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TMI Blog2021 (7) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... ication. No wonder, approval for Resolution Plan is to be judged with diligence and satisfaction in regard to the Approval of plan in writing with reasons to be recorded, of course, with due application of mind. Rejection of Valuation Report made by the Valuer Mr.R.K.Patel - HELD THAT:- Not resting with that, the Resolution Professional had resorted to the agreed International Valuation Standards and carried out the physical verification of the Corporate Debtor s fixed assets. Therefore, the question of appointing a third Valuer on the purported ground of difference of 15.92% in the Fair Value does not arise, in the considered opinion of this Tribunal . Equality Concept - HELD THAT:- One cannot ignore a vital fact that Guarantee of Equality before law is a positive concept. The principle of equal pay for equal work has to be granted only if there is total and complete identity between two employees. It is to be remembered that the burden of proving the right and parity in an employment is only on the individual claiming such right. Moreover, it cannot be lost sight of that in respect of the concerned employees functions may be same but skills and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, only after the approval of CoC, the Resolution Professional filed the Resolution Plan for approval of this Adjudicating Authority. It is seen that wide publicity has been made inviting Expression of Interest for getting a prospective Resolution Applicant, so that the maximum value be received for the Corporate Debtor s properties. If the contention of the applicant is accepted, a question arises here why any other interested persons, who can offer a more valued Resolution Plan than the present one has not come forward to submit a Resolution Plan. The technical stags stated by the applicant that one of the valuer assessed a less value and other valuer has given a good value cannot be accepted. The value assessed by both the valuers are more or less same, except few difference in the value. The resolution professional has not accepted the value given by Mr. Patel only. He has computed the value in accordance with the internationally accepted valuation standards, after physical verification of the fixed assets of the Corporate Debtor. The Fair Value and value arrived at by both groups of the registered valuers were not significantly different. Hence, he has not appointed a fresh va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. If the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal. 21. In this respect, it is worthwhile to note that when the Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Doctors under the category of Operational Creditor Employees 2.35% to Consultant Doctors under Operational Creditor except employee), the balancing of interest as envisaged in the preamble of the Insolvency and Bankruptcy Code and guided in the decision of Hon ble Supreme Court in Committee of Creditors of Essar Steel India Ltd. v Satish Kumar Gupta dated 15.11.2019 vide Civil Appeal No.9877-8767 of 2019 reported in 2019 SCC online SC 1478 was not followed. 6. The Learned Counsel for the Appellant points out that the Adjudicating Authority had committed an error in considering that the Operational Creditor s were paid a bare minimum of 2.34% of their dues although their nature of work precedents against the Operational Creditor being taken in a ride. 7. The Learned Counsel for the Appellant comes out with a plea that there was non-application of mind by the Adjudicating Authority while dismissing the application filed under Section 60(5) of the Insolvency and Bankruptcy Code. 8. The Learned Counsel for the Appellant takes a stand that the claim of the Appellant Doctors were filed under Form-B only because of the technicality that the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he enhancement of the Resolution Plan amount from ₹ 80 Crores to ₹ 126 Crores is a mere eye-wash, as it was evaluated based on a faulty valuation and further taken into consideration without keeping the best interests of the Corporate Debtor . 15. The Learned Counsel for the Appellant adverse to the Report of Valuer Mr.R.K.Patel who had mentioned in the report as under:- It is submitted that the Report of R.K.Patel has mentions as follows: the matter was taken up at the instance of resolution Professional Mr.Bijoy Prabhakaran Pulipra In the matter of M/s. Galaxy Cotton Textile Private Limited.. (vide Annexure 6, Vol I, Pg 199 of the Appellant Paper Book) .for evaluating Fair Value of the Land and Building, the subject land is assumed to be uncultivated freehold and owned by the M/s. Galaxy Cotton and Textile Pvt. Ltd (vide Annexure 6, Vol II, Pg 209 of the Appellant Paper Book) .for evaluating Liquidation value of the land and Building, entire land has been assumed to be owned by the Government and property is given on leas to M/s. Gupta Syunthetics Ltd (vide Annexure 6, Vol II, Pg 209 of the Appellant Paper Book) .for eva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different survey numbers and for ease of calculation ₹ 42,00,000 can be identified as the value per cent (vide Annexure 7, Vol II, Page 299, 300). 18. The Learned Counsel for the Appellant refers to the Valuation Report of Mr.R.K. Patel which is in Tabular Form runs as under:- Valuation report of R K Patel Hospital Area 78.54 Ares 194,0765666 cents Annexure 6, Vol II, Pg 211 of Appellant Paper Books Per cent value 48,56,228 Fair Value for 194.07 cents 94,24,80,000 (A) Valuation report of Tom Panikulam Hospital Area 78.54 Ares 194,0765666 cents Annexure 7, Vol II, Pg 298 of Appellant Paper Books Per cent value 42,00,000 Fair Value for 194.07 cents 81,51,21,580 (B) Difference in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question in the Hon ble Supreme Court s Judgment was made in a fair and equitable manner. 