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TMI Blog2020 (9) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... for taking a decision regarding the viability and feasibility, were not placed before the CoC or the Resolution Professional. The only basis for the corporate debtor to raise the issue of viability and feasibility is that the ownership and possession of the ethanol plant and machinery is the subject matter of another dispute and that the resolution plan does not take care of the contingency where the said plant and machinery may not eventually be available to the Successful Resolution Applicant. Therefore, the fact that there was an issue with regard to the ethanol plant and machinery, had been taken note of by the Resolution Professional, the Committee of Creditors and the Successful Resolution Applicant. Once all these three parties have taken note of the said fact and taken a conscious decision to go ahead with the Resolution Plan, it cannot be stated that the question of viability and feasibility was not examined in the proper perspective - the first ground and actually the main ground on which NCLAT interfered with the decision of the NCLT to approve the Resolution Plan, is wholly untenable, misconceived and unjustified. Alleged breach of confidentiality - contention of the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normal course of business. It is a commercial decision that they have taken. The corporate debtor cannot cry wolf over the said decision. Therefore, the third ground on which NCLAT chose to interfere, is also bound to be rejected. Advertisement issued by the Resolution Professional on 30.03.2018 - NCLAT holds that the advertisement was not in conformity with Regulation 36A of The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and as per Form G of the Schedule - HELD THAT:- But the conclusions reached by NCLAT in this regard cannot hold water for two reasons. If NCLAT was convinced that the very process of inviting Expression of Interest was vitiated, NCLAT should have issued a direction to start the process afresh all over again by issuing a fresh advertisement. NCLAT did not do this and the person who raised this point is not on appeal - The second meeting of the Committee of Creditors was held on 27.03.2018. The advertisement was approved in the said meeting. It was the unamended Regulation 36A that was in force at that time. This has not been appreciated by NCLAT. Therefore, the NCLAT was wrong in its approach eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as eventually dismissed on 23.08.2018. 5. Several meetings of the Committee of Creditors were held thereafter and eventually the Committee of Creditors, in its 8th Meeting held on 09.02.2019 resolved to approve the Resolution Plan submitted by one M/s. Sai Agro (India) Chemicals. On the basis of the approval of the Resolution Plan by the Committee of Creditors, the Resolution Professional moved an application on 15.02.2019 before the NCLT, Mumbai. At this stage, the Director/Promoter of the corporate debtor also came up with an application seeking permission to file a resolution plan. But by a common order dated 01.08.2019, NCLT, Mumbai Bench, rejected the application filed by the Director/Promoter of the corporate debtor and approved the Resolution Plan submitted by M/s. Sai Agro (India) Chemicals. Thus, M/s. Sai Agro (India) Chemicals, have become the Successful Resolution Applicant (hereinafter referred to as the 'SRA'). 6. The Director/Promoter of the corporate debtor (who unsuccessfully approached the High Court of Bombay at the earliest point of time), filed an appeal before the NCLAT in Company Appeal (AT) (Ins) No.943 of 2019, as against the order of the NCLT dated 01.08. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e SARFAESI Act; and (iv) That even the advertisement issued by the Resolution Professional on 30.03.2018 inviting Expression of Interest, was vitiated in as much as the invitation contained therein was for outright sale of the Company as a going concern, and was in violation of Regulation 36A. 10. The order of the NCLAT is assailed by the appellants on the ground, inter alia, (i) that the question of viability and feasibility, is to be left to the commercial wisdom of the CoC and the same cannot be lightly interfered with by the Tribunal, in view of the law laid down by this court in Essar Steel India Ltd. Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and others, (2019) SCC OnLine SC 1478 and K. Sashidhar; K. Sashidhar vs. Indian Overseas Bank, (2019) 12 SCC 150 (ii) that a mere suspicion that there was breach of confidentiality cannot take the place of proof; (iii) that once the Successful Resolution Applicant has taken note of the issue relating to the ethanol plant and machinery and submitted a resolution plan, the Director/Promoter of the corporate debtor cannot make an issue out of it, and (iv) that the advertisement issued was actually in tun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial creditors or their collective decision before the adjudicating authority. That is made nonjusticiable."