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TMI Blog2021 (1) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... (in short 'I&B Code'). The Parties are represented by their original status in the Company Petition for the sake of convenience. 2. These brief facts of the case are as follows: The Resolution Professional filed an Application under Section 33(1) of the I&B Code, 2016 in CP (IB.) No. 706(PB)/2018 for liquidation of the Corporate Debtor Apex Buildsys Private Limited allowed by the Impugned Order is challenged in these Appeals. 3. Appellants contend that the Company Petition No. 706(PB)/2018 filed by ICICI Bank (from now on referred to as 'Financial Creditor') was admitted under Section 7 of the I&B Code, 2016 by order of the Adjudicating Authority dated 20th September 2018. The Corporate Debtor has been engaged in design, engineering, fabrication and erection of the pre-engineered metal building and structures. It was being operated through its Plants in Pant Nagar, (Uttrakhand and Umred, Nagpur). The Resolution Professional after collation of the claims aggregating to Rs. 444.60 Crores formed the Committee of Creditors (in short "CoC"). The IRP was later on confirmed as the Resolution Professional. During CIRP the RP appointed two valuers for determination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Corporation of Greater Mumbai v Abhilash Lal 2019 SCC Online SC 1479 clarified that in the event property is not owned by the Corporate Debtor, the Administrative Authorities that leased the property to the Corporate Debtor will have the right over the property. Their rights will not be affected by Section 238 of the Code. Based on the law laid down by Hon'ble Supreme Court, the sale of properties of the Corporate Debtor during liquidation will be impermissible. The CoC has not been informed about the same. Therefore, RP has failed in his duties under Section 24(2) of the I & B Code read with 21(9) of the Code. * The Adjudicating Authority has erred in not granting the erstwhile director an opportunity to be heard and not considering the Resolution Professional's glaring misrepresentations. * That the Adjudicating Authority has completely ignored the employees' efforts of the Corporate Debtor, who all have worked diligently to ensure that the Corporate Debtor remains a going concern and stays in business during CIRP. 6. In Appeal No.291 of 2020 Appellant has challenged the liquidation order on the same grounds as taken in Appeal No. 274 of 2020. 7. The Resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai ('MCGM') Vs. Abhilash Lal (2019) SCC Online SC 1479 and contended that the leasehold property could not be transferred in liquidation. The valuation of the said properties cannot be included in the valuation whilst ascertaining the liquidation value of the assets of the Corporate Debtor. 14. In response to the above, the Respondent contended that the Hon'ble Supreme Court judgment passed in the above-mentioned case of MCGM is not applicable to the facts of this case. It is contended that in the instant case State Industrial Development Corporation of Uttrakhand Limited (in short 'SIDCUL') have leased land vide lease deed dated 20th March 2006 admeasuring 65,201.42 sq. mt. Pant Nagar, Uttrakhand for a period of 90 years and similarly, Maharashtra Industrial Corporation (in short 'MIDC') have vide lease deed dated 18th August 2008 leased out at Plot No. D-3 admeasuring 2,56,473 sq. mt. situated at Umred Industrial Area, Umred to the Corporate Debtor for a period of 95 years. The facts of 'MCGM' case show that the said judgment dealt with a situation where no lease deed was executed favouring the Corporate Debtor. Hence, in view of the execution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... November 2015, wherein primacy have been given to CoC to evaluate the various possibilities and make a decision. It has been observed that: "The key economic question in the bankruptcy process When a firm (referred to as the corporate debtor in the draft law) defaults, the question arises about what is to be done. Many possibilities can be envisioned. One possibility is to take the firm in to liquidation. Another possibility is to negotiate a debt restructuring, where the creditors accept a reduction of debt on an NPV basis, and hope that the negotiated value exceeds the liquidation value. Another possibility is to sell the firm as a going concern and use the proceeds to pay creditors. Many hybrid structures of these broad categories can be envisioned. The Committee believes that there is only one correct Forum for evaluating such possibilities, and making a decision: a creditors committee, where all financial creditors have votes in proportion to the magnitude of debt that they hold. In the past, laws in India have brought arms of the Government (Legislature, executive of judiciary) into this question. This has been strictly avoided by the Committee. The appropriate dispositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Code will respect the rights of all creditors equally. (10) The law must be impartial to the type of creditor in counting their weight in the vote on the final solution in resolving insolvency. VI. The Code must ensure that, when the negotiations fail to establish viability, the outcome of bankruptcy must be binding. (11) The law must order the liquidation of an enterprise which has been found unviable. This outcome of the negotiations should be protected against all appeals other than for very exceptional cases." 20. Learned Counsel for the Appellant argued that it is evident from the record that the Resolution Plans were only discussed and deliberated by the CoC in different meetings and after discussion every time CoC gave direction for improvement in the financial terms indicated in the Resolution Plan and further for removing conditions precedents in the Resolution Plan. It also appears that no voting process was done for approval or rejection of Resolution Plan. However, the approval or rejection of the Resolution Plan can only be made by the CoC's voting process. Appellant contends that the Resolution Plans were discarded even without voting and liquidation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable. 57. On a bare reading of the provisions of the I&B Code, it would appear that the remedy of Appeal under Section 61(1) is against an "order passed by the adjudicating authority (NCLT)", which we will assume may also pertain to recording of the fact that the proposed resolution plan has been rejected or not approved by a vote of not less than 75% of voting share of the financial creditors. Indubitably, the remedy of Appeal including the width of jurisdiction of the appellate authority and the grounds of Appeal, is a creature of statute. 