9911796707
TMI Blog2019 (5) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... ct seeking for the liquidation of the CD after rejection of Resolution Plans, Applications in C.A.190(PB) of 2018 and Application No.626 (PB)/2018 have been moved by the Resolution Applicants whose resolution plans stood rejected and aggrieved by the said rejection have approached this Tribunal under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC). (III) For the sake of convenience and for appraisal of facts from the date of initiation of CIRP in relation to the CD, the status reports filed by the RP as well as the application filed by RP based on rejection of the resolution plans and thereby for liquidation of the CD consequent to rejection of Resolution Plans is taken up first, being application in C.A.No. 884 of 2018 filed vide Diary No. 6226 dated 04.09.2018:- (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 4th meeting laid down certain pre-conditions, the Resolution Applicants jointly moved an application seeking for extension of time beyond the mandatory period which was rejected by this Tribunal vide order dated 25.01.2018 against which an appeal was preferred before Hon'ble NCLAT dated 01.02.2018 which had restrained this Tribunal from passing an order of liquidation as well as allowed the RP to continue in relation to CD (iii) That in the mean while, consequent to the qualifications being put by the COC in terms of net worth in its 4th meeting held on 23.01.2018 subsequent to order of extension of CIRP on 16.01.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution 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, this Tribunal was pleased to pass an order directing the RP to place the said plan of the Resolution Applicants before the COC and allowed COC to decide the eligibility under Section 29A as well as the plan. (ii) However, the COC without application of mind had rejected mechanically and in violation of decisions of the Hon'ble Principal Bench had declared the Resolution Applicants as ineligible in the first place under Section 29A of IBC, 2016 and also in relation to net worth of the applicants is without any merits and is liable to be overruled. (iii) That this additional application has been filed taking into consideration the RP as well as COC have not given the grounds for rejection and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 gain a back door entry into the process had compelled the Legislature to insert Section 29A in relation to persons not eligible to be resolution applicant by virtue of Insolvency and Bankruptcy Code (Amendment) Act, 2018 w.r.e.f. 23.11.2017 and further amended by Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 w.r.e.f. 06.06.2018. Similarly clause(h) of sub-section 2 of Section 25 of IBC, 2016 has also undergone changes by virtue of Insolvency and Bankruptcy Code (Amendment) Act, 2018 w.r.e.f. 23.11.2017 as compared to the position as it stood at the time of enactment of IBC, 2016. Since both Section 29A as well as Section 25(2)(h) has been invoked by the COC to bar the resolution applicants the same has been specifically mentioned. A similar mention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to Resolution Plans: 75. What has now to be determined is whether any challenge can be made at various stages of the corporate insolvency resolution process. Suppose a resolution plan is turned down at the threshold by a Resolution Professional under Section 30(2). At this stage is it open to the concerned resolution applicant to challenge the Resolution Professional's rejection? It is settled law that a statute is designed to be workable, and the interpretation thereof should be designed to make it so workable. xxxxxxxxxxxxxx 76. Given the timeline referred to above, and given the fact that a resolution applicant has no vested right that his resolution plan be considered, it is clear that no challenge can be preferred to the Adjudicating Authority at this stage. A writ p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 interest. (9) The resolution professional may seek any clarification or additional information or document from the prospective resolution applicant for conducting due diligence under sub-regulation (8). (10) The resolution professional shall issue a provisional list of eligible prospective resolution applicants within ten days of the last date for submission of expression of interest to the committee and to all prospective resolution applicants who submitted the expression of interest. (11) Any objection to inclusion or exclusion of a prospective resolution applicant in the provisional list referred to in sub-regulation (10) may be made with supporting documents within five days from the date of issue of the provisional list. (12) On considering the objections received under sub-regulation (11), the resolution professional shall issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, 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 Section 29A of the Code, after hearing arguments from the resolution applicant as well as the Committee of Creditors, after which an appeal can be preferred from the decision of the Adjudicating Authority to the Appellate Authority under Section 61. 