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TMI Blog2019 (8) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... of the plan was approved by the Committee of Creditors . However, we are not inclined to decide such issue in view of the provisions of Section 33(3) and mandate under Section 12 of the I B Code . In the present case, it is argued that none of the persons interests are prejudicially affected because of contravention, made any application to the Adjudicating Authority for liquidation order under sub-section (3) of Section 33, therefore, according to the counsel for the Committee of Creditors and the Resolution Professional , no order could have been passed under Section 33(3) of the I B Code - in case where the Resolution Plan earlier approved within a reasonable period of 180 days or much before completion of 270 days, one may request the Adjudicating Authority to allow the Resolution Professional / Committee of Creditors to consider the pending Resolution Plan (s) or to call for fresh Resolution Plan / Revised Resolution Plan , in absence of any application under Section 33(3) filed by any person whose interest is prejudicially affected by contravention of the plan by the Corporate Debtor . In the present case, more than 270 days have been completed much e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovil, Mr. Shivanshu Bhardwaj, Advocates for DVI Mr. Sumant Batra, Ms. Srishti Kapoor, Advocates for RP Mr. Sumesh Dhawan, Ms. Vatsala Kak, Advocates for shareholders For Intervenor: Mr. Rajiv Nayar, Sr. Advocate, Mr. Abhishek Swaroop, Ms. Manjira Dasgupta, Mr. Naman Singh Bagga, Advocates JUDGMENT Pursuant to an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 ( I B Code for short), the Corporate Insolvency Resolution Process was initiated against Amtek Auto Limited - ( Corporate Debtor ) on 24th July, 2017. 2. Subsequently, the Resolution Professional published advertisement inviting prospective Resolution Applicants to submit a Resolution Plan by 31st August, 2017. On receipt of Resolution Plans followed by improved Resolution Plan / revised Resolution Plan , the Resolution Plan filed by one M/s. Liberty House Group Pte Ltd. and another Deccan Value Investors LP were considered by the Committee of Creditors . 3. On 6th March, 2018, Deccan Value Investors LP withdrew its Resolution Plan , so the revised plan of M/s. Liberty House Group Pte Ltd. was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi High Court in a suit filed by M/s. Liberty House Group Pte Ltd. . 9. At this stage, the Committee of Creditors / Financial Creditors filed an application under Section 60(5) read with Section 74(3) of the I B Code before the Adjudicating Authority with prayer to declare that Resolution Applicant - M/s. Liberty House Group Pte Ltd. and its Promoters upon whom the Resolution Plan is binding under Section 31 of the I B Code , have knowingly contravened the terms of the Resolution Plan having failed to implement the same. Further prayer was made to reinstate the Committee of Creditors and the Resolution Professional to ensure that the Corporate Debtor remain as a going concern. Further prayer was made to grant 90 days to the Resolution Professional to make another attempt for a fresh process rather than forcing the Corporate Debtor into liquidation on account of fraud committed by M/s. Liberty House Group Pte Ltd. . Prayer was also made to debar M/s. Liberty House Group Pte Ltd. from applying for a fresh Resolution Plan and further direction to the Insolvency and Bankruptcy Board of India to take steps for initiation of proceeding under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inflated values and information. 14. However, the application filed by Successful Resolution Applicant namely- M/s. Liberty House Group Pte Ltd. for declaration that the Corporate Insolvency Resolution Process in respect of Amtech Auto Limited commencing on 24th April, 2017 and culminating into order of approval of Resolution Plan on 25th July, 2018 is vitiated by misrepresentation/fraud/mistake of fact has also been disallowed by the Adjudicating Authority by common impugned order dated 13 th February, 2019. However, certain observation has been made with regard to the manner in which Information Memorandum was prepared based on which the Resolution Plan filed by the Successful Resolution Applicant . 15. The contentions raised by learned counsel for M/s. Liberty House Group Pte Ltd. , learned counsel for the Financial Creditors and the learned counsel for the Resolution Professional at the time of hearing application being CA No. 567/2018 were disposed of in which the right has been kept open to the M/s. Liberty House Group Pte Ltd. to defend any action. The prayer made by M/s. Liberty House Group Pte Ltd. to lay down the guidelin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to file fresh plan. 19. The Adjudicating Authority taking into consideration all the aforesaid facts and submissions made by the parties, rejected the prayer made by the Committee of Creditors / Financial Creditors and disposed of their CA No. 567 of 2018. 