9911796707
TMI Blog2019 (7) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... cified. Section 12A of the Code stipulates that the Adjudicating Authority has the discretion to accept or reject the application, filed under Section 12A, provided that application is made by the applicant with the approval of 90% vote share of the CoC - Regulation 30A of CIRP Regulations, 2016 provides the procedure by which application under Section 12A can be filed. Regulation 30A provides that application under Section 12A should be filed in Form FA before issuance of an invitation for expression of interest. Since section 29A of the Code specifically prohibits a wilful defaulter to submit a Resolution Plan. In this case, admittedly promoters of the Corporate Debtor are a wilful defaulter, and therefore. they are not eligible to submit a Resolution Plan as per section 29A. The resolution for withdrawal of CIRP did not obtain the required percentage of voting by the members of CoC, i.e. 90% at the first instance. Subsequently, a CoC meeting was conducted, and a resolution was voted upon for reconsideration of the withdrawal. The RP/CoC has not quoted the exact provision that empowers them to again put for the voting of the resolution which was earlier defeated. - MA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till the date of application. (3) The committee shall consider the application made under sub-regulation (1) within seven days of its constitution or seven days of receipt of the application, whichever is later. (4) Where the application is approved by the committee with ninety per cent voting share, the resolution professional shall apply sub-regulation (1) to the Adjudicating Authority on behalf of the applicant, within three days of such approval. (5) The Adjudicating Authority may, by order, approve the application submitted under sub-regulation (4) . 5. Given the provision of Regulation 30A which specifically deals with the procedure for filing withdrawal application. It is clear that the application under Section 12A shall be submitted to IRP or the RP as the case may be. 6. This MA 951/2019 has been filed by Andhra Bank, i.e. the original petitioner and the Financial Creditor of the Corporate Debtor, Sterling Biotech Ltd. 7. Regulation provides that after receiving the application under Section 12A of the Code, IRP or the RP, as the case may be, in Form FA of the Schedule, before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbers of the CoC authorised the Resolution Professional to put the resolution for withdrawal of CIRP of the Corporate Debtor to vote in accordance with section 12A of the Code. Subsequently. On further deliberation, it was decided by the CoC that in case the resolution for withdrawal of CIRP of the Corporate Debtor fails, the Resolution Professional would put the resolution plan received from ACG Associated Capsules Pvt Ltd. (ACG) to vote. The Resolution Professional was directed by the CoC that in case the resolution for withdrawal of the CIRP, as well as the resolution for approval of resolution plan submitted by ACG, fails, then a resolution for liquidation of the Corporate Debtor be put to the vote. Andhra Bank also submitted a letter of guarantee dated 27.2.2019 undertaking to furnish a bank guarantee of Rupees One Crore towards CIRP costs as provided under Regulation 30A (2) of the CIRP Regulations. 11. It is further stated in the progress report that: the resolution stood rejected as it received 89.5% of the affirmative votes of the CoC as against the requisite 90% as prescribed under Section 12A of the Code. As per the directions of CoC, sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all stakeholders/CoC members have been provided for under the OTS offer, the Applicant Andhra Bank and CoC will address all such queries posed by the NCLT directly and not with the Resolution Professional. 12. It is also reported by the Resolution Professional that Resolution Professional put a fresh resolution for withdrawal of CIRP under section 12A to vote on 5.3.2019. The said fresh resolution for withdrawal of CIRP had received 90.32% affirmative votes. A copy of the voting results for the fresh resolution for withdrawal of the CIRP of the Corporate Debtor is annexed with the application as Exhibit J. 13. It is pertinent to mention that after getting the application under Section 12A of the Code, when Resolution professional asked the CoC to provide him with the details of OTS offer, sources of funds, timeframe for payments to each lender, compliance with RBI norms and whether the interest of all stakeholders/CoC members have been provided for under the OTS offer, then Andhra Bank informed the Resolution professional that they will directly address the issue with the Tribunal and did not submit any information to the Resolution professional. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of different prosecution complaints, the last being filed on 23.10.2018 before the Special PMLA court, Patiaia House, New Delhi explaining the complicity of the accused persons and the Hon'ble Court after taking cognizance in the matter issued nonBailableWarrants against the accused persons/promoter of SBL Group on 25.10.2018 . 