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TMI Blog2021 (4) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... h - II), in MA 2972/2019 in CP (IB) No. 82 of 2018 and MA 3137 of 2019 in MA 2972 of 2019 in CP (IB) No. 82 of 2018. 2. Aggrieved by the Impugned Order dated 20.01.2020 in MA 3724/2019 in CP (IB) No. 82/MB/2018, preferred by the Next Orbit Ventures Fund opposing the approval of the Resolution Plan submitted by another Resolution Applicant "Sify Technology Limited", Company Appeal (AT) (Insolvency) No. 417 of 2020 is filed by the Appellant herein. 3. MA 2972 of 2019 was filed by the Resolution Professional of Print House (India) Pvt. Ltd. (the 'Corporate Debtor') by invoking the provisions of Section 30(6) of the Insolvency and Bankruptcy Code, 2016 ('in Short the Code') read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India. (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, for approval of the Resolution Plan in respect of Print House (India) Pvt. Ltd., against whom Corporate Insolvency Resolution Proceedings (CIRP) has been initiated vide an Order dated 09.10.2018 in CP (IB) No. 82/MB.II/2018. MA 3137/2019 in MA 2972/2019 was filed by the Suspended Directors and Promotors of the Corporate Debtor seeking impleadment in MA 2972/2019. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution Plan should be respected, subject to the limited judicial review that is available to us. 52. In this view of the matter and having evaluated the Resolution Plan through the limited window of Section 30(2) of the Code available to us, we do not see any reason to interfere with the decision of the CoC taken after due consideration. This Adjudicating Authority does no exercise appellate jurisdiction over the decisions of the Committee of Creditors."...... "54. For these reasons, the Application in MA 3137 fails, and hence the same is dismissed, but without costs. MA No. 2972/2019 is APPROVED as stated in para 42 supra." Submissions of the Learned Counsel for the Appellant: 4. Learned Counsel for the Appellant vehemently contended that the Learned Adjudicating Authority has erred in approving a Resolution Plan which completely changed the nature of the business of the ''Corporate Debtor'' and is therefore in contravention to the objective of the Code, which is 'Resolution', maximization of the value of assets of the ''Corporate Debtor'', 'promoting entrepreneurship, availability of credit and balancing the interests of the Stakeholders'. The Learned Counsel submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modifications/corrections in the Plan to make it compliant with the Code. 6. Learned Counsel for the Appellant further placed reliance on the 16th CoC Meeting deliberations which are observed as follows; "With regard to observations made in previous meeting on Resolution Plan submitted by Sify about their intension not to continue with existing business of the 'Corporate Debtor' and start new business activity of developing Data Centers at the land of the 'Corporate Debtor', the representatives of Sify informed the meeting that they have relooked into this matter and will suitably change their Resolution Plan to provide for continuation of existing business of the 'Corporate Debtor'. After discussion, the Committee decided to give some more time to resubmit the revised Resolution Plan; accordingly, the Sify representatives were asked to resubmit their revised Resolution Plan by 5:00 p.m. on 21.08.2020." 7. Learned Counsel contended that the Resolution Professional and the CoC approved the Plan despite the fact that the Plan did not provide for 'continuation of existing business of the 'Corporate Debtor'' nor maximization of the assets and did not take care of the interests ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CoC Meeting, the Resolution Professional tabled his Compliance Report after examining both the Resolution Plans and it was suggested that the Resolution Applicant make certain corrections/modifications in their Plan to make it compliant with the Code and give a revised proposal by 19.08.2019; that in the 16th CoC Meeting held on 19.08.2019 the representative of SIFY informed that they were in process of finalizing the revised Resolution Plan and needed some time to submit the same; that the CoC unanimously agreed to discuss the Appellant's revised bid and convened a Meeting for 21.08.2019. 10. Learned Counsel submitted that on 21.08.2019 in the 17th CoC Meeting, though an opportunity was given to the Appellant to submit a revised Plan, the Appellant refrained from coming to the Meeting and requested additional time beyond 22.08.2019 which was denied by the CoC and it was requested that the same be submitted by 22.08.2019. On 26.08.2019 in the 18th CoC Meeting after going through various aspects of both the plans, submitted by the Appellant and SIFY, CoC approved the Resolution Plan of SIFY with a majority of 70.5%. 11. The Learned Counsel for the first Respondent submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Submissions of the Learned Counsel appearing for the SIFY 14. The submissions of the Learned Counsel appearing for the SIFY, the Successful Resolution Applicant is as hereunder:- * The Learned Counsel submitted that the plant and machinery used by the 'Corporate Debtor Company' and the printing technology employed by the Company had become obsolete on account of which the business suffered and revenues reduced from 32.2 Crs. (FY 2014) to 4.1 Cr. (FY 2018) and therefore 'SIFY' sought to invest large amounts of money to revive the 'Corporate Debtor' and integrate the obsolete printing business with the digital Data Centers. * The business plan reproduced by the Adjudicating Authority envisages that the scope and intent of the Code has been met by 'SIFY'. Assessment: 15. Heard all parties at length and perused the Written Submissions filed. 