub-regulation (1) strictly as per the evaluation matrix to identify the best resolution plan and may approve it with such modifications as it deems fit: Provided that the committee shall record the reasons for approving or rejecting a resolution plan. This regulation shows that the disapproval of the Committee of Creditors on the ground that the resolution plan violates the provisions of any law, including the ground that a resolution plan is ineligible under Section 29A, is not final. The Adjudicating Authority, acting quasi-judicially, can determine whether the resolution plan is violative of the provisions of any law, including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicating authority and from it to the Appellate Authority and ultimately to the Supreme Court being the legal hierarchy as contemplated under IBC, 2016 where there is a disapproval of the resolution plan on the ground that it violates the provisions of any law, including the ground that a resolution plan is ineligible under Section 29A taken by the COC is not final; (iii) However, where there is an approval of the resolution plan by the COC which gets the nod of the adjudicating authority as well, the said decision can also be challenged before the NCLAT and thereafter before the Supreme Court as enunciated in paragraph 81; (iv) The role of a Resolution Professional is only to examine and confirm that each of the Resolution Plans conforms to Section 30(2) of IBC, 2016 and an onus is cast on the Resolution Professional under Section 25(2)(i) to place all the resolution plans along with Resolution Professional's prima facie opinion supported also by a due diligence report on the resolution plans per se placed before the COC taking into consideration the fitness of things and that the Resolution Professional is not empowered to decide whether the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XXXX XXXX Thus armed with the wisdom of Hon'ble Supreme Court as above and as to how this Tribunal should proceed in relation to consideration of a Resolution Plan it will be apposite to consider the list of dates and events brought forth in the compilation filed by ICICI Bank, being a member of the COC having a voting percentage of 61.46% which is to the following effect: List of Dates and Events from ICICI Bank Compilation: Date Event 03.05.2017 An application under Section 9 of the Insolvency Bankruptcy Code, 2016 ( Code ) was filed by one Operational Creditor namely M/s. Anant Overseas Pvt. Ltd. against the Respondent No. l Company. Hon'ble NCLT New Delhi, vide its order dated 03.05.2017 was pleased to admit the petition and consequently Corporate Insolvency Resolution Process ( CIRP ) commenced w.e.f. 03.05.2017. 26.10.2017 Resolution Plan submitted by Corporate Debtor (as section 29A was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the 90 days extended period be calculated from the date of order i.e. w.e.f. 16/1/2018. 13.03.2018 In compliance of CoC meeting dated 19.2.2018, the Resolution Professional filed a status report for liquidation of Corporate Debtor vide diary No. 1377 dated 13.03.2018 which was taken on record by the Ld. Tribunal below. 23.03.2018 The application being CA No. l90/PB/2018 filed by Promoter Director of the Respondent Company - Mr. Ram Niwas, claiming to have come forward with another Resolution Plan was taken up. 09.04.2018 The Ld. Tribunal directed the Resolution Professional to place the Resolution Plan of Mr. Ram Niwas, Promoter Director of the Respondent Company before the Committee of Creditor for consideration, provided: ( a ) The criteria as laid down under the provisions of the Code read with Attendant Rules and Regulations are complied with and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Debtor when apprised by the RP of the consequence of rejection. The Resolution Plans of the resolution applicants it must be noted having been rejected on 13.04.2018 and in the circumstances the only course available is to press the liquidation mode in relation to the Corporate Debtor in view of the provisions of Section 33 of IBC, 2016. (X) However, learned counsel for the resolution applicants vehemently opposes the liquidation of the Corporate Debtor on the grounds as given in paragraph II (2) supra under the caption Application No. 626 (PB)/2018 filed vide diary No. 4141 dated 26.06.2018 and for sake of brevity the same is not repeated. It is evident that the resolution applicants are none other than the members comprising of the board of directors of the Corporate Debtor (KMP) whose powers stand suspended and who seeks to take advantage of the amendments brought into effect in relation to inter alia the provisions of IBC, 2016 as well as to Section 29A of IBC, 2016 dealing with persons not eligible to be a resolution applicant and contends that the said provisions, namely 29A(c) and 29A(h)cannot be made applicable in relation to the resolution applicants bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balanced construction of the statute would therefore lead to the result that, where a resolution plan is upheld by the appellate authority, either by way of allowing or dismissing an appeal before it, the period of time taken in litigation ought to be excluded. 