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TMI Blog2021 (5) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... he timeline with the provisions of the Code and the Regulations and, when required, invoked Regulation 40 C. The RP doesn't need to invoke Regulation 40 C as a matter of routine. Regulation 40 C provides exclusion of the timeline for completion of CIRP during the Covid-19 outbreak for any activity that could not be completed due to such lockdown. It excludes the timeline for the activities that could not be performed due to the lockdown during the Corporate Insolvency Resolution Process. On perusal of the minutes of the CoC, it appears that the RP apprised the CoC about the legal options available either to seek an extension of the timeline for submission of Resolution Plan or to make the decision for publication of fresh Form-G. It was the CoC's commercial decision that no extension of time for submission of Resolution Plan should be done and RP was directed to expedite the valuation process and check the feasibility and viability of the Resolution Plan already submitted and present the eligible Resolution Plan before the CoC for consideration. -In its commercial wisdom, the CoC discussed the viability and feasibility of the Resolution Plan and had taken such a decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as High Court challenging the Order of the Adjudicating Authority/NCLT dated 5 May 2020. By its Order dated 20 May 2020, Hon'ble High Court stayed the constitution of the Committee of Creditors (in short CoC) for three weeks, i.e. till 10 June 2020. 3. After that, the Committee of Creditors (in short, CoC), in its 3rd meeting held on 4 September 2020, resolved to appoint Respondent No 1 as Resolution Professional of the Corporate Debtor. After that, based on the Resolution of the CoC, the Resolution Professional was appointed by Order of the Adjudicating Authority dated 2 November 2020 in IA 726/2020. During the CIRP period, due to the lockdown imposed by the Central/State Government on account of the Covid 19 pandemic, various activities about the CIRP could not be completed as per the timelines prescribed under the Code and statutory period of 180 days for completion of the Corporate Insolvency Resolution Process was to end on 4 November 2020. Therefore, the CoC, in its 5th meeting held on 12 November 2020, deliberated on the issue of filing an Application before the Adjudicating Authority for excluding the period from 5 May 2020 till 31 October 2020 on the ground of lockd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession of Interest (EOI) was submitted by the bidders. Despite the Committee of Creditors raising the issue about the value of the Resolution Plan submitted by the prospective Resolution Applicants, which was far below the liquidation value, and due to the Covid 19 lockdown, several interested and desirous Resolution Applicants were unable to submit their Expression of Interest. Because the market conditions were not encouraging, it would have been commercially prudent to grant additional time. (c) The Appellant contends that the Resolution Professional has committed the categorical violation of Regulation 40 C by not considering the interests of all Stakeholders of the Corporate Debtor and merely seeking exclusion to complete the formalities in the capacity of the Resolution Professional before the Adjudicating Authority. The Resolution Professional ought to have considered the interest of all the Stakeholders and sought complete exclusion of the timeline and the activities undertaken during the excluded period to render a considerable benefit to all the Stakeholders. Whereas, the Resolution Professional, the extent of the same sought exclusion like a mere extension of the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the resolution applicant proceeded ahead with the entire CIRP Process in full force during the peak of the pandemic where all businesses were down to rock bottom and more so, the hospitality and the hotel industries. The Resolution Professional did not attempt to safeguard the valuable assets of the Corporate Debtor and has presented the plan of the Resolution Applicant, which takes care of just the minimum requirement as prescribed under the Insolvency and Bankruptcy Code 2016 by paying back only the financial, secured, unsecured and Operational Creditors. However, the members of CoC themselves have felt that the Resolution Plan amount is far lower than the liquidation value of the Corporate Debtor and hence, suggested re-invitation of expression of interest and the re-issuance of Form G. The Resolution Professional did not take any steps to obtain a better offer for the Corporate Debtor and mindlessly proceeded ahead with the CIRP formalities. However, there was no economic activity during Covid 19 pandemic. The Resolution Professional has acted entirely against the object of the Insolvency and Bankruptcy Code 2016, which is primarily for enhancement of entrepreneurship and maxi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of period, the steps taken during that period of Corporate Insolvency Resolution Process should have been excluded, and the entire CIR process ought to have been restarted. Also, the 1st Respondent has not worked as per the objective of the Insolvency and Bankruptcy Code 2016. It is not understood how the Appellant, who is only an equity Shareholder of the Corporate Debtor, can dispute the CIR process. The Application seeking exclusion of period was not at all affecting the Appellant. 10. We have heard the argument of the Learned Counsel for the parties and perused the record. Discussions and Findings 11. The Appellant has filed this Appeal mainly on the ground that the Resolution Professional has committed the categorical violation of Regulation 40 C by not considering the interests of all Stakeholders of the Corporate Debtor and merely seeking exclusion of time - period to complete the formalities in the capacity of the Resolution Professional. The Resolution Professional ought to have considered all the Stakeholders' interest and sought complete exclusion of the timeline and the activities undertaken during the excluded period to render a considerable benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a seamless at the value 20% below its liquidation value arrived at by the valuers seems inequitable, the Court ought to cede grounds to the commercial wisdom of the creditors rather than assess the Resolution Plan on the basis of quantitative analysis. 