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TMI Blog2021 (6) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... on Plan the Adjudicating Authority can entertain or dispose of the question of priorities or any question of law or facts, arising out of or in relation to CIRP or Liquidation proceedings - the argument of Ld. Counsel for Pankaj Joshi that the Adjudicating Authority has no jurisdiction to entertain and decide the Application cannot be agreed upon. Whether GIACL did not have locus standi to challenge the inclusion of DSKL in the CIRP? - HELD THAT:- Admittedly, DSKL requested to submit EOI after one month of due date and the same was rejected in the 7thCoC meeting held on 03.04.2020 and the decision was communicated to the DSKL on 09.04.2020. After lapse of two months DSKL again made attempt to become a part of CIRP before that four eligible Applicants including GIACL were short listed as Prospective Resolution Applicants. Therefore, there was a competition between these four Prospective Resolution Applicants but the RP has tried to induct DSKL in the CIRP in violation of the provisions of Regulation 36-A (6) of the Regulations 2016 - We are unable to convince with the Ld. Counsel for DSKL and Pankaj Joshi that GIACL did not have the locus standi to challenge the inclusion of DS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no question to issue a request for resolution plan to DSKL - Pankaj Joshi in 09th CoC meeting canvassed the case of DSKL and when one of the CoC Members proposed to publish fresh Form G then he suggested that this is impracticable and delayed the CIRP - the decision taken in 09th Meeting of the CoC was not transparent, fair and was under the influence of Pankaj Joshi. Whether the adverse remarks in Para 54 of the impugned order are baseless and uncalled for? - HELD THAT:- Mr. Pankaj Joshi has failed to explain that his actions are bonafide. It is expected from a Resolution Professional that he must act in a fair and balanced manner without getting influenced by the conflicting interest of the parties. In the present case, Mr. Pankaj Joshi suppressed material facts and misguided the members of CoC to achieve the desired decision in favour of DSKL - the adverse remarks and observations made in the Para 54 of the impugned order are not baseless and uncalled for and on the other hand, for appreciating the materials on record and to decide the matter, such observations are necessary. Appeal dismissed. - Company Appeal (AT)(Insolvency) Nos. 233 & 333 of 2021 - - - Dated:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mail to Mr. Shetty requesting to make necessary information available for submissions of Resolution Plan. On 03.04.2020, Mr. Shetty placed the request of submitting EOI by DSKL before the 07thCoC Meeting. After deliberation, the CoC passed the Resolution unanimously and thereby rejected the request of DSKL for submitting EOI. Mr. Shetty has communicated the decision to DSKL on 09.04.2020. 4. The Adjudicating Authority, on 27.05.2020, at the recommendation of the CoC, replaced Mr. B S Shetty to Mr. Pankaj Joshi (RP) and Pankaj Joshi has taken charge on the same day. Aggrieved by the decision of CoC,on 05.06.2020 at 10:43 AM, Advocate of DSKL sent email enclosed with an Application to Mr. Shetty who thereby forwarded the same to the RP Pankaj Joshi at 12: 20 PM. On the same day i.e. 05.06.2020 RP Pankaj Joshi at 12:43 PM sent an email to DSKL requesting to submit EOI within 10 days from the date of receipt of the communication. Thereafter, again on the same day, RP Pankaj Joshi has sent another email to DSKL at 15:13 PM with the same request to submit EOI. The 9thCoC meeting convened on 13.06.2020, wherein Mr. Pankaj Joshi has placed EOI submitted by DSKL and canvassed before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that a person, who has been allowed to participate in Resolution Process, cannot contest it on the ground that it obviates competition. The argument is that, the people at large were not given any opportunity to participate in the CIRP by not issuing a fresh Form G . This argument is not sustainable, as such argument can only be available to a person who has been denied participation in the CIRP. He also submitted that, the judicial precedents permitted the CoC to depart from Regulation 36-A (6) to achieve the object of the IBC. The Regulation 36-A (6) is not mandatory. The Hon ble Supreme Court in the case of Kalpraj (supra) held that the CoChas the right to take a commercial decision of accepting the Resolution Plan after due date and it is not open to judicial intervention. He submitted that, the decision to allow DSKL to participate was a well deliberated decision, taken up by 100% majority in the 9thCoC meeting. GIACL is one of the beneficiaries of the decision and cannot question the same. He submitted that, the allegations are factually incorrect that Pankaj Joshi received information of filing Application at 12:20 PM on 05.06.2020 and allowed DSKL to submit EOI at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal in the Kotak Investment Advisors Ltd. Vs. Krishna Chamadia (CA(AT) (Ins) NO. 344 - 345 of 2020) to hold that RP and CoC could not have accepted any Resolution Plan after expiry of the deadline prescribed by the Regulation and that the RP ought to have republished Form - G in compliance with the Regulations. Hon ble Supreme Court has overturned the decision in Kalpraj Dharamshi Case (supra). He submitted that, it is a settled law that the Regulation 36 A (6) is not mandatory in nature. The word shall has to be read as may , since no consequence of non-compliance is provided. For this purpose, cited the Judgment of Hon ble Supreme Court in the case of State of Bihar Vs. Bihar Rajya [(2018) 9 SCC 472- Para 24]. He submitted