2. From the above observations of the Hon'ble Supreme Court it is evident that more than a fair chance is required to be given for the resolution of insolvency by this Tribunal prior to ordering liquidation, however based on a reasonable and balanced construction of the statute. The reasonable and balanced construction can be safely interpreted to mean the interest of the various stake holders concerned are to be balanced and cannot be divorced from their interest and being tilted only towards one of the stakeholders, to the detriment of other stakeholders in this case towards the promoters of the Corporate Debtor ignoring the concerns and interest of the creditors which will only militate against the avowed object of the Code, namely IBC, 2016 and as also reflected in the Banking Law Reforms Committee of November 2015 as extracted by the Hon'ble Supreme Court at paragraph 16 of the judgment rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate Debtor, prior to commencement of insolvency proceedings have candidly admitted to the default by stating that they have no funds to meet the liability of the Operational Creditor, namely Anant Overseas Private Limited and based on the said representations the CIRP of the Corporate Debtor has been initiated and thereafter the control of the company by virtue of provisions of IBC, 2016, has vested with the COC and under the circumstances equity holders cannot have a say according to their own dictates and conditions by way of trying to impose a Resolution Plan as submitted by them should be necessarily considered. 4. The sermonizing on the part of the parties, particularly ICICI Bank having a voting strength of 60% as well as the RP and the Board of Directors whose powers stand suspended and being the Resolution Applicants in relation to certain delays which has occasioned due to certain infrastructural deficiencies which are being addressed to by the Central Government, we find it strange and deliberately thrown at this Tribunal and of which strong exception is taken.The apprehension expressed concerning the unavoidable delay made by the Counsel for ICICI Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate Debtor, was presented before the CoC, by Sh. Vikas Surana, consultant of the Resolution Applicant. Numerous queries were raised on the resolution plan by the members of the CoC and were responded to by the KMP, being the Resolution Applicant. The RP also informed the CoC, that in case of rejection of the Resolution Plan in the e-voting, the Corporate Debtor would automatically become eligible for liquidation u/s. 33 of the IBC, 2016. Approved by 0.00%, Opposed by 91.24%, Abstained from voting 8.76%. 7. The fate of the resolution plan as given above shows that by overwhelming majority of 91.24% the resolution plan as submitted by KMP of the CD has been opposed and thereby rejected. However, it is also evident from the said meeting of CoC held on 26.10.2017 and the voting completed thereafter that the CoC has not recommended for liquidation of the CD despite the RP bringing to the notice of the CoC that the rejection of resolution plan will entail liquidation automatically but on the other hand the CoC had decided to send for extension of the CIRP process by further 90 days and in the meanwhile directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pression of Interest (EoI) and for calling for the resolution plan thereafter. In this connection, the CoC had also directed the RP to suitably advertise calling for EoI and it is also seen from the minutes of meeting dated 23.01.2018, certain eligibility criteria for a resolution applicant to fulfil has been fixed which is to the following effect: Item No.B-1 Eligibility of Resolution Applicant The agenda was discussed in detail and CoC shortlisted the following criteria of eligibility of Resolution Applicant. Qualification Criteria for Potential Resolution Applicant (RA), Possible parties/bidders A. For Private/Public Ltd. Company/LLP/Body Corporate, whether incorporated in India or outside/any