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TMI Blog2020 (2) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by Deccan relating to net realistic capacity of the Corporate Debtor has been wrongly shown in the InformationMemorandum . On the realistic and actual basis of technical production of the capacity of the Corporate Debtor , the Deccan brought to the notice of the Adjudicating Authority that the present plan was unviable or unfeasible or unimplementable - the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench rightly observed that the Insolvency and Bankruptcy Code do not confer any power and jurisdiction on the Adjudicating Authority to compel specific performance of a plan by an unwilling resolution applicant. In absence of fact that there was any procedural infirmity and having not proceeded in the manner as was required, we hold that the plan approved was violative of Section 30(2)(e) of the I B Code , having contravened the provisions of the I B Code - the plan approved by the Committee of Creditors under sub-section (4) of Section 30 of the I B Code and rejected by the Adjudicating Authority in terms of Section 31(2), no interference is called for. Refund of forfeiture of the Bid Bond Guarantee - HELD THAT:- This Appellate Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithdraw the Resolution Plan and filed for approval by the Adjudicating Authority. 4. Miscellaneous Application No. 956 of 2018 was filed by the Resolution Professional for approval of the Resolution Plan of Deccan. In the said case, the Deccan also moved an application under Section 60(5) of the I B Code in MA No. 1272/2018 for withdrawal of the plan. 5. The Adjudicating Authority taking into consideration the fact and circumstances of the case by impugned order dated 27th September, 2019 refused to approve the resolution plan of Deccan and directed the Resolution Professional/Committee of Creditors for inviting the fresh bid (Plans) within a period of 21 days. 6. The Adjudicating Authority while passing such order observed that the Resolution Applicant - Deccan will not be entitled to refund of the amount of the bid bond guarantee in case fresh bid of Resolution Applicant (Deccan) is not accepted. The Resolution Applicant did not participate in the 1st Bid process. 7. The Committee of Creditors have challenged the order dated 27th September, 2019, as the approval of the Resolution Plan of the Deccan has been rejected. 8. The Resolution Applicant (Deccan) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Committee of Creditors . 13. He further submits that the impugned order is also erroneous insofar as it treads on exclusive domain of the Committee of Creditors to examine and decide on the feasibility and viability of the approved resolution plan . 14. He also submits that it is a settled position of law that the Adjudicating Authority being a creature of a statute (such as under the I B Code ) is bound within the four corners of the said statue and cannot exercise its jurisdiction beyond/outside the scope prescribed under the statute. Accordingly, it was impermissible for the Adjudicating Authority to allow the withdrawal of the resolution plan beyond its jurisdiction prescribed under the 'I B Code or return a finding on feasibility or viability of a resolution plan. He also relied upon the judgment of the Hon ble Supreme Court in the case of Committee of Creditors of Essar Steel Limited v. Satish Kumar Gupta Ors. wherein the argument of a right being available under Section 60(5) of the I B Code to challenge the decision of the Committee of Creditors to approve a resolution plan was rejected on account of Section 60(5)(a) which only refers to an applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eccan was only that on the VDR, which the resolution applicants were entitled to rely upon. There was no public source of information that would enable Deccan to ascertain production capacity. 16. He further submits that under Section 60(5) of the I B Code , the Adjudicating Authority is required to consider the questions of fact raised i.e. whether Deccan has been misled in the course of the Corporate Insolvency Resolution Process , and whether the Corporate Insolvency Resolution Process had been vitiated by misrepresentation and / or mutual mistake. The M.A. No. 1272 of 2018 filed by the Deccan was maintainable. 17. The data and material on record and the foregoing submissions clearly show that the production capacity of the Corporate Debtor and the feasibility of the resolution plan was not accurately represented on record at the time of Committee of Creditors accorded its approval to the plan; further, a critical part of the resolution plan viz. the 12,500 ton Press was subsequently revealed to be unavailable. 18. On the merits, Deccan successfully established that the Resolution Plan was not capable of implementation, and thus, justified their withdrawal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to approval of the resolution plan as under: 31. Approval of resolution plan. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. [Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.] (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. (3) After the order of approval under sub-section (1),- (a) the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process or liquidation proceeding of such corporate debtor. (4) The National Company Law Tribunal shall be vested with all the powers of the Debt Recovery Tribunal as contemplated under Part III of this Code for the purpose of sub-section (2). (5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of- (a) any application or proceeding by or against the corporate debtor or corporate person; (b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. 28. It is evident that the application under Section 60(5) of the I B Code can be entertained by the Adjudicating Authority (National Company Law Tribunal) both on the question of facts and law or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor . 29. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30. A Resolution Professional has presented a resolution plan to the Committee of Creditors for its approval, but the Committee of Creditors does not approve such plan after considering its feasibility and viability, as the requisite vote of not less than 66% of the voting share of the financial creditors is not obtained. As has been mentioned hereinabove, the first proviso to Section 30(4) furnishes the answer, which is that all that can happen at this stage is to require the Resolution Professional to invite a fresh resolution plan within the time limits specified where no other resolution plan is available with him. It is clear that at this stage again no application before 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. 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 Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d contain false information since they are being subjected to the transaction and forensic audit. Therefore, any reliance upon these statements is said to have vitiated Deccan s Resolution Plan. 34. The Adjudicating Authority noticed that the income tax returns of the company for the Financial Year 2015-16 and Financial Year 2016-17 do not indicate trading operations. The audited financial statements of the Corporate Debtor also, do not indicate any trading operations at all. The Corporate Debtor was represented as a primarily manufacturing company to the Bidders. However, as per the claims made by the Resolution Professional, based upon the document purporting to be the relevant excerpt of the details of historical revenues provided to the Resolution Applicant in the Metalyst HO Model under the tab Historical Financial , the obvious implications would be that almost 70% of the revenue of the Corporate Debtor would come from trading, and not from manufacturing, which would mean that the Corporate Debtor s business has been misrepresented to bidder as a primarily manufacturing company, and the size and scale of the purported revenues from manufacturing were also misrepresented ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is role, she is responsible for managing the process through which to invite proposals from the overall financial market, rather than just the creditors and debtor. The Committee discussed that this could include other potential market participants, such as other financial institutions, asset reconstruction companies, foreign financiers, strategic investors, other firms and minority shareholders in the entity. Part of the task of the RP is to ensure as much equality of information about the entity to all participants in the negotiations as is possible. Thus, the RP needs to ensure several features in the IRP, giving priority to the need to preserve time value and equality in negotiations in the process: 1. The RP must provide the most updated information about the entity as accurately as is reasonably possible to this range of solution providers. In order to do this, the RP has to be able to verify claims to liabilities as well as the assets disclosed by the entity. The RP has the power to appoint whatever outside resources that she may require in order to carry out this task, including accounting and consulting services. 2. The information collected on the entity is used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity held that the Resolution Professional was duty bound to provide the list updated information about the entity as accurately as is reasonably feasible and possible to the range of solution providers. In Mobilox Innovations (P) Ltd. vs. Kirusa Software (P) Ltd. (2018) 1 SCC 353 while tracing the background of the I B Code, referred to the Legislative Guide on Insolvency Law of the United Nations Commission on International Trade Law and the following pertinent provisions/clauses thereof: 11. An insolvency law should be transparent and predictable. This will enable potential lenders and creditors to understand how insolvency proceedings operate and to assess the risk associated with their position as a creditor in the event of insolvency. This will promote stability in commercial relations and foster lending and investment at lower risk premiums. Transparency and predictability will also enable creditors to clarify priorities, prevent disputes by providing a backdrop against which relative rights and risks can be assessed and help define the limits of any discretion. Unpredictable application of the insolvency law has the potential to undermine not only the confidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kruptcy Code do not confer any power and jurisdiction on the Adjudicating Authority to compel specific performance of a plan by an unwilling resolution applicant. 40. In absence of fact that there was any procedural infirmity and having not proceeded in the manner as was required, we hold that the plan approved was violative of Section 30(2)(e) of the I B Code , having contravened the provisions of the I B Code . 41. For the said reasons, the plan approved by the Committee of Creditors under sub-section (4) of Section 30 of the I B Code and rejected by the Adjudicating Authority in terms of Section 31(2), no interference is called for. 42. Insofar as refund of forfeiture of the Bid Bond Guarantee is concerned, this Appellate Tribunal is not inclined to grant any relief to the Deccan . On 18th November, 2019, the Committee of Creditors was allowed to go through the other resolution plans and approve the same. As observed by the Adjudicating Authority subsequently on 6th December, 2019, the Deccan was also allowed to settle the claim. After having received all the information including 2016 MM Report relating to net realistic volume production from the existing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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