24. The Learned Counsel for the Appellant refers to the decision of Hon ble Supreme Court in Committee of Creditors of Essar Steel India Limited v Satish Kumar Gupta and Ors. Reported in 2020 (8) SCC at Page 531 wherein it is observed as under: 40. What is left to the majority decision of the Committee of Creditors is the feasibility and viability of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution Applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution Applicant with a consequent modification as to distributi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reconsideration and re-evaluation. Respondents Contentions:- 26. The Learned Counsel for the Respondent submits that the discrepancies in the Valuation Report submitted by one of the Registered Valuers Mr.R.K. Patel identified by the appellant are merely clerical errors caused due to inadvertence. Further the Valuation was made by the two independent registered Valuers registered with the IBBI under the Companies (Registered Valuers and Valuation) Rules, 2017 and that the Fair Value and the Liquidation Value of the Corporate Debtor was computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the Corporate Debtor . In short, the inadvertent clerical errors crept in, while typesetting the Valuation Report are not material in nature and had no material impact on the Fair Value as well as the Liquidation Value. Apart from this, the Fair Value and the Liquidation Value of the Corporate Debtor arrived at by the groups of Registered Valuers were not significantly different and therefore there was no requirement to appoint another Registered Valuer by the Resolution Professional to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon ble Supreme Court in Maharashtra Seamless case wherein at paragraphs 26 to 28 it is observed as under: 26. No provision in the Code or Regulations has been brought to our notice under which the bid of any Resolution Applicant has to match liquidation value arrived at in the manner provided in Clause 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. This point has been dealt with in the case Essar Steel (supra).We have quoted above the relevant passages from this judgment. 27.It appears to us that the object behind prescribing such valuation process is to assist the CoC to take decision on a resolution plan properly. Once, a resolution plan is approved by the CoC, the statutory mandate on the Adjudicating Authority under Section 31(1) of the Code is to ascertain that a resolution plan meets the requirement of Sub-sections (2) and (4) of Section 30 thereof. We, per se, do not find any breach of the said Provisions in the order of the Adjudicating Authority in approving the resolution plan. 28.The Appellant Authority has, in our opinion, proceeded on equitable perception rather than C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in various other hospitals as well, which is quite independent from Form 26 AS [Annual Tax Statement under Section 203 AA of the Income Tax Act, 1961]. In fact, there is no discrimination , or arbitrariness among the said two categories of Doctors , since the Claims were admitted purely on the basis of Claim Forms submitted by the respective claimants. 33. The Learned Counsel for the Respondent seeks in aid of the Judgment of the Hon ble Supreme Court in the matter of Swiss Ribbons Private Limited Ors. Vs. Union Bank of India Ors. [Writ Petition (Civil) No.99, 100, 115, 459, 598, 775, 822, 849, 1221 of 2018 (vide Special Leave Petition Civil No.28623 of 2018 and Writ Petition (Civil) No.37 of 2019] wherein at paragraph 20 and 54 it is observed as under: 20. The tests for violation of Articles 14 of the Constitution of India, when legislation is challenged as being violative of the principle of equality, have been settled by this Court time and again. Since equality is only among equals, no discrimination result if the Court can be shown that there is an intelligible differentia which separates two kinds of creditors so long as there is some rational relation b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Insolvency and Bankruptcy Code and CIRP Regulations upholding the fundamental rights enshrined under the Constitution of India and arrived a value of Resolution Plan which balances the interest of all stakeholders. 36. It is the version of the Appellant that the different of ₹ 5 Crores in the amount claimed during CIRP namely ₹ 200.46 Crores and the claims considered for the Resolution Plan namely ₹ 195.08 Cr/ores proves that the Resolution Applicant was endeavored to scuttle the CIRP during COVID times with the Committee of Creditors dancing to their tunes. 37. The real grievance of the Appellant/Applicant is that in terms of the Sanctioned Plan the Employees of the Corporate Debtor will get 99.29% of their admitted claim. However, the other Operational Creditor s [other than employees and workmen] is getting only 2.34% of the admitted claim to an extent of ₹ 13,01,55,997 who had rendered Health Care Services to the patients visiting the Corporate Debtor on the Consultancy Basis . 38. According to the Appellant [he being the Power of Attorney Holder of 46 Doctors] and they are qualified professional Doctors who attend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt, the Fair Value for 194.07 Cents hospital area 78.54 Ares, Per Cent value ₹ 48,56,228 was arrived at ₹ 94,24,80,000 (A). However, the Valuation Report of Mr.Thomas Panikulam had arrived a Fair Value for 194.07 Cents as ₹ 81,51,21,580 (B) per cent value ₹ 42,00,000/- To put it precisely, the difference in Fair Value for 194.07 Cents is ₹ 12,73,58,420/- = 15.62%. The crux of the plea projected on behalf of the Appellant is that the difference in adapting various methods of valuation by the two valuers had let to a difference in the value which necessitates the appointment of third Valuer as provided in Regulation 35(1)(a), (b) and (c) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Unfortunately, the Adjudicating Authority had not appointed the third Valuer therefore an emphatic stand of the Appellant is that the CIRP was not conducted as per the Insolvency and Bankruptcy Code and Regulations and the Committee of Creditors is not to waive of any procedure enunciated under Code and the Regulations. 