20. Learned counsel for the Committee of Creditors made similar prayer for exclusion of the period for the purpose of counting total period of 270 days of Corporate Insolvency Resolution Process . 21. It is informed that on account of an informal feedback received by the Resolution Professional , various prospective investors have shown interest in participating in the Corporate Insolvency Resolution Process of the Corporate Debtor , in the event an opportunity is granted by this Appellate Tribunal. 22. It is also informed by the Committee of Creditors that the following entities who have expressed an informal interest for participating the Corporate Insolvency Resolution Process of the Corporate Debtor : S.No. Organisation Relevant Contact Person 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Plan ) ii. Liquidation Value was considered for the purpose of assessing a valuation floor by Committee of Creditors and Resolution Professional and actively used for negotiation with resolution applicants. iii. Regulation 27 and 35 of the CIRP Regulations the valuers have to conduct the exercise of valuation as per internationally accepted valuation standards . d) Post approval of Resolution Plan , M/s. Liberty House Group Pte Ltd. s authorised representative started attending operational reviews/site visits such as on 6th August 2018, 29th August 2018 and 18th September 2018. This is when it was discovered that ground condition did not reflect the values as per the Valuation Reports. e) Thus, M/s. Liberty House Group Pte Ltd. conducted independent verification after being granted access to plants as an observer on the Monitoring Committee , by procuring quotations of new machines from vendors. f) As time is the essence, M/s. Liberty House Group Pte Ltd. shortlisted nine (9) key plants of Amtek, whose liquidation value of plant and machinery constitute about sixty percent (60%) of the total liquidation value of plant and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Crore) VDR Reality Gap Unit2 361 234 -35% Bhopal 178 93 -48% Ace 1 2 168 88 -47% Vision 270 137 -49% Sanswari 147 93 -37% Atal 212 122 -42% Ranjangaon 123 44 -64% Hosur 183 89 -51% FY 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sional in the VDR) that the Corporate Debtor s dependency on Group Companies for its business is to the tune of forty-three percent (43%). Accordingly, M/s. Liberty House Group Pte Ltd. factored a dependency of forty-three percent (43%) of the Corporate Debtor on the Group Companies, while formulating the Resolution Plan . b . Pursuant to attending Monitoring Committee meetings, M/s. Liberty House Group Pte Ltd. was surprised to learn that the actual dependency of the Corporate Debtor on supplies from the Group Companies (for H1 of FY 2019) is to the extent of sixty-six percent (66%) i.e. nearly 50% higher than as implied by the data shared with us in the VDR. c . This changes the entire dynamics of the business for the Corporate Debtor , as the supplies from the Group Companies to the Corporate Debtor are customised to suit the contracts of the Corporate Debtor with the end customer and as such the supplies cannot be immediately (or within any reasonable period of time) procured by the Corporate Debtor from any other supplier in case the Group Companies are unable to supply to the Corporate Debtor because of their own status/financial posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ltd. has already been noticed in the preceding paragraph. The two appeals have been filed in view of the common order passed in two Company Applications which were disposed of by common impugned order dated 19th February, 2018. 32. One of the question arises for consideration in these appeals is whether a case has been made out to exclude any period for the purpose of counting 270 days of the Corporate Insolvency Resolution Process . In absence of any extraordinary situation and the fact that more than 270 days have already been passed, we find no ground to exclude any period. Further, once a plan is approved by the Adjudicating Authority under Section 31, if it is not implemented, that cannot be a ground to exclude any period. 33. If a plan is approved under Section 31 within 180 days or much before completion of 270 days, one may request the Adjudicating Authority to allow the Committee of Creditors to consider the other Resolution Plans , if the Resolution Applicant is not ineligible and such plans were not rejected on merit but were not approved because best of the plan was approved by the Committee of Creditors . However, we are not inclined to deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the corporate debtor is registered. (2) Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors 1 [approved by not less than sixty-six per cent. of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). (3) Where the resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii), (iii) of clause (b) sub-section (1). (4) On receipt of an application under sub-section (3), if the Adjudicating Authority determines that the corporate debtor has contravened the provisions of the resolution plan, it shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icating Authority has no other option but to pass order of liquidation. 