16. The main point for consideration in this Appeal is whether the Resolution Plan approved under Section 31 by the Learned Adjudicating Authority is in contravention with the scope and objective of the Code which is 'Resolution', 'maximization of value of assets of the 'Corporate Debtor'' and 'promoting entrepreneurship', 'availability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or such an appeal is not time barred under any provision of law for the time being in force; or (iii) where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of a resolution plan;] (c) provides for the management of the affairs of the corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. Explanation. - For the purposes of Clause (e), if any approval of shareholders is required under the Companies Act, 2013 (18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law. (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in Sub-section (2). (4) The committee of creditors may approve a resolution plan by a vote of not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30 meets the requirements as referred to in Subsection (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, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, 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 Subsection (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 insolvency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining necessary approvals from the Central and State Governments and other authorities.] 38. Mandatory contents of the resolution plan. - [(1) The amount payable under a resolution plan - (a) to the operational creditors shall be paid in priority over financial creditors, and (b) to the financial creditors, who have a right to vote under sub-section (2) of section 21 and did not vote in favour of the resolution plan, shall be paid in priority over financial creditors who voted in favour of the plan.] [(1-A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholder, including financial creditors and operational creditors, of the corporate debtor.] [(1-B) A resolution plan shall include a statement giving details if the resolution applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any other resolution plan approved by the Adjudicating Authority at any time in the past.] (2) A resolution plan shall provide: - (a) the term of the plan and its implementation schedule; (b) the management and control of the business of the corporate debtor during its t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haramshi & Anr.' V/s. 'Kotak Investment Advisors Ltd. & Anr.' reported in 2021 SCC OnLine SC 204. 21. The Jurisdiction of NCLAT being in continuation of the proceedings envisages that any Appeal against an Order approving the Resolution Plan shall be in the manner and on the grounds specified in Section 61(3) of the IBC. Pertinently, the grounds, be it under Section 30(2) or under Section 61(3) are regarding testing the validity of the Resolution Plan approved by the CoC. The enquiry in such an Appeal would be limited to the power authorized to the RP under Section 30(2) of the IBC, or at best, by the Adjudicating Authority under Section 31(2) read with Section 31(1). This Tribunal can examine the challenge only in relation to the grounds specified in Section 61(3), which is limited. 22. An Appeal against an Order approving the Resolution plan can be made under Section 61(3) of the IBC on the following grounds; 61. Appeals and Appellate Authority. - (3) An appeal against an order approving a resolution plan under section 31 may be filed on the following grounds, namely:- (i) the approved resolution plan is in contravention of the provisions of any law for the time being i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir data residing in India, which will push for buoyant growth in Data Center services. Mumbai, being one of the primary Gateway for the Internet in the country, will largely benefit from this policy initiative. Sify, with its Data Center strategy in Navi Mumbai, will look to partner in this digital India campaign. 3. To support Make in India Policy: Sify sources the inputs required for the construction, operation and maintenance of the Data Centers from local suppliers to the extent available. Further, the Data Center services are offered from India to both Domestic and International customers. The future expansion of capacity in relation to facility and power will be focused towards maximizing the philosophy of Make in India. Sify's Data Center investment will have multiplier effect on the local economy contributing to the national development. 4. Attract and invest in local talent pool: Sify's investment in Data Center facilities will create and indirect employment for more than 150 people, which will be from the local talent pool. Any expansion of the facility and services will lead to more employment opportunities in the state. 5. Maximise value for stakeholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the entity is to be revived, or the debt is to be restructured, or the entity is to be liquidated. This decision will come from the deliberations of the creditors committee in response to the solutions proposed by the market. (Emphasis Supplied) 25. It is seen from the aforenoted extract that the Committee has advocated that there should be freedom given to the market, to propose solutions on keeping the entity as a going concern. The decision as to how the Insolvency is to be resolved and the mode and manner in which the debt is to be restructured will only emanate from the deliberations of CoC in response to the current economic and market scenario. 