19. It is further stated in the representation that an application under Fugitive Economic Offender Act, 2018 has been filed before the Hon'ble Special Court of Additional Session Judge, Patiaia House Court, New Delhi seeking the tag of fugitive economic offender on Mr. Nitin Jayantilai Sandesara, which will further allow the Enforcement Directorate to confiscate the properties owned by him in his name or has any interest as beneficial owner . It is also pertinent to mention here that the Special Court has taken the cognizance of the said application and issued a notice to Nitin Jayantilai Sandesara and others. 20. It is submitted that, even though the promoters of SBL Group had sufficient funds and resources to avoid declaration of the Bank loans as Frauds subsequent to the classification as Non-Performing Assets, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Creditors. Regulation 30A imposes an additional condition for withdrawal of CIRP that such application shall be filed before the issue of invitation for expression of interest under Regulation 36A. 25. It is also stated by the Central Government that the OTS Proposal is from Mr. Farhad Daruwalla who has signed on behalf of Sandesara Group, wherein the promoters of the Sandesara Group is reportedly absconding and facing several criminal charges before various law forums. The issue raised in the captioned order on which response of answering respondent has been sought inter alia raises an important question of law; 26. Whether there can be a valid agreement/contract between parties where a party is absconder , i.e. Promoters of Sandesara Group and represented through Mr. Farhad Daruwalla ? 27. In this regard, it is stated that the prerequisite conditions for a valid contract are lawful offer and acceptance thereof which is enforceable by law. In the instant case, the offer is from a representative of absconder whose whereabouts cannot be verified and the person so called authorised to represent absconder Mr. Farhad Daruwala is acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 33 (1) of the Code, shall be placed in the liquidation. The Applicant states that the Liquidation of the Corporate Debtor would not be beneficial to either the Corporate Debtor or its Financial and Operational Creditor. 32. It is further stated in the intervening application that if the withdrawal application is not accepted by this tribunal, the applicant's plan ought to be voted upon by the CoC once again and the Corporate Debtor ought not to be allowed to go into liquidation. 33. It is stated in the application that Liquidation will result in unemployment of the employees of the Corporate Debtor. It is further submitted that upon liquidation of the Corporate Debtor, 800 employees would stand to be discharged. 34. It is further stated that the objective of the Code is resolution and therefore if there is a viable and interested investor, liquidation should not be the route the Corporate Debtor is forced to go down. 35. In this circumstance, by Intervening application MA 1519/2019 ACG Associated Capsules Private Limited, the applicant has sought direction against the CoC for reconsidering once ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociation of India are annexed with the additional Affidavit as Annexures 2A 2B respectively. 38. It is further stated in the additional affidavit that vide letter dated 26.12.2018(Annexed at Page 73 of the MA) signed by Mr Nitin Sandesara, the Applicant has been informed that the promoter group is proposing to invest about 20% of the settlement amount which is about USD 700 Million, from its cash flow sources from its business in Nigeria and further, has identified investors who have shown their interest in investing. 39. It is further stated in the additional affidavit that Applicant with the secured lenders have approved the OTS proposal given by the erstwhile management of the Corporate Debtor which offers to pay substantial amounts. It is further stated that vide a majority vote share of 90.32% of the Committee of Creditors of the Corporate Debtor, Form FA submitted by the Applicant for withdrawal of the CIRP initiated against the Corporate Debtor (as per regulation 30A of the CIRP Regulations), has been approved. 40. It is further stated that in terms of the Minutes of meeting dated 05.03.2019 as requested by the Resolution Prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the OTS offer. I say that the present Miscellaneous Application has been filed under the provisions of Section 12A of the code read with Regulation 30A of the CIRP Regulations, 2016 for withdrawal of the CIRP process initiated against the Corporate Debtor under the approval of 90.32% of the CoC. I say that such withdrawal shall not, prejudicially or otherwise, in any manner affect the rights of the stakeholders of the Corporate Debtor. I repeat and reiterate that the sanction of the OTS proposal shall also not affect/Come in between the ongoing criminal proceedings initiated against the Corporate Debtor. 