40. It is made clear that once order of liquidation is passed, the liquidator is required to follow the procedure laid down under the I B Code , including Sections 35, 36, 37, 38, 39 and 40 etc. as also the procedure laid down under Section 230 of the Companies Act, 2013 as held by this Appellant Tribunal in Y. Shivram Prasad Vs. S. Dhanapal Ors.─ Company Appeal (AT) (Insolvency) No. 224 of 2018 . 41. M/s. Liberty House Group Pte Ltd. has shown certain grounds for non-compliance of the plan, which cannot be deliberated by this Appellate Tribunal to decide whether the grounds shown by M/s. Liberty House Group Pte Ltd. is genuine or it attracts punishment prescribed under Section 74(3) of the I B Code , which reads as follows: 74. Punishment for contravention of moratorium or the resolution plan.─ (3) Where the corporate debtor, any of its officers or creditors or any person on whom the approved resolution plan is binding under section 31, knowingly and wilfully contravenes any of the terms of such resolution plan or abets such contravention, such corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment are not made a party respondent to any of the Corporate Insolvency Resolution Process . Therefore, they cannot have any idea as to whether any offence has been committed by any Corporate Debtor or its members, including Successful Resolution Applicant ( Corporate Debtor ) under Section 74(3) or any of the provisions of Chapter VII of Part II of the I B Code . 46. In this background, we are of the view that it is the Adjudicating Authority who is required to refer such matter to the Insolvency and Bankruptcy Board of India or the Central Government to take up the matter to the Special Court if on investigation, if any case of offence under Chapter VII, including Section 74(3) is made out. 47. There is no procedure laid down under the I B Code , but the Adjudicating Authority, which is the National Company Law Tribunal is required to follow the procedure as mandated under Section 424 of the Companies Act, 2013 and quoted below: 424. Procedure before Tribunal and Appellate Tribunal. ─(1) The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it or, as the case may be, an appeal before it, be bound b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act, 2013, the Adjudicating Authority/ National Company Law Tribunal is required to be follow the principles of natural justice and the provision of the I B Code / Companies Act, 2013 , therefore, without giving any opportunity of hearing, the Adjudicating Authority/ National Company Law Tribunal cannot refer the matter to the Central Government or the Insolvency and Bankruptcy Board of India for instituting a case against the alleged defaulter. 49. Section 213 of the Companies Act, 2013 may not be directly applicable to the proceeding under the I B Code . However, it relates to Investigation into company s affairs in other cases . As per clause (b) of sub-section 213, on an application made to it (Adjudicating Authority/ Tribunal) by any other person (say, the Resolution Professional or the Committee of Creditors ) or otherwise (suo moto), if the Tribunal (Adjudicating Authority) is satisfied that there are circumstances suggesting that the business of the company is being conducted with intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose, or misfeasance or other misconduct towards the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors to investigate into the affairs of the company in respect of such matters and to report thereupon to it in such manner as the Central Government may direct: Provided that if after investigation it is proved that- (i) the business of the company is being conducted with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose, or that the company was formed for any fraudulent or unlawful purpose; or (ii) any person concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, then, every officer of the company who is in default and the person or persons concerned in the formation of the company or the management of its affairs shall be punishable for fraud in the manner as provided in section 447. 50. We have notice that Section 213 of the Companies Act, 2013 has not been adopted under the I B Code but such order can be passed by the Tribunal on an application by any person against any Company ( Corporate Debtor ), if the fraud has been committed as mentioned in clauses (i) or (ii) or (iii) of Section 213 (b). Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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