that, while passing the impugned order, Ld. Adjudicating Authority has fallen in a grave error and arrived at that, the RP has accepted the plan of DSKL after opening the bids of other Prospective Applicants and DSKL has submitted its plan after the expiry of timelines. Ld. Sr. Counsel in rebuttal submitted that on 9th July, 2020 Counsel for DSKL appeared before the Adjudicating Authority for the first time and made submissions for allowing the impleadmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ias of Pankaj Joshi. Pankaj Joshi again sent a detailed email on the same day i.e. 05.06.2020 at 15:13 PM. The promptness by Pankaj Joshi in reading the entire application served and preparing such a lengthy email containing reasoning and opinion shows only one thing that, it is premeditated in order to create record and justify the acts and put into action immediately to meet the ulterior objectives. Furthermore, on 09.06.2020 Pankaj Joshi after accepting the EOI of DSKL, felt the need to ask for the CoC s permission on 13.06.2020 i.e. a week after his email to DSKL and accepting its EOI. 12. Ld. Counsel for GIACL also submitted that, it is evident from the minutes of 9thCoC meeting that Pankaj Joshi has clearly misguided the CoC Members by stating that the RP under law is not required to take express permission from the CoC to issue a request for Resolution Plan to an eligible Prospective Resolution Applicants even when DSKL s request for submitting EOI after due date was rejected by the same Members in the 7thCoC Meeting. 13. Ld. Counsel for GIACL further submitted that, the bias of RP is clearly evident from the record and facts in minutes of the 9thCoC Meeting, held on 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether the Adjudicating Authority does not invest with the Jurisdiction to interfere before the quasi-judicial determination is made, under S. 31 of IBC? (ii) Whether GIACL did not have locus standi to challenge the inclusion of DSKL in the CIRP? (iii) Whether DSKL was a necessary party to the Application I.A. No. 1029 of 2020? (iv)Whether to allow DSKL after due date to file EOI is a commercial decision? (v) Whether the adverse remarks in Para 54 of the impugned order are baseless and uncalled for? Issue No. (i) Whether the Adjudicating Authority does not invest with the Jurisdiction to interfere before the quasi-judicial determination is made, under S. 31 of IBC? 19. Ld. Counsel for Appellant Pankaj Joshi raised a preliminary objection that before the quasi-judicial determination is made, under Section 31 of the IBC, the Adjudicating Authority has no jurisdiction to entertain and decide the Application of GIACL. For this purpose, he cited Para 84 of the Judgment of Hon ble Supreme Court in the case of Arecellor Mittal India Pvt. Ltd. (supra), which reads as under: 84. If, on the other hand, a resolution plan has been approved by the Committee of Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndi to challenge the inclusion of DSKL in the CIRP? 21. Admittedly, DSKL requested to submit EOI after one month of due date and the same was rejected in the 7thCoC meeting held on 03.04.2020 and the decision was communicated to the DSKL on 09.04.2020. After lapse of two months DSKL again made attempt to become a part of CIRP before that four eligible Applicants including GIACL were short listed as Prospective Resolution Applicants. Therefore, there was a competition between these four Prospective Resolution Applicants but the RP has tried to induct DSKL in the CIRP in violation of the provisions of Regulation 36-A (6) of the Regulations 2016. Regulation 36-A of Regulations 2016 provides the procedure how to deal with EOI, which reads as under: - 36-A Invitation for Expression of Interest-(1) . (6) The Expression of Interest received after the time specified in the invitation under clause (b) of sub-regulation (3) shall be rejected. . (10) The RP shall issue a provisional list of eligible Prospective Resolution Applicants within 10 days of the last date for submission of EOI to the Committee and to all Prospective Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. It is admitted fact that, DSKL has submitted EOI on 12.03.2020 whereas due date was 10.02.2020 and after due deliberation in the 7thCoC Meeting held on 03.04.2020, the request of DSKL for submitting EOI after due date was rejected and the decision was communicated to DSKL on 09.04.2020. 26. DSKL has no vested right because, the right has already been extinguished when DSKL has failed to submit EOI till last date and subsequently, the request for submitting EOI after due date was also rejected by the CoC in view of Regulation 36-A of Regulations 2016. Therefore, DSKL has no right to contest the Application as in the Application the actions of RP CoC are questioned. In such a situation, we are in agreement with the Ld. Adjudicating Authority that DSKL was not a necessary party to the Application I.A. No. 1029 of 2020.The question for the consideration before Adjudicating Authority was that, whether the actions of RP and CoC are justifiable in the present facts of this case. 27. Therefore, we are not convinced with the argument of Ld. Counsel for DSKL that the Ld. Adjudicating Authority has not given reasonable opportunity of hearing and thereby violated the principle of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Joshi heavily placed reliance on Para 156of the Judgment of Hon ble Supreme Court in the case of Kalpraj (supra), which reads as under: - 156. No doubt, it is sought to be urged, that since there has been a material irregularity in exercise of the powers by RP, NCLAT was justified in view of the provisions of clause (ii) of subsection (3) of Section 61 of the I B Code to interfere with the exercise of power by RP. However, it