41. It is further stated by the Applicant that the Applicant and the other secured lenders have conducted all due diligence in the matter, being conscious of the fact that there are ongoing criminal proceedings pending against the promoter/ex-directors of the Corporate Debtor. Hence the applicant while sanctioning the OTS proposal (vide its letter dated 05.11.2018 annexed at Exhibit-J at Page 140 of the Miscellaneous Application) has stipulated that the settlement agreed between the parties shall not in any way affect or be construed as sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant/other banks are responsible/answerable only to the RBI who is the regulator of banking sector and the submissions/arguments of the other enforcement agencies such as ED/CBI is of not much relevance to the current MA 951/2019. In response to our notice, RBI has submitted only a circular, and no comments were offered about the withdrawal application submitted by Andhra Bank. Therefore, during the hearing, the Bench has directed the Counsel of RBI to obtain the specific comments/stand of RBI considering the submission of the Ld. Senior Counsel for the Andhra Bank and also the sensitivity, the importance attached to the issue and the concern being raised by this Bench. However, the counsel for the RBI during the next date of hearing simply reiterated its previous submissions. Therefore, the Bench did not receive any specific input/regulatory assistance from RBI. 45. During the hearings, the bench had also sought for a copy of Foreign Inward Remittance Certificate (FIRC) from Andhra Bank for having received the funds from the promoter who are currently abroad, and the bank submitted that they would submit the copy of the FIRC shortly/within an hour. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 11C (5) of the SEBI Act. 50. Shri Rajbhushan Dixit is in the process of filing of a compounding application in respect of SEBI Special Case No. 100011/2018, pending before the SEBI Special Court apart from the proceedings above, SEBI has initiated investigation against one of the subsidiaries of the Respondent Company and therefore Directors who are also directors of the Respondent Company. 51. SEBI has brought to the notice of this Tribunal details of the proceedings initiated by SEBI against the Respondent Company. However, the action of the SEBI against the Respondent Company is not of any significance because we are not concerned with the action taken by the SEBI against the Respondent Company. 52. Another Intervention Application being MA 1642/2019 is filed on 26.04.2019 by Madison Pacific Trust Limited (Madison), who is a constituted trustee of the Bond holders of FCCB issued by the Corporate Debtor and that this application is made in the interest of the entire class of Bond holders. The Madison is admittedly a Financial Creditor of the Corporate Debtor. The prayer clause of the said application seeks permission to Madison to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the current stage of the CIRP when the 270 days' statutory period is over, and a withdrawal application under section 12A is under consideration, the present application being MA 1642/2019 cannot be allowed and hereby rejected at the outset. 57. We have heard the argument of the Ld. Senior Counsel Mr. Gaurav Joshi representing the Applicant, Andhra Bank, Ld. Sr. Counsel Mr. Janak Dwarkadas representing the Resolution Applicant, Ld. Sr. Counsel Mr. Vikram Chaudhri for the promoters, Ld. Counsel Mr. ZaI Andhyarujna for Resolution professional, Counsel representing the SEBI, Enforcement Directorate, Reserve Bank of India, CBI Director (Prosecution Legal) representing Union of India, MCA. 58. The MA 951/2019 has been filed by the Andhra Bank under Section 12A read with Section 60(5) of the I B Code, seeking permission to withdraw CIRP initiated against the Corporate Debtor. Section 12A of the Code provides that the Adjudicating Authority may allow the withdrawal of application admitted under Section 7 or section 9 or section 10 on an application made by the applicant with the approval of 90% voting share of the Committee of Creditors, in such manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance Investment Manager LLP, Civil Appeal No. 9279 of 2017; Mothers Pride Dairy India Private Limited v. Portrait Advertising and Marketing Private Limited, Civil Appeal No. 9286/2017; Uttara Foods and Feeds Private Limited v. Mona Pharmacem, Civil Appeal No. 18520/2017], This practice was deliberated in light of the objective of the Code as encapsulated in the BLRC Report, that the design of the Code is based on ensuring that all key stakeholders will participate to collectively assess viability. The law must ensure that all creditors who have the capability and the willingness to restructure their liabilities must be part of the negotiation process. The liabilities of all creditors who are not part of the negotiation process must also be met in any negotiated solution. Thus, it was agreed that once the CIRP is initiated, it is no longer a proceeding only between the applicant creditor and the corporate debtor but is envisaged to be a proceeding involving all creditors of the debtor. The intent of the Code is to discourage individual actions for enforcement and settlement to the exclusion of the general benefit of all creditors. 