42. Repudiating the contentions of the Appellant , the Respondent has come out with a stand that except certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manner of applying such parameters, as approved by the committee for consideration of Resolution Plan(s) for its approval. After the receipt of the Resolution Plan(s) in accordance with the Code and these regulations, the Resolution professional shall provide the Fair Value and the Liquidation Value to every member of the committee in electronic form on receive an undertaking from the member to the effect that such member shall maintain confidentiality of Fair Value and Land Value and shall not use such values to cause an undue gain or undue loss to itself or any other person and comply with the requirements under sub section 2 of Section 29 of the Code. 47. As per substituted clause (k) of sub regulation of regulation ii of the amended regulations 2018, the express Liquidation Value means the estimated realisable value of the assets of Corporate Debtor , if the Corporate Debtor were to be liquidated on the Insolvency commencement date. Analysis 48. In the instant case, although on behalf of the Appellant a strenuous endeavour is made before this Tribunal that there is a variance of 15.62% in the Valuation and in this regard this Tribunal points out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the other Resolution Plan . After decision of the Committee of Creditors , Resolution Professional is required to place the Decision before the Adjudicating Authority under Section 31 and that the Adjudicating Authority is to take a decision in terms of Section 31 of the Code. In fact, the Adjudicating Authority can scrutinise the reasoning either to accept or reject one or other objection or suggestion and also offer his own opinion. 51. As per Section 31 of the Code, if an Adjudicating Authority is satisfied with the Resolution Plan is approved by the Committee of Creditors under Section 30(4) of the Code that it meets the requirements as contemplated in Section 30(2) of the Code, it shall by an order approve the Resolution Plan which shall be binding on the Corporate Debtor Employees and Members Creditors and other Stakeholders involved in the Resolution Plan . 52. It is well settled that it is not open to reopen the reasons for rejection of Resolution Plan passed with 100% voting share s for adjudication. No wonder, approval for Resolution Plan is to be judged with diligence and satisfaction in regard to the Approval of plan in wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 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 thumping majority of 84.36%. The only Creditor Voting in favor of KIAL is Kotak Bank, which is a holding company of KIAL, having voting rights of 0.97%. We are of the considered view, that in view of the paramount importance given to the decision of CoC, which is to be taken on the basis of Commercial Wisdom , National Company Law Appellate Tribunal was not correct in law in interfering with the commercial decision taken by CoC by a thumping majority of 84.36%. Hon ble Supreme Court s Decision: 56. At this juncture, this Tribunal points out the judgment of Hon ble Supreme Court in Maharashtra Seamless Limited V Padmanabhan Venkatesh and Ors. (vide Civil appeal Nos 4242 and 4967-4968 of 2019 reported in Manu/SC/0066/2020) wherein at Paragraph 19 it is observed as under: 19. The manner in which the claims of the operational credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme- workers are paid the creditors in the long run will be repaid in full and shareholders/investors are able to maximise their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development or credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development or the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed or as a last r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re- submit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal. 20. It has been further been held in the case of Essar Steel (supra): 124. The other argument of Shri Sibal that Section 53 of the Code would be applicable only during liquidation and not at the stage of resolving insolvency is correct. Section 30(2)(b) of the Code refers to Section 53 not in the context of priority of payment of creditors, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Creditors arrived at by the Respondent, the same was on account of the character and type of Claim Forms furnished by the respective Claimants. Equality Concept: 60. One cannot ignore a vital fact that Guarantee of Equality before law is a positive concept. The principle of equal pay for equal work has to be granted only if there is total and complete identity between two employees. It is to be remembered that the burden of proving the right and parity in an employment is only on the individual claiming such right. Moreover, it cannot be lost sight of that in respect of the concerned employees functions may be same but skills and responsibilities may be really and substantially different. Viewed in that perspective, in the instant case on hand, there is a clear difference and defined arena between the Employee Doctors and the Consultant Doctors of the Corporate Debtor . As such the contra plea taken on behalf of the Appellant(s) is not worthy of acceptance by this Tribunal . 61. In the light of the forgoing detailed discussions, this Tribunal taking note of the divergent contentions advanced on either side and also bearing in mind the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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