26. The Hon'ble Supreme Court in 'K. Sashidhar' (Supra) has laid down the role of the CoC in accepting or rejecting the Resolution Plan as well as the role of the Adjudicating Authority while considering the Application from approval or rejection of the Resolution Plan. There is an intrinsic assumption that the 'Financial Creditors' are fully informed about the viability of the 'Corporate Debtor' and the feasibility of the Resolution Plan. The opinion expressed after due deliberations in the CoC meeting through voting, is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LAT) has been endowed with the jurisdiction to reverse the commercial wisdom of the dissenting financial creditors and that too on the specious ground that it is only an opinion of the minority financial creditors....." 151. This Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra) after reproducing certain paragraphs in K. Sashidhar (supra) observed thus: "Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar" 152. It can thus be seen, that this Court has clarified, that the limited judicial review, which is available, can in no circumstance trespass upon a business decision arrived at by the majority of CoC." 28. Discussing the legislative intent and the commercial wisdom of CoC the Hon'ble Apex Court in 'Kalpraj Dharamshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Plan were compared with that of the revised 'Resolution Plan' submitted by 'SIFY'. It is pertinent to reproduce the Minutes of the Meeting wherein both the Plans were compared and a final decision was arrived that; "The Committee went through the revised final Resolution Plan as received from Sify Technologies Limited and noted the following salient features of the Plan: * Summary of payments under the Plan: Sl. No. Claimant Amount of liability (in Rs.) Settlement Amount (in Rs.) % of liability Upfront payment (in Rs.) 1. FinancialCreditors 81,91,45,955 42,50,00,000 51.88 38,50,00,000 2. Workmen & Employee 9,24,55,241 14,41,00,000 34.52 6,90,83,040 3. Operational & other Creditors 32,50,29,235 Total 123,66,30,431 56,91,00,0000 45,40,83,040 B. Payment schedule: (a) Financial Creditors- within a period of two quarter beginning from 60 days from effective date. (b) Others- Upon finalization of claim amount. After going through various aspects of both the plans, the Committee evaluated plans as per evaluation Matrix determined. As per evaluation matrix, the plans got total scores as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i & Anr.' (Supra). 31. It was strenuously argued by the Counsel for the Appellant that the workman's dues were disregarded and therefore, the interests of all stakeholders were overlooked. The portion of the Plan dealing with the issue on hand, is detailed as hereunder; "11. INTERESTS OF ALL STAKEHOLDERS The Resolution Plan proposed by the Resolution Applicant adequately deals with the interests of all stakeholders, including Financial Creditors and Operational Creditors, of the Company, in the following manner: (a) Employees/ Workmen: The Current plan proposes to continue the services of approx. 70 active employees and workmen as on the rolls of the company on current date. The Resolution Applicant further undertakes to provide adequate training and upskilling opportunities to employees so that they may find suitable employment within the corporate debtor. (b) Banks/ FIs: Financial Creditors shall be paid a sum of INR 42.5 cr. Towards full and final settlement of their claims in the manner set out in the Resolution Plan. However, it is hereby clarified that such payment shall not absolve or be treated as a waiver of the obligation of the existing promoters of corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, legal feasibility, market and real estate feasibility, resource feasibility, financial feasibility, etc. 'Viability' on the other hand is the study of the existing business or proposed venture's sustainability. Apart from determining whether the proposal should be approved or not, it involves dealing with strategies on how to make the business grow and last. Business growth and sustainability are the important aspects of viability. In the instant case 'feasibility and viability' is to be viewed holistically. The technical, market, economic, financial, model viability is to be taken into consideration as it is ultimately linked to the profitability of the business. Business sustainability is defined as managing the financial, social and environmental risks, obligations and opportunities. An integration of all these factors is essential for sustainability and growth of a business. 36. It is significant to mention that while we agree with the submission of the Learned Counsel for the Appellant that Resolution Process under 'IBC' is 'not an auction or a recovery proceeding', we are of the considered view that the facts in the instant case read with the Minutes of the CoC Meetings a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered view that if the Resolution Plan contemplates a change in the nature of business to another line when the existing business is obsolete or non-viable, it cannot be construed that the Resolution Plan is not 'feasible or viable'. It can be seen from the aforenoted Sections 30(2) & 31 and Regulations 37, 38 and 39 that there is nothing in the Code which prevents a 'Resolution Applicant' from changing the present line of business to adding value or creating 'Synergy' to the existing assets and converting an obsolete line of business to a more 'viable and feasible' option. Keeping in view the ratio laid down by the Hon'ble Supreme Court in the recent Judgement 'Kalpraj Dharamshi & Anr.' (Supra), and the fact that there is no 'material irregularity in the exercise of powers' by the Resolution Professional; and the approved 'Resolution Plan' is not in contravention of any law for the time being in force, we are of the view that there is no illegality or infirmity in the Impugned Order of the Learned Adjudicating Authority. 39. In the result, for all the aforenoted reasons, Company Appeal (AT) (Insolvency) No. 417 of 2020 is rendered infructuous and Company Appeal (AT) (Insolvency) N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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