other applicant: B. For Financial Institutions/Investment Companies/Fund Houses /PE Investors/NBFCs/ARC or any other applicant: C. Individuals/Partnership Firms/Group of Investors. Basis of evaluation of the bidders: Category A Financial credibility 1. Financial statements of the past 2-3 y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed on 3.2.2017 in Business Standard inviting for the prospective resolution applicants in accordance with the criteria as fixed and extracted as above and the last date in this regard was fixed as 9.2.2018 for receipt of EOIs. Pursuant to the same an EoI has been received from the promoters of the CD, namely, Mr. R.N. Basia, Mr. Naresh Basia s/o Mr. R.N. Basia, Mr. Amit Basia again s/o Mr. R.N. Basia to become joint resolution applicants which was conveyed on 6.2.2018 by the said persons to the RP and that a sum of ₹ 25,000/- was deposited on 7.2.2017 to the account of the company. It is also brought to the notice of this Tribunal vide the said report by the RP that based on CIBIL report Mr. Naresh Basia was shown as willful defaulter by 5 banks/FIs and taking into consideration the same Mr. Naresh Basia had become ineligible in his personal capacity and that in view of the provision of Section 29A of IBC, 2016 read with explanation provided there under, the other joint applicants also become ineligible. It is also brought to the notice of this Tribunal by the RP that Punjab National Bank had invoked guarantee given by Mr. Naresh Basia in favor of CD and in the circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it seeking for modification or clarification from the resolution applicant in relation to the resolution plan which has been annexed as Annexure-9 to the report filed by the RP vide Dy. No. 2203 dated 18.4.2018. 16. It is seen from the said e-mail that RP has required of the resolution applicants to comply with the formalities as provided under the provisions of IBC, 2016 as it stood as well as to abide by the relevant regulations in relation to the resolution plan, namely, Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and also to duly sign the resolution plan as submitted by the resolution applicants. 17. Coming back to the minutes of the CoC meeting held on 13.4.2018 being the 6th meeting, the CoC had taken note of the fulfilment of net worth criteria as prescribed by it in the 4th CoC held on 23.01.2018 meeting which also stands extracted as above which is to the following effect: 1. Calculation of Net-worth, which was fixed at ₹ 10 crores by the CoC There was a difference in the method of calculation of total net worth of the resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he had checked the resolution plans for compliance under the provisions of the IBC, 2016 and relevant regulations and amendments. The only provisions that was not currently complied with was Regulation 38(3), to the extent that the source of funds to pay the dissenting financial creditors was not mentioned in the plans. The RP also informed otherwise the resolution applicants had submitted revised resolution plans after incorporating all the suggested and required modifications, in the resolution plans. The CoC had a detailed discussion on the 2 resolution plans submitted by the resolution applicants and then put their queries to the resolution applicants. 18. It is also seen from the minutes of 6th CoC meeting that the resolution plan was considered in detail and that after consideration of the same certain queries seem to have also been addressed in relation to is commercial viability, namely, the concern of funding of the working capital to implement the resolution plan in the initial years, basis of value of equity shares proposed to be issued at ₹ 25 per share (rupees 15 per share premium to the financial creditors), provision of payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 is acceptable which it is not, on facts it is seen that the resolution applicants have failed to satisfy either the RP or before this Tribunal about the status of MSME and that leaves this Tribunal to consider only the resolution plan deters of Section 240A of IBC, 2016 and whether the rejection of the same by the CoC is valid or not. 21. In this connection, it should be highlighted that interventions of this Tribunal in the decision of the CoC and as gathered from the reading of Arcelormittal India (P.) Ltd. (supra) as rendered by the Hon'ble Supreme Court should be in relation to legal aspects more than the commercial aspects of the decision of the CoC and as to whether it is sustainable. Commercial decisions as to how to deal with the CD are to be left to the