29.2 On a review of the multip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of each case. 53. The main thrust against the provision of Section 12A is the fact that ninety per cent of the committee of creditors has to allow withdrawal. This high threshold has been explained in the ILC Report as all financial creditors have to put their heads together to allow such withdrawal as, ordinarily, an omnibus settlement involving all creditors ought, ideally, to be entered into. This explains why ninety per cent, which is substantially all the financial creditors, have to grant their approval to an individual withdrawal or settlement. In any case, the figure of ninety per cent, in the absence of anything further to show that it is arbitrary, must pertain to the domain of legislative policy, which has been explained by the Report (supra). Also, it is clear, that Under Section 60 of the Code, the committee of creditors do not have the last word on the subject. If the committee of creditors arbitrarily rejects a just settlement and/or withdrawal claim, the NCLT. and thereafter, the NCLAT can always set aside such decision Under Section 60 of the Code. For all these reasons, we are of the view that Section 12A also passes constitutional muster. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NPA, on the other hand, refers to the account belonging to a person that is declared as such under guidelines issued by the RBI. 66. Hon'ble Supreme court further observed that the legislative policy, therefore, is that a person who is unable to service its debt beyond the grace period referred to above, is unfit to be eligible to become a resolution applicant. 67. Since section 29A of the Code specifically prohibits a wilful defaulter to submit a Resolution Plan. In this case, admittedly promoters of the Corporate Debtor are a wilful defaulter, and therefore. they are not eligible to submit a Resolution Plan as per section 29A. 68. The question which is hammering to our conscious is regarding the consequences of accepting application u/s 12A of the Code in the instant case. After permitting withdrawal of the CIRP process the promoters of the corporate debtor, i.e. SBL will again get control over the corporate debtor company at a discount. The Union of India through the Ministry of Corporate Affairs has opposed the application on the pretext that the promoters of the corporate debtor SBL are a wilful defaulter and absconders. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a type of Resolution Plan. In the alleged plan/OTS it is stated that the promoter group is proposing to invest about 20% of the settlement agreement which is about USD 700 million, from its cash flow sources from its businesses in Nigeria. Further, the promoter group has also identified investors who have shown their interest in investing which shall be the source of funds to make payment to the Financial Creditors under OTS Proposal. As per the one-time settlement, they had given a plan to make the upfront payment by 30.6.2019. Thus, it is also a type of Resolution Plan to get the management and control of the Company by the wilful defaulters, which is contrary to the provision of Sec. 29A of the Code. 72. Here promoters are absconders and the source of funds are not disclosed to the Resolution Professional. When the Resolution Professional inquired about the source of funds, timeline of payment to each lender or explanation of RBI norms and interest of each stakeholder in the OTS, then CoC informed that they would address this issue to the Adjudicating Authority. 73. However, it is also clear that from the additional affidavit filed by the Andhra b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Daruwalla. The prerequisite condition for a valid contract is lawfull offer and acceptance thereof which is enforcible by law. In the instant case, the offer is from the representative of the absconder, whose whereabouts cannot be verified. The person so called authorised to represent absconders, Mr. Farhad Daruwalla, is an agent of the absconders, who has not submitted any detail of the absconders. Thus, there cannot be binding contract enforceable by taw in the present case within the meaning of the Contract Act. Section 10 of the Contract Act, provides that all Agreement are Contract if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Section 23 of the Contract Act stipulates that the consideration or object of an agreement is lawful, unless it is forbidden by Law; or is of such a nature that, if permitted, it would defeat the provision of any law; or fraudulent; or involves or implies, injury to the person or property of another; or the court regards it as immoral or opposed to public policy. 77. We also record our appreciation of Enforcem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant. In this case, no Resolution Plan has been approved to date despite completion of CIR period. Resolution Professional has not filed an application under Section 33 for liquidation of the Company which is a clear cut violation of the statutory provisions of I B Code. This Bench having not received any resolution plan under sub-section (6) of section 30 before the expiry of the Corporate Insolvency Resolution Process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12, there remains no other option but to order for liquidation of this company as envisaged under Section 33(1) of I B Code and the Regulations thereof. Since no Resolution Plan has been approved within the statutory period of 270 days, therefore, we are passing the order of the Liquidation of the Corporate Debtor on a going concern basis as under: a. As the Corporate Debtor is a going concern employing more than 800 employees, it is hereby directed that the Corporate Debtor be liquidated as per provisions of Regulations 32(b) (e) of the IBBI (Liquidation Process) Regulations, 2016 which provides fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
