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TMI Blog2020 (8) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Plan complies with the mandate of Section 30(2) of the I B Code . While considering whether the Resolution Plan approved by the Committee of Creditors does not emanate from any ineligible person, does not contravene any of the provisions of the law in force and provides for management of affairs of the Corporate Debtor after approval of the Resolution Plan, the Adjudicating Authority has to keep in view the object of the legislation. Section 29A inserted by amending Act No.8 of 2018 declares certain persons ineligible to be Resolution Applicants. It cannot be disputed that the person who is promoter or in the management or in control of the Resolution Applicant or is promoter or in management or in control of the business of the Corporate Debtor during the implementation of the Resolution Plan falls within the expression connected person . Persons who contributed to default of company with their misconduct have to be excluded from submitting a Resolution Plan or acquiring the assets of the Corporate Debtor when pushed into liquidation. The Adjudicating Authority has rightly declined to approve the Resolution Plan of Mr. Madhusudhan who was only used as a ploy to ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (IB) No. 423/9/HDB/2018 for triggering Corporate Insolvency Resolution Process. The Adjudicating Authority admitted the application vide order dated 12th February, 2019. Initially, Mr. Gonugunta Murali was appointed as Interim Resolution Professional and subsequently confirmed as Resolution Professional. However, the Adjudicating Authority subsequently replaced him with Mr. Sisir Kumar Applikatla. Since the Corporate Insolvency Resolution Process was not concluded within the statutory period of 180 days, same was extended from time to time. The Resolution Professional invited Expression of Interest after the appeal preferred against the order of admission came to be rejected by this Appellate Tribunal. Two prospective Resolution Applicants namely- M/s. Orion Ferro Alloys Private Limited and Mr. Madhusudhan Raju Chintalapati submitted Resolution Plans. Committee of Creditors authorised the Resolution Professional to negotiate with the prospective Resolution Applicants to improve upon their plans. One of the Resolution Applicants namely- Mr. Madhusudhan meanwhile entered into an agreement with P. Vijay Kumar (former Managing Director of the Corporate Debtor) undertaking to invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Corporate Debtor. It noticed that the former Managing Director P. Vijay Kumar entered into an agreement with one of the Resolution Applicants lowering his stake in the Corporate Debtor from 45.32% to 30.81%. After taking into consideration the new shareholding patterns in terms of the agreement filed with I.A No. 15 of 2020 and the Settlement Agreement dated 6th February, 2020 entered inter se the Resolution Applicants with the Operational Creditor for withdrawal of the Company Petition, Committee of Creditors did not consider the matter of withdrawal of the Company Petition and proceeded to approve the Restructuring Plan as the Resolution Plan. Obviously, the Restructuring Plan was based on an agreement between one of the Resolution Applicants and the erstwhile Promoter and Managing Director of the Corporate Debtor. Under the Restructuring Plan approved as the Resolution Plan by the Committee of Creditors, P. Vijay Kumar would continue to hold substantial stake in the new management under the Restructuring Plan though slightly less than before. It is in this context that the Adjudicating Authority viewed the Restructuring Plan as not being a Resolution Plan in terms of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct have to be excluded from submitting a Resolution Plan or acquiring the assets of the Corporate Debtor when pushed into liquidation. An unscrupulous person associated with the management of the Company who pushes the Corporate Debtor into financial crisis leading to default in its repayment obligations towards creditors cannot be permitted to gain control of the management of the Corporate Debtor through backdoor viz by entering into an agreement with an investor in the form of a settlement and then submitting a Restructuring Plan masquerading as a Resolution Plan while retaining the majority shareholding and without divesting his effective control in the management. In this regard, it would be apposite to reproduce the dictum of Hon ble Apex Court in Chitra Sharma vs. Union of India- (WP(Civil) No. 744 of 2017 decided on 09.08.2018) : The provisions for insolvency resolution and liquidation of a corporate person in the Code did not restrict or bar any person from submitting a resolution plan or participating in the acquisition process of the assets of a company at the time of liquidation. Concerns have been raised that persons who, with their misconduct contributed to defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jay Kumar, under the new shareholding pattern would continue to hold substantial stake, its majority character being trimmed insignificantly. Viewed thus the Restructuring Plan projected as the Resolution Plan approved by the Committee of Creditors could not be termed as a Resolution Plan within the ambit of Section 30 of the I B Code and is unacceptable for not being in conformity with Section 30(2) of the I B Code . The Adjudicating Authority has rightly declined to approve the Resolution Plan of Mr. Madhusudhan who was only used as a ploy to gain control of the Corporate Debtor by the very person who had pushed the Corporate Debtor into insolvency. The Committee of Creditors has overlooked the settlement offer and ignored the withdrawal plea without assigning any reason. This in itself raises eyebrows. This is further compounded by approval of the Restructuring Plan camouflaged as Resolution Plan emanating from an ineligible person which renders the role of the Committee of Creditors questionable. Such circumstances justify raising of inference of complicity. 7. We find no reason to entertain this appeal. The impugned order is well reasoned and in consonance with the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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