decision of the CoC as they are the right persons in view of the report of BLRC extracted with the approval by the Hon'ble Supreme Court in Innoventive Industries Ltd. case as extracted in paragraph supra that the affairs of the CD shift from the hands of the promoters to that of the creditors. It is no doubt true that this Tribunal is required to see that the interest of the stakeholders are duly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets and debts have not been collectible for long periods and in the circumstances the shares of the CD cannot even said to be valued at par of ₹ 10 per share what the net worth being in the negative. It is also further required to note that the resolution plan submitted earlier by the resolution applicants in the month of September, 2017 which stood rejected by the CoC on 26.10.2017 as well as the subsequent resolution plans which had been submitted and got rejected for not fulfilling the criteria set by the CoC on 23.1.2018 in its meeting held on 13.4.2018 and the EoI exercise completed much prior to that and a perusal of the said Resolution Plan shows that even in relation to the resolution exercise which has been prescribed by the Resolution Applicants as evidenced by way of two tabulations extracted herein below from the respective resolution plans disclose as follows: Under Resolution Plan which was rejected by CoC on 26.10.2017 The Revival Plan Restructuring without extra funding by Lenders Cut off dated 31st July, 2017 Particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .01 30.00 BMW India Fin. Services 0.10 0.02 0.06 0.00 0.07 70.00 0.00 0.00 0.03 30.00 HDFC Bank 0.15 0.02 0.08 0.00 0.10 70.00 0.00 0.00 0.04 30.00 ICICI Car Loan 0.04 0.01 0.02 0.00 0.03 70.00 0.00 0.00 0.01 30.00 Rainbow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TL2 WC Proposed Outstanding % Value of Shares % Sacrifice Amt % Secured Loans ICICI Bank Ltd. 33.71 6.40 6.74 5.39 18.54 55.00 15.17 45.00 0.00 0.00 PNB 9.19 0.51 2.99 1.56 5.05 55.00 4.13 45.00 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 0.23 0.00 0.23 40.00 0.00 0.00 0.34 60.00 Jainsons Finlease Ltd. 1.69 0.00 0.68 0.00 0.68 40.00 0.00 0.00 1.01 60.00 Total 48.96 6.91 13.23 6.96 27.10 55.35 19.70 40.25 2.16 4.40 Unsecured Loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. Taking into consideration all the above aspects and since the resolution plan as submitted by the resolution applicants stand rejected by the CoC and we do not find any legal infirmity in rejecting the resolution plan by the CoC as it is seen that the CoC has repeatedly considered the case of the promoters of the CD, this Tribunal is of the view that liquidation process in relation to the CD is required to be initiated as contemplated under Section 33 of IBC, 2016 with all the attendant consequences. 25. In view of no Resolution Plan having been approved by the CoC within the period of CIRP of 180 days as well as the extended period of 90 days, recourse is to only press the liquidation mode as provided under the provisions of Section 33 of IBC, 2016 of which the relevant sub-section 1 of Section 33 is reproduced hereunder : 33. (1) Where the Adjudicating Authority, - (a) before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast track corporate insolvency resolution process under section 56, as the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal as mandated therein. 28. The present RP, namely Mr. Vijender Sharma shall act as the liquidator based upon his consent expressed, as the liquidator of the CD. He shall issue the public announcement that the CD is in liquidation. In relation to officers/employees and workmen of the CD, taking into consideration Section 33(7) of IBC, 2016, this order shall be deemed to be a notice of discharge. The Liquidator appointed being the Resolution Professional during the CIRP period shall follow up and continue to investigate the financial affairs of the CD particularly, in relation to preferential transactions/under valued transactions and such other like transactions including fraudulent preferences. The Liquidator shall also submit report by way of preliminary report to this Tribunal within 75 days from the liquidation commencement date in accordance with the regulations. Further, a copy of this order shall be also communicated to the Registrar of Companies, NCT of Delhi and Haryana. The Liquidator shall intimate the Registrar of Companies forthwith in relation to the Liquidation Process of the Corporate Debtor being set in motion. In terms of Section 178 of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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