(paragraph 52) (ii) "The provisions investing jurisdiction and authority in NCLT or NCLAT as noticed earlier, have not made the commercial decision exercised by CoC of not approving the resolution plan or rejecting the same, justiciable. This position is reinforced from the limited grounds specified for instituting an appeal that too against an order "approving a resolution plan" under Section 31." (paragraph 57) (iii) "Further, the jurisdiction bestowed upon the appellate authority (NCLAT) is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in Section 61(3) of the I&B Code, which is limited to matters "other than" enquiry into the autonomy or commercial wisdom of the dissenting financial creditors." (paragraph 58) (iv) "At best, the adjudicating authority (NCLT) may cause an enquiry into the "approved" resolution plan on limited grounds referred to in Section 30(2) read with Section 31(1) of the I&B Code. It cannot make any other inquiry nor is competent to issue any direction in relation to the exercise of commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly be available to the Successful Resolution Applicant. 14. But the aforesaid argument, coming as it does from the Promoter/Director of the corporate debtor is like the wolf shedding tears for the lamb getting drenched in rain. The records very clearly show that the Successful Resolution Applicant, the Resolution Professional and the financial creditor were fully aware of the said issue. The order passed by the NCLAT in Company Appeal (AT) (Insolvency) No.897 of 2019 on 16.12.2019 shows that the possession of the ethanol plant and machinery was restored to Sarvadnya Industries Pvt. Ltd., in the appeal to which the Successful Resolution Applicant was also a party. The Successful Resolution Applicant also appears to have offered to Janata Sahkari Bank to purchase the said plant and machinery. In the appeal before the NCLAT out of which the present Civil Appeals arise, Sarvadnya Industries Pvt. Ltd. which claims ownership of the ethanol plant and machinery, were also a party. 15. In any case, the Resolution Professional has taken a specific plea in his grounds of appeal before this Court, that the Successful Resolution Applicant is itself into the ethanol manufacturing business and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from material irregularities and the Resolution Plan approved suffers from feasibility and viability. But then the operative portion of the impugned order does not take the findings on other issues to their logical end. For instance, the Tribunal holds that the advertisement inviting Expression of Interest itself was defective and that there was breach of confidentiality in as much as the liquidation value appears to have been leaked out. These findings should have taken the Appellate Tribunal to the point of setting aside the entire process and directing the Resolution Professional to start the process all over again from the stage of issue of a fresh advertisement. The NCLAT did not do so. In the operative portion, NCLAT merely remanded the matter back to the Adjudicating Authority with a direction to send back the Resolution Plan to the Committee of Creditors to resubmit the plan after taking into consideration the law laid down by this Court. 20. In other words, the reliefs that would normally flow in the light of the findings with regard to breach of confidentiality and defective Invitation to Offer, were not granted by NCLAT. The Director/Promoter of the corporate debtor h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly flow out of those other grounds. 26. But be that as it may, we will still deal with the other three grounds also, as the same would put things in the right perspective and clear any air of suspicion. 27. The second ground on which NCLAT interfered with the decision of the NCLT is the alleged breach of confidentiality. The contention of the Promoter/Director of the corporate debtor is that the liquidation value mentioned in the Resolution Plan submitted by the SRA exactly tallied with the liquidation value obtained by the Resolution Professional and that the whole sequence of events would show clearly that there was an attempt to cover up. 28. According to the Director/Promoter of the corporate debtor, the selfdeclaration signed by the Resolution Applicant, and which forms part of the Resolution Plan, bears the date 9th February 2019. This document mentions the liquidation value as ₹ 13.53 crores. It was the same value as obtained by the Resolution Professional. It is the contention of the Director/ Promoter of the corporate debtor that the Resolution Professional wrote an email on 07.02.2019 itself (2 days before the submission of the Resolution Plan by the SRA), askin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was filed after the conclusion of the oral arguments. 