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. First, that the approved resolution plan is in contravention of the provisions of any law for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is by a vote of not less than 75% (as in October 2017) of voting share of the financial creditors. Conversely, the legislative intent is to uphold the opinion or hypothesis of the minority dissenting financial creditors. That must prevail, if it is not less than the specified per cent (25% in October 2017; and now after the amendment w.e.f. 6-6-2018, 44%). The inevitable outcome of voting by not less than requisite per cent of voting share of financial creditors to disapprove the proposed resolution plan, de jure, entails in its deemed rejection. 83. Assuming that this provision was applicable to the cases on hand, non-recording of reasons for approving or rejecting the resolution plan by the financial creditor concerned during the voting in the Meeting of CoC, would not render the final collective decision of CoC nullity per se. Concededly, if the objection to the resolution plan is on account of infraction of ground(s) specified in Sections 30(2) and 61(3), that must be specifically and expressly raised at the relevant time. For, the approval of the resolution plan by CoC can be challenged on those grounds. However, if the opposition to the proposed resolution plan is purely a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other conditions precedent stipulated by both the RAs under the garb of reliefs and concessions etc. 3) The resolution plan consideration amount proposed by both the RAs is not commensurate with the intrinsic value of the Corporate Debtor, being even below the assessed Liquidation Value of assets of CD. In view of the aforesaid terms of plans stipulated by both the RAs, it was noted that both the Plans are not feasible/viable, being non-compliant with Section 30 of the Code read with Regulation 37 of CIRP Regulations and as such the same can't be considered resolution plans per se within the meaning of the Code and Regulations framed thereunder. CoC, finding both the plans non-compliant with the provisions of the Code and requirements of RFRP, decided not to evaluate/consider them. CoC further decided to propose liquidation of the CD and directed RP to put up the Resolution for approval to this effect through E-Voting. The CoC also directed the RP to communicate the decision of the CoC to both the RAs appropriately and refund their EMD amount." 24. Based on the above decision of the Committee of Creditors, with 87.30% of vote share, i.e. more than the required threshold 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Committee of Creditors v. Satish Kumar Gupta 2020 (8) SCC 531. 27. In the above-mentioned case, Hon'ble Supreme Court has held it is the CoC that has to decide whether or not to rehabilitate the Corporate Debtor through acceptance of a particular Resolution Plan, and such decision is left with the requisite decision of the CoC. It is further held that the very limited review is available which can in no circumstances trespass upon a business decision of the majority of the CoC but has to be within four corners of the Section 30(2) of the Code. It is further said that liquidation order being a consequence either upon expiry of the time of CIRP when no Resolution Plan is received or in the event, a Resolution Plan is rejected by the CoC as per Section 33 of the Code. 28. The Learned Counsel for the Appellants laid much emphasis on the judgment of the Hon'ble Supreme Court in case of Municipal Corporation of Greater Mumbai vs Abhilash Lal (2019) SCC Online SC 1479 has held that: "48. In the opinion of this court, Section 238 cannot be read as overriding the MCGM's right - indeed its public duty - to control and regulate how its properties are to be dealt with. That ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018, proposing termination of the contract/agreement. It is submitted that Seven Hills owed MCGM an amount of Rs. 76,05,07,780." 30. It appears that in MCGM case, the issue involved was whether under the Resolution Plan, property for which the lease deed was never executed, can by way of the Resolution Plan, Government be directed to enter into a lease agreement. The facts of the above case are totally different from the instant case. In the instant case, the lease deeds have been executed in favour of the Corporate Debtor way back in the year 2006 and 2008, which are transferable upon payment of applicable transfer fee etc. as per related terms of the respective lease deeds. Thus, the ratio of the decision of Hon'ble Supreme Court in the MCGM case (supra) is not applicable to the facts of this case, because certain assets of the Corporate Debtor are leased by 'SIDCUL' and 'MIDC' in favour of the Corporate Debtor. 31. In case of MCGM case (supra) Hon'ble Supreme Court has dealt with a situation where lease deed was to yet to be executed upon completion of the project. Therefore the rights of MCGM can't be dealt with under a Resolution Plan, where lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, it is hereby declared that the Committee of creditors may take the decision to liquidate the corporate debtor, any time after its constitution under sub-section (1) of Section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum.]" 34. Thus, it is clear the CoC was empowered to decide to liquidate the Corporate Debtor at any time before confirmation of the Resolution Plan, including any time before the preparation of Information Memorandum. 35. It also appears that when CoC noticed that both the Resolution Plans were not feasible and viable, and are being non-compliant which Section 30 of the Code read with Regulation 37 of CIRP Regulation thus. The same could not be considered the Resolution Plans per se within the Code and Regulations' meaning framed thereunder. Consequently, the CoC decided to propose the liquidation of the Corporate Debtor and on voting the same was passed by a majority of 87.30% of voting share of the Members of CoC. 36. Based on the above discussion, we are of the considered opinion that both the Appeals sans merit hence dismissed-no order as to costs. The interim order pas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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