81. If, on the other hand, a resolution plan has been approved by the Committee of Creditors, and has passed muster before the Adjudicating Authority, this determination can be challenged before the Appellate Authority under Section 61, and may further be challenged before the Supreme Court under Section 62, if there is a question of law arising out of such order, within the time specified in Section 62. Section 64 also makes it clear that the timelines that are to be adhered to by the NCLT and NCLAT are of great importance, and that reasons must be recorded by either the NCLT or NCLAT if the matter is not disposed of within the time limit specified. Section 60(5), when it speaks of the NCLT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 resolution plan does or does not contravene the provisions of law by virtue of Section 30(2)(e) as the same is in the domain of the COC ; (v) The resolution applicant does not have a vested right to demand that his resolution plan is required to be considered by the Resolution Professional where after examination the Resolution Professional is of the prima facie opinion that Resolution Plan does not conform to Section 30(2) of IBC, 2016 and the recourse is for the Resolution Professional to fall back upon 30(4) of IBC, 2016 to invite fresh resolution plans if no other resolution plan has passed muster of course within the time lines prescribed which cannot be lost sight off. (VIII) The Hon'ble Supreme Court taking into consideration the scheme of things of IBC, 2016 has considered Section 30 of IBC, 2016 as an important provision and has expressed in as many words in paragraph 73(viii) of the Arcelor Mittal's case as follows:- 73. XXXX &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 not there in statute book then) considered by the Committee of Creditors ("CoC") in their meeting held on 26.10.2017 and was rejected. Thus, CoC recommended for liquidation of the Respondent Corporate Debtor. CoC also resolved to file application for extension of CIRP time as enquiry was receive d from M/s. Anant Overseas, the Operation Creditor. 22.11.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e criteria as laid down under the provisions of the Code read with Attendant Rules and Regulations are complied with and (b) The criteria fixed by Committee of Creditors are fully compiled; with. 13.04.2018 Committee of Creditors in their meeting held on 13.04.2018, rejected with 83.45% voting share, the Resolution Plan submitted by Shri Ram Niwas, Promoter Director, as it was not in compliance with the criteria laid down by the Committee of Creditors. 16.04.2018 Extended period of 270 days (after exclusion of time taken in pronouncement of Extension Order) expired. (IX) Taking into consideration the above sequence of events and also of the Hon'ble Supreme Court in Arcelor's case as referred to in earlier paragraphs it is seen that in view of there being no vested right accruing to the resolution applicant at the relevant stage of the CIRP as well as necessity in relation to any directions to consider by the Resolution Professional of the resolution plan as submitted and further the COC having considered the Resolution Plan subsequently in view of directions issued by this Tribunal dated 09.04.2018 on 13.04.2018 and the COC having rejected the Resolution Plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minimum net worth in case of individuals of Rs. 10 crore as prescribed by the COC being a criteria prescribed under Section 25(2)(h) of IBC, 2016 by the COC in its meeting held on 23.1.2018 and in relation to which it is contended by Ld Counsel for resolution applicant that the said criteria stands satisfied. Ld Counsel for RP as well as counsel for ICICI Bank Ltd, being a financial creditor as already pointed out having a voting strength of more than 60% in the COC resists the said submissions of the resolution applicant on the ground that the amendments to Section 29A is only prospective and not retrospective and in view of liquidation having already been recommended by the COC well before 6.6.2018, the benefit of Section 29A as amended cannot be taken, more so when the 270 days period had expired on 16.4.2018. In any case it is contended that the resolution applicant being individual has failed to comply with prescribed criteria of Rs. 10 crores fixed by the COC under Section 25(2)(h) of IBC, 2016 and which criteria it is contended it is entitled to prescribe and in the circumstances the rejection of resolution plan based on the said ground cannot be assailed. As already stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebt. As long as debt obligations are met, equity owners have complete control, and creditors have no say in how the business is run. When default takes place, control is supposed to transfer to the creditors; equity owners have no say xxxxxxx "The role that insolvency and bankruptcy plays in debt financing Creditors put money into debt investments today in return for the promise of fixed future cash flows. But the returns expected on these investments are still uncertain because at the time of repayment, the seller (debtor) may make repayments as promised, or he may default and does not make the payment. When this happens, the debtor is considered insolvent. Other than cases of outright fraud, the debtor may be insolvent because of * Financial failure - a persistent mismatch between payments by the enterprise and receivables into the enterprise, even though the business model is generating revenues, or * Business failure - which is a breakdown in the business model of the enterprise, and it is unable to generate sufficient revenues to meet payments. Often, an enterprise may be a successful business model while still failing to repay its creditors. A soun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seems to not be the case here despite defaults on the part of the Corporate Debtor. 