34. But NCLAT failed to take note of the fact that the Resolution Professional did not have any alternative except to respond in the manner that he did, to a point raised only in the course of arguments, but not raised in the Memorandum of Appeal. If the Promoter/Director of the corporate debtor had raised the issue of collusion or the submission of the Resolution Plan after the expiry of the last date, even in the Memorandum of Appeal, a duty would have been cast upon the Resolution Professional to respond in an appropriate manner. But that was not the case. Therefore, we do not approve the manner in which NCLAT rejected the contents of the email correspondence. 35. The fact that there was an email correspondence between the Resolution Professional and the SRA on 07.02.2019, touching upon one of the contents of the Resolution Plan, would show (i) that the SRA had submitted the Resolution Plan before the last date and (ii) that the Resolution Professional had obviously scrutinised it, as otherwise he could not have found out the liquidation value mentioned therein matching the confidential information that he had. 36. In any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the third ground on which NCLAT chose to interfere, is also bound to be rejected. 41. The last ground revolves around the advertisement issued by the Resolution Professional on 30.03.2018. NCLAT holds that the advertisement was not in conformity with Regulation 36A of The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and as per Form G of the Schedule. 42. But the conclusions reached by NCLAT in this regard cannot hold water for two reasons. If NCLAT was convinced that the very process of inviting Expression of Interest was vitiated, NCLAT should have issued a direction to start the process afresh all over again by issuing a fresh advertisement. NCLAT did not do this and the person who raised this point is not on appeal. 43. In any case, it does not lie in the mouth of the Promoter/Director of the corporate debtor to raise any issue in this regard. It is seen from the Minutes of the 2nd Meeting of the Committee of Creditors that the Promoter/Director of the corporate debtor attended the meeting held on 27.03.2018. In Item No. 3 of the Agenda for the said meeting, the draft of the Invitation for Expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 25, to submit resolution plans at least thirty days before the last date of submission of resolution plans. (2) Where the invitation does not contain the evaluation matrix, the resolution professional shall issue, with the approval of the committee, the evaluation matrix to the prospective resolution applicants at least fifteen days before the last date for submission of resolution plans. (3) The resolution professional may modify the invitation, the evaluation matrix or both with the approval of the committee within the timelines given under subregulation (1) or subregulation (2), as the case may be. (4) The timelines specified under this regulation shall not apply to an ongoing corporate insolvency resolution process( a) where a period of less than thirtyseven days is left for submission of resolution plans under subregulation (1); (b) where a period of less than eighteen days is left for submission of resolution plans under subregulation (2). (5) The resolution professional shall publish brief particulars of the invitation in Form G of the Schedule: (a) on the website, if any, of the corporate debtor; and (b) on the website, if any, designated by the Board for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... committee under clause (h) of subsection (2) of section 25; (b) relevant records in evidence of meeting the criteria under clause (a); (c) an undertaking by the prospective resolution applicant that it does not suffer from any ineligibility under section 29A to the extent applicable; (d) relevant information and records to enable an assessment of ineligibility under clause (c); (e) an undertaking by the prospective resolution applicant that it shall intimate the resolution professional forthwith if it becomes ineligible at any time during the corporate insolvency resolution process; (f) an undertaking by the prospective resolution applicant that every information and records provided in expression of interest is true and correct and discovery of any false information or record at any time will render the applicant ineligible to submit resolution plan, forfeit any refundable deposit, and attract penal action under the Code; and (g) an undertaking by the prospective resolution applicant to the effect that it shall maintain confidentiality of the information and shall not use such information to cause an undue gain or undue loss to itself or any other person and comply with the requir ..... 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