17. The Resolution passed by the CoC unanimously to seek exclusion of time from CIRP of the Corporate Debtor is a commercial decision that cannot be questioned either by the Adjudicating Authority or by the Appellate Authority as held by various judgements of the Hon'ble Supreme Court. 18. The Appellant's contention that the Resolution Professional has committed the categorical violation of Regulation 40 C by not considering the interests of all Stakeholders of the Corporate Debtor and merely seeking exclusion of time-period to complete the formalities in the capacity of the Resolution Professional. The Resolution Professional ought to have considered all the Stakeholders' interest and sought complete exclusion of the timeline and the activities undertaken during the excluded period to render a considerable benefit to all the Stakeholders. 19. The Learned Counsel for the Appellant has placed much emphasis on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tualities of the Covid 19 pandemic. It is stated that the period of lockdown imposed by the Central Government in the wake of the Covid-19 outbreak shall not be counted for the timeline for any activity that could not be completed due to such lockdown about a Corporate Insolvency Resolution Process. 21. In the instant case, the IRP/RP conducted the CIR Process in the timeline with the provisions of the Code and the Regulations and, when required, invoked Regulation 40 C. The RP doesn't need to invoke Regulation 40 C as a matter of routine. Regulation 40 C provides exclusion of the timeline for completion of CIRP during the Covid-19 outbreak for any activity that could not be completed due to such lockdown. It excludes the timeline for the activities that could not be performed due to the lockdown during the Corporate Insolvency Resolution Process. Per contra, the activities performed and completed during the lockdown in a given timeline cannot be invalidated on account of Regulation 40 C. 22. The Learned Counsel for the Appellant placed reliance on the minutes of CoC held on 12 November 2020. The relevant portion of the minutes of the CoC meeting is given below for ready ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no extension of time for submission of Resolution Plan should be done and RP was directed to expedite the valuation process and check the feasibility and viability of the Resolution Plan already submitted and present the eligible Resolution Plan before the CoC for consideration. 24. The commercial decision of the CoC is not justiciable. Hon'ble Supreme Court, in the case of K. Sashidhar K. Sashidhar v Indian Overseas Bank and Others (2019) 12 SCC 150 has held; the commercial wisdom of COC has been given Paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the IB code. There is an intrinsic assumption that the financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of proposed resolution plan and assessment made by their team of experts. The opinion on the subject matter expressed by them after due deliberations in COC meetings through voting, as per voting share, is a collective business decision. The legislature, consciously has not provided any ground to challe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oked Regulation 40 C and sought exclusion of 179 days while calculating the CIRP period. The allegations against the IRP/RP that he acted against the interest of the Corporate Debtor and the Stakeholders are incorrect. 30. In important to mention that Section 12 (2) of the Insolvency and Bankruptcy Code 2016 empowers the Adjudicating Authority to extend the timeline for completion of CIRP beyond 180 days on the basis of the Resolution of the Committee of Creditors passed the minimum 66% of voting share. 2nd proviso to Sub-section 3 of Section 12 further empowers the Adjudicating Authority to extend the timeline for completion of CIRP up to 330 days. Section 12 of the Code reads as under; Section 12. Insolvency and bankruptcy code of India 2016 12. Time-limit for completion of insolvency resolution process.- (1) Subject to sub-section (2), the corporate insolvency resolution process shall be completed within a period of one hundred and eighty days from the date of admission of the Application to initiate such process. (2) The Resolution professional shall file an application to the Adjudicating Authority to extend the period of the corporate insolvency resolution proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay granted by NCLAT, while reserving the matters for orders. After a gap of five months and eight days, NCLAT passed the final Order on 5.8.2020. It could thus be seen, that for a long period, there was no restraint on implementation of the resolution plan of Kalpraj, which was duly approved by NCLT. It is the case of Kalpraj, RP, CoC and Deutsche Bank, that during the said period, various steps have been taken by Kalpraj by spending a huge amount for implementation of the plan. No doubt, this is sought to be disputed by KIAL. However, we do not find it necessary to go into that aspect of the matter in light of our conclusion, that NCLAT acted in excess of jurisdiction in interfering with the conscious commercial decision of CoC. 159. It is also pointed out, that in pursuance of the Order dated 5.8.2020 passed by NCLAT, CoC has approved the resolution plan of KIAL on 13.8.2020. However, since we have already held, that the decision of NCLAT dated 5.8.2020 does not stand the scrutiny of law, it must follow, that the subsequent approval of the resolution plan of KIAL by CoC becomes non-est in law. For, it was only to abide by the directions of NCLAT. We are of the view that not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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