5. Unlike the situation prevalent and detailed in the Hon'ble Supreme Court judgment in Arcelormittal India Private Ltd. (supra) where there were multiple bidders and bidders left out all of whom were aggrieved by the action of the RP/CoC therein, in the present petition the resolution applicant is only the KMP of the CD has filed the resolution plan and in the circumstances this Tribunal is not required to grapple with multiple resolution plans and to decide on the issue as to which of the resolution plan placed fulfils the objects of IBC, 2016 but in the other hand is only required of this Tribunal to consider whether the resolution plan as submitted by the resolution applicants satisfies the parameters as laid down by IBC, 2016 read with attendant regulations and whether the decision of the CoC to reject the resolution plan submitted by the resolution applicants is based on valid considerations. For this purpose this Tribunal is required to consider in some detail the status reports as filed by the IRP/RP from time to time as well as the resolution plans submitted by the KMPs of the CD seeki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport of the RP that certain avoidable transactions have taken place as between OC and CD and contrary to the statements made in the applications supported by affidavits in relation to the receipt of payments from the CD concerning its operational debts made by the OC, CoC has also taken note of in the meeting held on 26.10.2017 in relation to avoidable transactions and even though the IRP has suggested for forensic audit to be undertaken, the CoC had not considered the same at that point of time in view of fast depletion of time in relation to the CIRP process, namely, of 180 days. This Tribunal is also aware from the order which has been passed by Hon'ble Principal Bench at the time of admission of the petition and thereby initiating CIRP process that the consent of the CD as stated earlier for the initiation of CIRP process had been given by the KMPs as it has been recorded by Hon'ble Principal Bench of this Tribunal in its order dated 3.5.2017. 9. As on the date of amendment of IBC, 2016 with retrospective effect from 22.11.2017, it is evident that the CoC had received only one resolution plan which also stood rejected by the CoC in its meeting held on 26.10.2017, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us expenditure not written off, and does not include reserves created out of revalue of assets, write back of depreciation and amalgamation. Experience level 1. The player should have at-least 10 years' experience in the business to face and overcome the challenges. Qualitative factors 1. The player has to be preferably from the same industry. It can be a competitor, supplier or customer of the target company, with a thorough understanding of the business of the company. It should be able to bring synergies to the business of the company. 2. The bidder should have good reputation in the market. 3. Should not have defaulted with any bank, financial institution or statutory/government authority. 11. The above criteria it is seen from the minutes of the meeting has been approved by 85.08% whereas in relation to the criteria, 5.08% have voted against and the absentee from the voting had been 9.84%. The total claim submitted as reflected in the report filed by RP at the time of 4th CoC meeting and as disclosed in Annexure-E of the said report in relation to the Creditors aggregates to Rs. 55,78,24,203/-. For record purposes the RP has also disclosed the claims not yet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted by promoters of the CD in the capacity of resolution applicants having been rejected by the CoC and that in relation to one Mr. Satish has not lodged or filed for due consideration of the RP any Resolution Plan, there is no resolution plan which has been received and in view of the CIRP process fast expiring, the call was taken in relation to the liquidation process. However, as narrated in the earlier paragraphs of this order in view of exclusion of the time period by the Hon'ble NCLAT vide order dated 28.02.2018 and the Amendment Act taking effect retrospectively from 22.11.2017, this Tribunal vide order dated 09.04.2018 directed the CoC to consider the resolution plan as submitted by the resolution applicants, namely, the promoters of the CD and also in view of the resolution professional does not have the power to reject the resolution plan on his own which position having been affirmed subsequently by Hon'ble Supreme Court in the case of Arcelormittal India (P.) Ltd. (supra), and pursuant to the said direction dated 09.04.2018, the CoC has considered the resolution plan as submitted by the resolution applicants vide its 6th meeting held on 13.4.2018. 15. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... numerous queries to the resolution applicants and sought clarification on their calculation. The resolution applicant requested the CoC to waive-off the criteria fixed by the CoC. After detailed discussion, the resolution applicants requested the CoC that since the criteria had been fixed by the CoC only; it was within its prerogative to waive-off this requirement in case the CoC was not convinced of the calculation done by the resolution applicants. The CoC was apprehensive that since the eligibility criteria had been published and declared to the public at large, whether it could now be relaxed for one particular resolution applicant. The RP, at this stage pointed out and reminded the CoC that this opportunity to present the resolution plan had been granted by the Hon'ble NCLT, to the resolution applicants. He also stated that the Hon'ble Tribunal had said that all possible efforts should be made by all to prevent liquidation of the CD, as it was only the last course available, in cases where no resolution was possible, at all. The resolution applicants argued that since they were the only resolution applicants who had come forward to submit a resolution plan of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion by CoC amendment to IBC, 2016 by way of Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 had not come into force as it came into effect on and from 6.6.2016 by which certain exemptions has been provided if the CD is a MSME, by inclusion of Section 241A and invocation of which provision in the application CA No. 626(PB)/2018 is sought by the applicants to be given effect, in addition to the plea of amendments made to Section 30(4) of IBC, 2016. 20. We are afraid that the same cannot be considered as the Resolution Plan submitted is prior to 06.06.2016 and the decision of the CoC has also been taken prior to it. In any case, Resolution Applicants has not also been able to establish by production of valid certificate that it is registered as a MSME and which fact has also been brought forth by RP in his report filed vide Dy. No.5610 dated 13.8.2018 as it is seen from the said report that RP had requested the resolution applicants to provide the certificate of registration or any other proof that the CD falls under the provisions of MSME and the said communication has also been annexed as Annexure-H to the above said report dated 3.8.2018. The e-mail communication bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt, presently this Tribunal supplanting its wisdom as compared to that of the stakeholders unless it is brought to the notice of this Tribunal that there has been a violation of law or an exercise, for e.g. in share valuation, which is strikingly shocking as unconsciable if there is a challenge to the same by any of the stakeholders. This analogy can also be applied to the decision of the CoC as well taken by it and primarily falls in the realm of commercial decisions unless the plans are sought to be rejected due to non-compliance of any provisions of IBC, 2016 or has been approved by the CoC in derogation of the provisions of IBC, 2016. In the instant case on the other hand we find that CoC in its wisdom in the 4th meeting has prescribed certain eligibility criteria which it is entitled to do so by virtue of provisions under Section 25(2)(h) of IBC, 2016 wherein for individual, a net worth of Rs. 10 crores has been fixed by CoC and CoC has not been satisfied with the value as demonstrated by the resolution applicants in computing their net worth, either jointly or singly in relation to Rs. 10 Crores by valuing their equity share holding by the CD itself and the decision of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amt. 6.74 0.00 1.01 0.00 1.01 15.00 0.00 0.00 5.73 85.00 Grand Total 54.24 7.12 11.54 6.29 24.95 46.00 20.95 38.63 8.34 15.37 Under Resolution Plan which was rejected by CoC on 13.04.2018 The Revival Plan Restructuring without extra funding by Lenders Particulars Existing O/S Amt. TL1 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 0.00 0.00 SIDBI 1.29 0.00 0.65 0.00 0.65 50.00 0.40 30.94 0.25 19.06 Standard Chartered Bank 1.98 0.00 1.58 0.00 1.58 80.00 0.00 0.00 0.40 20.00 Kotak Mahindra Prime 0.23 0.00 0.16 0.00 0.16 70.00 0.00 0.00 0.07 30.00 BMW India Fin. Services 0.10 0.00 0.07 0.00 0.07 70.00 0.00 0.00 0.03 30.00 HDFC Bank 0.15 0.00 0.10 0.00 0.10 70.00 0.00 0.00 0.04 30.00 ICICI Car Loan 0.04 0.00 0.03 0.00 0.03 70.00 0.00 0.00 0.01 30.00 Rainbow Digital Services 0.57 0.00 0.23 0.00 0.23 40.00 0.00 0.00 0.34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 case may be, does not receive a resolution plan under sub-section (6) of section 30; or (b) rejects the resolution plan under section 31 for the non¬compliance of the requirements specified therein, it shall- (i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter; (ii) issue a public announcement stating that the corporate debtor is in liquidation; and (iii) require such ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticularly, 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-tax Act, 1961, the Liquidator shall give necessary intimation to the Income Tax Department. In relation to other fiscal and regulatory authorities which governs the Corporate Debtor, the Liquidator shall also duly intimate about the order of liquidation. 29. The Corporate Resolution Process of the Corporate Debtor comes to a close and moratorium granted under Section 14 of IBC, 2016 at the time of admission is also lifted but the provisions of Sections 33(5) & 33(6) shall apply. 30. In view of the order of Liquidation and as already in relation to CA.No.190(PB) of 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