could be seen, that all actions of RP have the seal of approval of CoC. No doubt, it was possible for RP to have issued another Form G , in the event he found, that the proposals received by it prior to the date specified in last Form G could not be accepted. However, it has been the consistent stand of RP as well as CoC, that all actions of RP, including acceptance of resolution plans of Kalpraj after the due date, albeit before the expiry of timeline specified by the I B Code for completion of the process, have been consciously approved by CoC. It is to be noted, that the decision of CoC is taken by a thumping majority of 84.36%. The only creditor voted in favour of KIAL is Kotak Bank, which is a holding company of KIAL, having voting rights of0.97% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting was convened on 03.04.2020 and after two months, the 09thCoC meeting was convened on 13.06.2020 and when the CoC reviewed its earlier Resolution these same challenges were there too, there is no change in circumstances which compel them to review/revisit their earlier decision. They have not assigned any good reason for revisiting their earlier decision. The CoC, in the shelter of maximisation of value of asset, cannot be permitted to take any decision at any point of time in the name of commercial wisdom. In the present case the Resolution Plan of DSKL is yet to be examined with the comparison of other PRAs. Therefore, at this stage, how one can say that the decision taken in the favour of DSKL was for maximization of value of asset. 37. Now, we have considered whether the decision taken by the CoC in 09th CoC meeting was an independent decision or was it procured by Pankaj Joshi by suppressing material facts. 38. At the time of 9th CoC meeting, Pankaj Joshi has suppressed the fact that he was served with the Application of DSKL and that they are going to file Application before the Adjudicating Authority against the decision of 7th CoC. If such fact was disclosed by P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prescribed there for. By providing a special treatment, backdoor entry for accepting the resolution plan of the DSKL s the RP and the CoC have deviated from the norms prescribed under the Code and Regulations framed thereunder, which vitiates the Corporate Insolvency Resolution Process and cause prejudice to the other PRAs. Such a practice has been strongly deprecated by the Hon ble NCLAT cited above. 44. We are in agreement with the Learned Counsel for Mr. Pankaj Joshi that in the aforesaid Para, Learned Adjudicating Authority has incorrectly mentioned Per contra on the part of RP . This fact is factually incorrect that RP Mr.Pankaj Joshi has accepted the plan after the expiry of the deadline for submission of Resolution Plan. Actually Mr. Pankaj Joshi has overturned the decision of 7th CoC meeting and permitted DSKL to submit EOI and DSKL submitted EOI on 09.06.2020 (last date for submission EOI was 10.02.2020). It seems that inadvertently incorrect facts have been mentioned by the Adjudicating Authority in aforesaid Para 54. However, it does not absolve Mr. Pankaj Joshi from the malafide actions during CIRP which we will be discussing in subsequent paras. 45. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uest for submitting EOI after due date has been rejected by the CoC. Following events show that, for inclusion of DSKL in the list of prospective Resolution Applicants, how Mr. Pankaj Joshi manipulated the things. (i) After receiving the communication of rejection on 09.04.2020, for about two months, DSKL has not taken any action and has not filed any Application before Adjudicating Authority. (ii) After two months, when, on 27.05.2020, Pankaj Joshi was appointed as RP, then they intended to file Application before the Adjudicating Authority against the rejection order of 7th CoC meeting. (iii) Mr. Shetty sent a reply to Advocate of DSKL on 05.06.2020 12:20PM and informed that in his place Mr. Pankaj Joshi has been appointed as RP and copy of this email was sent to Pankaj Joshi, who, within twenty three minutes, prepared a detailed email (see Annexure-I Appeal CA(AT)(Ins)233of 2021) and overturned the decision of 7thCoCmeeting and sent an email to DSKL with an assertion that I am inclined to grant you an opportunity to resubmit your expression of interest in the format as laid down in the Process Flow Document, Attached hereto and marked as Annexure-B is the Process Flow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, we are of the considered view that Mr. Pankaj Joshi has failed to explain that his actions are bonafide. It is expected from a Resolution Professional that he must act in a fair and balanced manner without getting influenced by the conflicting interest of the parties. In the present case, Mr. Pankaj Joshi suppressed material facts and misguided the members of CoC to achieve the desired decision in favour of DSKL. Therefore, we are of the considered view that the adverse remarks and observations made in the Para 54 of the impugned order are not baseless and uncalled for and on the other hand, for appreciating the materials on record and to decide the matter, such observations are necessary. 48. With the aforesaid discussion, we are of the view that there is no merit in these appeals and, therefore, the appeals are dismissed, however, no order as to Costs. [Justice Jarat Kumar Jain] Member (Judicial) The Appeal is heard by the Bench comprising Justice Mr. Jarat Kumar Jain Member (Judicial) and Mr. Kanthi Narahari Member (Technical). Mr. K. Narahari is not readily available today, however, he requested to pronounce the Judgment on behalf of the Bench, therefore, as per Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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